Like a Fine Watch, a Swiss Fund

I recently purchased a longer term position in the Swiss Helvetia Fund (SWZ). SWZ is a non-diversified, closed-end fund that invests in equity and equity-linked securities of Swiss companies. Here are some reasons I like SWZ:

1) Discount to NAV yesterday was 12.9%. The annual expense ratio is 1.10%. A discount/expense ratio of 10 times or more is generally attractive.

2) Solid portfolio holdings. The top four stock holdings are Nestle, Roche, Syngenta (SYT) and Novartis (NVS). I have recently been adding to my health care exposure and this fund fits the bill. The top three industry breakdown is:
Pharmaceuticals- 17.21%
Fodd and beverages- 14.88%
Biotechnology- 9.72%

3) Good long term performance. The five year NAV performance is about 17% a year.

4) Hedge for US dollar- The Fund’s equity investments are denominated in Swiss francs. The cash and short-term investments are also held in Swiss francs. The investment policy of the Fund is not to hedge the exposure to the Swiss Franc. So investors are fully exposed to fluctuations in the value of the Swiss franc relative to the U.S. dollar.

5) Sponsorship- Karpus Investment Management has a fairly big position in the fund. Karpus is known as an activist investor, and may push to reduce the NAV discount at some point.

Disclosure: I am long shares of SWZ.

Comments

[Greg Pinelli:]

Nice to see something about one of the most stable and interesting of th CEFs..a few additions to the article...
1. SWZ has a most interesting portfolio..that would be difficult to reproduce on an individual equity level. At one time it would have been virtually impossible.
2. The history of the fund i one of consistent..and occasionally very substantial..semi-annu... payouts..these have..on occassion..given holders upwards of a 10% distribution.
3. Roughly..below $15..and discount beyond 10% and you're practically assured of substantial returns..
SWZ is a real under the radar gem...typically something not seen on this miserable site.

2008 Aug 07 04:50 PM

[bsharvy:]

Are you concerned that Europe is hitting a recession, perhaps harder than the US? Or that Swiss companies are very "global" (predating that as a buzzword), and emerging markets are also slowing down sustantially?

2008 Aug 08 03:30 AM

[Flip1234:]

It looks like it has lagged the the Swiss ETF (symbol EWL).

2008 Aug 08 05:09 AM