14. The Swiss National Bank’s Investment Decision-Making Process from a Safe-Haven Currency Perspective

Defining an investment policy at the Swiss National Bank (SNB) has a long history and tradition. Strategy definition is a two-stage process. As a first step, the investment policy framework is drawn up, comprising all aspects of central banking, reputation, and risk policy, and a detailed, feasible long-term asset allocation strategy is formulated. In the second step, an investment strategy for the following 12–15 months is then prepared on the basis of this “neutral” allocation. Any deviations from the LAA are solely attributable to market valuation estimates. The SNB reports in a safe-haven currency, i.e. the Swiss franc. This has far-reaching implications for investment policy: the SNB can hold a higher proportion of risk assets relative to other central banks, while the diversification effect of risk assets is less pronounced and that of bonds stronger. The gradual expansion of the investment universe over the last 20 years has been accompanied by an ongoing improvement in the portfolio’s risk and return profile, even against the backdrop of the significant expansion in the SNB’s balance sheet. Ultimately, it has also alleviated the issue of excessive concentration in certain markets, which had become ever more problematic in light of this substantial balance sheet growth.