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Swiss investors have traditionally placed great trust in the home market. That is understandable: Switzerland stands for stability, legal certainty, a strong currency and world-class companies. Yet that very familiarity can become a trap. Many portfolios are far more heavily tilted towards Switzerland than they appear at first glance.

A preview of this became visible in August 2025. The US imposed tariffs of 39 percent on Swiss exports. The SMI then lost almost 2 percent in a single trading day. After months of negotiations and Switzerland’s pledge to invest at least $200 billion in the US, the tariff rate was reduced to 15 percent.

“Swiss investors benefit from one of the most stable financial centres in the world. But stability is no substitute for diversification.”

The episode was quickly digested by the market. But the underlying question remains: how robust are Swiss portfolios really when external shocks hit the home market?

Familiarity is not diversification

Swiss investors benefit from one of the most stable financial centres in the world. But stability is no substitute for diversification.

On average, Swiss pension funds hold between 33 and 40 percent of their equity investments in Swiss securities. If this weighting were based on Switzerland’s share of global equity markets, it would be closer to around 2 percent. Added to this are earned income in Switzerland, property ownership, bonds and other assets that are often also heavily dependent on the domestic environment.

This creates a concentration risk that is barely noticeable in everyday life. In periods of stress, however, it can become decisive.

The Swiss equity market itself is also less broadly based than many investors assume. By the end of 2024, almost half of the Swiss Market Index was accounted for by just three companies: Nestlé, Novartis and Roche. In the MSCI Switzerland, these three stocks still made up around 38 percent of market capitalisation.

A Swiss equity index may appear diversified on paper. In practice, however, its performance depends heavily on a few heavyweight stocks.

The problem is not just Swiss

This development is not an isolated case. Market concentration has also risen sharply in the US. The ten largest companies now account for around 41 percent of the S&P 500 — a level not seen since the dot-com bubble.

For investors, this means that simply shifting from Swiss equities to US stocks does not automatically create diversification. In some cases, they are merely replacing three Swiss heavyweights with a handful of American technology groups.

“Foreign revenues are not the same as international diversification.”

Geographic diversification does improve — but the concentration problem remains.

Global Swiss companies are not enough

A common argument is that Swiss blue chips are already globally diversified. Nestlé, Novartis and Roche generate a large share of their revenue abroad. So why invest internationally as well?

The answer: foreign revenues are not the same as international diversification.

A Swiss share remains a Swiss share. It is listed in Switzerland, is strongly shaped by the Swiss market environment and is subject to the same regulatory, currency-related and index-specific dynamics as other Swiss stocks. Global revenues can cushion risk, but they do not replace direct exposure to different markets, regions and economic cycles.

That is precisely where the value of genuine diversification lies: not all economies move in lockstep. Markets such as Japan, India or Brazil are in part driven by different forces than Switzerland, Europe or the US. They react differently to interest rates, currencies, commodity prices or political developments.

For Swiss investors, this can help reduce dependence on the home market.

Diversification requires more than foreign equities

But geographic diversification alone is not enough. Many global equity indices are themselves highly concentrated. Anyone investing internationally should therefore pay attention not only to countries, but also to sectors, currencies, sources of return and asset classes.
That is where private markets are gaining importance. Private equity, private credit, infrastructure and real estate can provide broader support for portfolios because they are not traded on the stock exchange every day and their performance depends more heavily on long-term fundamentals.

Large international endowment funds, such as those of Yale or Harvard, have for decades relied on a mix of listed assets and alternative asset classes. The reason is simple: different sources of return can help make portfolios more resilient.

“For Swiss investors, that means: what is needed is not less quality, but more breadth.”

For Swiss investors, this point is particularly relevant. The domestic market is heavily shaped by a few large companies and certain sectors. Private market investments can open access to areas barely represented on the Swiss stock exchange — such as infrastructure, specialised credit strategies, fast-growing companies or international real-estate segments.

Switzerland remains strong, but it is not enough on its own

Switzerland remains an exceptionally stable and attractive market. That is precisely why it provides a solid foundation for many investors. But a solid foundation is not the same as a complete portfolio.

No single market can permanently fulfil all tasks: protection against external shocks, real returns, broad risk diversification and low dependence on individual companies or sectors. Not even Switzerland.
For Swiss investors, that means: what is needed is not less quality, but more breadth. Those who diversify their portfolios geographically, sectorally and across different asset classes are better prepared when markets become more challenging.

The decisive question is therefore not whether Swiss investors are allowed to trust their home market. They may. The more important question is whether they trust it too much.

Wassim Jomaa is CIO at Petiole Asset Management.

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