How to build long-term performance: a Q&A with Swiss Fixed Income

Successful fixed income investing rests on a combination of people, process and performance, in our view. LOIM's Swiss Fixed Income strategy is built on these foundations. This year, Swiss Franc Credit Bond surpassed CHF 2 billion in assets under management, a key milestone.

In the following Q&A, Markus Thöny, Head of Swiss Fixed Income, reflects on nearly two decades of managing the strategy and preserving value through market cycles.  He discusses the team’s investment philosophy, lessons from past market crises, the importance of client trust and what may lie ahead for Swiss fixed income.

Q: Your track record has been established across very different market environments. What has been key to delivering those results?

A: Performance is always our first priority. It starts with outstanding investment professionals and an investment process that reflects our philosophy.

Our philosophy is built on accountability and ownership. We empower our investment specialists to do what they do best – apply their expertise directly to portfolios and make investment decisions within clearly defined risk budgets. We believe that decisions should be made by those with the deepest expertise, closest to the opportunity and fully accountable for the outcome. This creates a culture of responsibility, agility and performance.

Read also: Swiss Franc Credit Bond: a reliable record of outperformance

Equally important is the way we serve our clients. We believe that trust must be earned every day through integrity, professionalism and consistent execution. Our commitment is to deliver what we promise and to ensure our portfolios reflect the investment approach we communicate to clients.

Ultimately, our goal is to generate strong investment results and be a trusted long-term partner for our clients¹.

Q: Have market developments prompted meaningful changes to your approach, or have its core principles stood the test of time?

A: Our philosophy has remained unchanged since the strategy’s inception in June 2008. At the heart of our process is a clear distinction between beta and alpha generation. Benchmark replication and cash management are handled by dedicated replication specialists. Alpha generation is done through a multi-PM approach, in which skilled investment professionals apply their specialist expertise to contribute differentiated and largely uncorrelated return streams.

A robust investment process must be consistent with the investment philosophy, but also scalable and adaptable. While the core principles haven’t changed, we have continuously refined the process over the past 18 years by adding new alpha sources and incorporating systematic hedging strategies. This combination of consistency and innovation has been a key driver of our long-term success.

Stability, complementary skill sets and deep experience combine to create a truly collaborative platform, united by a shared commitment to delivering consistent outcomes.

Q: The strategy was launched  at the height of the global financial crisis. You then managed it through the eurozone debt crisis, the era of negative Swiss interest rates and the post-pandemic inflation shock. How did the strategy respond to these very different environments?

A: As active managers, we seek to take active risks. By definition, this means we won’t always get every investment decision right. We were at times unable to keep pace with the benchmark. However, temporary underperformance was always followed by strong outperformance, underpinning our confidence in our active investment approach over the medium to long term.

In periods of stress, we place great importance on transparent communication so that clients understand what has happened, how portfolios have been affected and how we’re responding.

“Temporary underperformance was always followed by strong outperformance², underpinning our confidence in our active investment approach over the medium to long term.” 

- Markus Thöny, Head of Swiss Fixed Income

Uncertainty is often amplified by a lack of information. We are therefore committed to providing timely, transparent and honest updates. Keeping clients informed about developments, risks and our assessment of the situation helps build trust and supports well-informed decision-making. Clear communication, combined with disciplined investment management, is the foundation of successful crisis management.

Investment decisions start with a rigorous assessment of both issuer fundamentals and portfolio-level risk. When investing in lower-rated credits, for example, broad diversification is essential to managing risk. Systematic hedging strategies can also mitigate downside risk and portfolio volatility during periods of market stress.

At the same time, market dislocations often create some of the most compelling opportunities, as temporary dislocations can emerge between market prices and underlying fundamentals. Our credit specialists’ deep understanding of issuers and markets enables us to assess risks with confidence and identify attractive risk-return opportunities through disciplined and selective investing.

