In the past decade, since the current LOIM Swiss Equities team took charge of this franchise, our in-depth knowledge of companies and sectors has enabled us to generate consistent outperformance. Looking ahead, certainty over US tariffs, low inflation and strength in sectors including technology, energy and biopharma underpin our constructive outlook for domestic stocks.
Strong 10-year track record
Since November 2015, the three funds in LOIM’s Swiss Equities franchise – focused on either small and mid caps or the broader market – have each substantially outperformed their respective benchmarks over one-, three-, five- and 10-year periods on a gross basis (see Figure 1).
FIG 1. Long-term outperformance across the LOIM Swiss Equity franchise1
During this period, LO Funds – Swiss Small & Mid Caps (CH) has also achieved the leading information ratio among its peers, indicating its ability to provide investors with superior risk-adjusted returns versus the benchmark (see Figure 2).
FIG 2. LOIM Swiss Small & Mid Cap: leading information ratio vs peers2
We believe the strategies have benefitted from the stability of the investment team – we have worked together for more than 11 years – and our focus on bottom-up fundamental analysis. Each year, we have more than 300 meetings with corporate management teams and over time have developed expert knowledge of companies in key sectors, like financials and healthcare. This supports our stock picking in pivotal periods, such as when companies’ earnings is front of mind for markets.
Constructive outlook for the Swiss economy
As an export-oriented economy, Switzerland will undoubtedly benefit from lowering of US tariffs from 39% to 15%3. And, since many Swiss businesses – such as Nestlé4 and ABB – have local-for-local manufacturing operations in the US, and a number of industries like pharmaceuticals are not subject to the trade levies, the effective tariff rate likely to be closer to half the headline 15% figure. This supports our house view that GDP growth in 2026 should rise from the previous forecast of 0.9% to 1.2%.
This, combined with inflation of 0-0.5%5, provides a decent investment backdrop. Further, the expansion of the Eurozone PMI to 50.0 in October6 – after more than two years of contraction – indicates improving regional conditions. The likelihood the Swiss National Bank (SNB) will keep rates at 0% underpins liquidity but reduces capacity for easing in any future shock.
However, Switzerland is a low-beta economy, with exogenous shocks tending to have less of an impact than elsewhere. With innovative companies, sound politics and price stability anchored by the SNB, it offers appealing investment propositions amid global uncertainty.
Reasonable valuations and potential for structural growth
In addition to easing tariffs and improving European growth, we are reasonably constructive on Swiss equities going into 2026 for reasons including:
- Valuations look reasonable, with the market trading on a price/earnings multiple of 17x, in-line with its 10-year average
- The continuing US rate-cutting cycle throughout 2026 – which will likely feature Chairman Jerome Powell being succeeded in May by a more dovish official –will support both equity valuations and economic growth
- We are finding stocks aligned with compelling structural growth stories in the Swiss market, including: AI and data centres, biopharma innovation and the energy transition.
