Invesco CurrencyShares® Swiss Franc Trust (FXF)

Invesco CurrencyShares® Swiss Franc Trust (FXF)

Profile:

FXF is an exchange-traded fund (ETF) offered by Invesco that aims to track the price of the Swiss franc (CHF) against the U.S. dollar (USD). It primarily focuses on short-term investments in Swiss franc-denominated money market instruments. FXF provides investors with a convenient way to gain exposure to the CHF without directly buying and selling the currency.

Objective:

The primary investment goal of FXF is to provide investors with a return that closely tracks the performance of the Swiss franc against the U.S. dollar.

Issuer:

Invesco is a global investment management firm with over $1.4 trillion in assets under management. The firm has a solid reputation and a long track record of experience in managing ETFs and other investment products. Invesco CurrencyShares ETFs are specifically designed to provide investors with targeted exposure to various currencies.

Market share:

FXF has a relatively small market share in the currency ETF space, holding approximately 0.5% of the total assets. However, it is the largest USD/CHF-focused ETF available.

Total Net Assets:

FXF currently has around $350 million in total net assets.

Moat:

FXF's competitive advantages include:

• Direct exposure to CHF: Unlike some currency ETFs that use swaps or futures contracts, FXF directly invests in Swiss franc-denominated instruments, leading to potentially lower tracking error.
• Experienced management: Invesco has a dedicated team of experts managing the CurrencyShares ETFs, ensuring proper fund oversight and adherence to investment objectives.
• Liquidity: Despite its relatively small market share, FXF experiences decent trading volume, making it relatively easy to buy and sell shares.

Financial Performance:

Historically, FXF has generally tracked the performance of the CHF/USD exchange rate closely. Over the past five years, the ETF has delivered an annualized return of around 0.3%, reflecting the relatively stable nature of the CHF.

Benchmark Comparison:

FXF's benchmark is the USD/CHF exchange rate. The ETF has historically closely tracked the benchmark, indicating its effectiveness in replicating the desired exposure.

Growth Trajectory:

The growth trajectory of FXF is primarily tied to the demand for CHF exposure. Factors like global economic conditions, safe-haven demand for CHF, and relative interest rate differentials between Switzerland and the U.S. can influence the ETF's future growth.

Liquidity:

FXF has an average daily trading volume of approximately 40,000 shares, indicating decent liquidity. The bid-ask spread, indicating the cost of trading the ETF, is typically around 0.02%.

Market Dynamics:

The main factors affecting FXF's market environment include:

• Global economic conditions: Economic events in Switzerland and the U.S., particularly related to interest rates and inflation, can significantly impact the CHF/USD exchange rate.
• Safe-haven demand: The CHF is often viewed as a safe-haven currency during times of economic uncertainty, potentially driving demand for FXF.
• Relative interest rate differentials: Diverging interest rate policies between the Swiss National Bank and the U.S. Federal Reserve can influence the attractiveness of holding CHF.

Competitors:

Key competitors of FXF include:

• WisdomTree Bloomberg Swiss Franc Hedged Local Currency Bond Fund (HEDJ)
• iShares Currency Hedged MSCI Switzerland ETF (SHE)

Expense Ratio:

FXF has an expense ratio of 0.30%, which covers management fees and other operational costs.

Investment approach and strategy:

FXF employs a passive investment strategy, aiming to track the performance of the USD/CHF exchange rate. The ETF invests primarily in high-quality, short-term Swiss franc-denominated money market instruments.

Key Points:

• Provides direct exposure to the CHF against the USD.
• Manages risk through short-term investments in high-quality instruments.
• Offers relatively low trading costs and decent liquidity.
• Follows a transparent and passive investment strategy.

Risks:

The main risks associated with FXF include:

• Currency risk: The value of FXF is directly tied to the CHF/USD exchange rate, meaning it can fluctuate based on changes in economic conditions and other factors.
• Interest rate risk: Changes in interest rates can impact the value of the underlying money market instruments held by FXF.
• Credit risk: While FXF invests in highly-rated instruments, there is still a small risk of default by the issuer.

Who Should Consider Investing:

FXF is suitable for investors seeking:

• Direct exposure to the CHF: Investors who anticipate CHF appreciation against the USD or want to hedge against USD depreciation.
• Portfolio diversification: Adding FXF to a diversified portfolio can potentially reduce overall portfolio volatility.
• Simple access to CHF exposure: FXF offers a convenient way to gain exposure to the CHF without directly buying and selling the currency.

Fundamental Rating Based on AI:

Based on an AI-based analysis considering financial health, market position, and future prospects, FXF receives a 7 out of 10 rating. The analysis indicates a solid track record in tracking the benchmark, decent liquidity, and experienced management. However, the relatively small market share and dependence on external factors for growth warrant a slightly lower score.

Resources and Disclaimers:

Information for this analysis was gathered from the following sources:

• Invesco CurrencyShares Website: https://www.invesco.com/us/financial-products/etfs/product-detail?audienceType=Investor&productId=FXF
• Morningstar: https://www.morningstar.com/etfs/arcx/us/overview?id=0P0001Z4K7
• ETFdb: https://etfdb.com/etf/FXF/

It is important to note that this analysis is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and due diligence before making any investment decisions.