Ultimately, we view market dislocations not only as periods of heightened risk, but also as opportunities to create long-term value for our clients. Success depends on strong risk awareness, disciplined risk-taking and the conviction to act when opportunities arise.

Q: Over the years, how have investors’ needs and expectations changed, and what do you think drives loyalty and repeat business?

A: Professional client service is crucial and has become even more so in recent years. Open, transparent, timely and consistent communication, supported by insightful analysis, is essential for building and maintaining trust.

While clients continue to prioritise strong performance and competitive fees, their expectations have evolved. Reporting requirements have become more demanding, particularly in areas such as sustainability, so we must be able to address a broader range of client needs. We benefit from extensive in-house sustainability expertise, which enables us to meet these requirements consistently and effectively.

At the same time, we strive to demonstrate the value of active management to an investor community that remains largely focused on passive solutions. Our growing success in attracting these investors reflects their confidence in our expertise, disciplined process and long-term results.

We view client service as a core element of our value proposition. Trust, transparency, responsiveness and a commitment to meeting clients' needs are what build lasting relationships.

Q: How has your market changed over the years from an issuance perspective, and what trends stand out today?

A: The Swiss franc corporate bond market has undergone several distinct phases. Following the financial crisis, the market expanded significantly in both size and number of issuers as companies sought to diversify their funding sources and reduce reliance on traditional bank financing.

During the period of ultra-low and negative interest rates, as well as in times of market stress, domestic issuers tended to dominate primary market activity. More recently, however, international borrowers have returned to the Swiss franc bond market in greater numbers. This year, most notably, the hyperscalers Alphabet and Amazon³ have accessed the Swiss franc bond market. Other large borrowers, including Novo Nordisk, L’Oréal and Mondelez³, have also come to market with multiple-tranche deals, attracting strong investor demand.

“Trust, transparency, responsiveness and a commitment to meeting clients' needs are what build lasting relationships.”

- Markus Thöny, Head of Swiss Fixed Income

Based on current issuance trends, 2026 is on track to become a record year for primary market volumes in the Swiss capital market. At the same time, we can see sustained and solid demand for Swiss fixed income offsetting this primary market supply, with significant investor flows into the corporate credit space.

Meanwhile, the Swiss franc sub-investment-grade segment continues to shrink, further highlighting the strong overall credit quality of the Swiss franc corporate bond market. The issuer base remains predominantly high-quality with exceptionally low default risk, making it an attractive investment universe for credit investors seeking a good risk-return profile.

Q: What are the main risks or market developments you are watching most closely today?

A: Right now we see the greatest risks stemming from geopolitical developments and their potential impact on economic growth, inflation and employment.

Given the current global backdrop, we find it difficult to fully reconcile the prevailing market optimism with the risks we see on the horizon. We are, therefore, currently positioned somewhat more cautiously than we have been in the past.

That said, our cautious stance should not be mistaken for a lack of conviction. Rather, it reflects a disciplined and risk-aware approach to investing in an environment where uncertainty remains elevated and the balance between risks and opportunities has become less clear-cut.

Q: What do you see as the most important themes shaping the outlook for your market in the years to come?

A: Our primary objective is clear: to outperform the benchmark over the long term. While all-in yield levels remain relatively modest due to still-low interest rates, we continue to see value in the compensation for credit risk. As a result, we maintain an overweight allocation to credit.

In the current environment, corporate bonds are particularly appealing because they typically carry less interest rate risk than government bonds.

At the same time, volatility in the Swiss franc credit market remains exceptionally low, making carry trades the dominant source of returns. As is always the case with carry strategies, rigorous credit analysis is critical. Generating attractive returns requires a deep understanding of issuers, careful risk selection and continuous monitoring of underlying fundamentals.

If market volatility returns, it will be essential to capitalise on the new opportunities that emerge. Ultimately, sustainable outperformance can only be achieved by taking well-researched and risk-aware investment decisions. Investors who can act decisively and selectively will be best positioned to generate long-term outperformance.