Investing in Zurich was the best decision we’ve ever made.
– Eric Schmidt, former CEO of Alphabet (Google)
Nestled in the foothills of the Swiss Alps, Zurich is renowned as one of the leading financial centers in Europe with a strong business culture and many opportunities for savvy investors. This article explores the best stocks, bonds, and real estate opportunities this city has to offer.
Zurich, Schwyz, and Zug form the backbone of the Swiss financial system. Zurich’s prominence, however, is highlighted by its rank as the 18th most important financial center globally. From 2011 to 2021, Zurich outpaced all other Swiss financial hubs in growth, as illustrated in the chart below. To this day, Zurich continues to lead the nation as a financial superpower.
Development of real gross value added to the financial sector and the overall economy in the Zurich region over 2011–2021 (2011 = 100)
Source: Zurich Financial Centre 2023/2024
Renowned for its business-friendly environment, exceptional human capital, and global reputation, Zurich is home to the headquarters of Fortune 500 companies like ABB, Swiss RE, UBS, and Zurich Insurance. The city also houses major offices of global giants including Google, Meta, Sony, and NVIDIA. This concentration of leading enterprises enhances Zurich’s business ecosystem, attracting a diverse range of investors eager to capitalize on the city’s dynamic economic landscape.
Headquarters of UBS, Google, and Sony in Zurich
Sources: UBS, Greater Zurich Area, Aepli
Zurich’s ability to attract world-leading companies – along with Switzerland’s economic stability, strong currency and banking system, favorable tax environment, and thriving real estate market – is a key reason why the city is home to over 99’300 ultra-high-net-worth individuals (UHNWIs) who are looking for lucrative investment opportunities both in the city and beyond. It is no wonder that the Barnes City Index 2023 ranks Zurich among the top 20 cities worldwide for investment attractiveness.
A strong culture of innovation has become a driving force powering Zurich’s growth. A powerful collaboration between universities, companies, and the public sector fosters investment in cutting-edge research in advanced technologies like robotics, material science, and synthetic fuels. Innovation Park Zurich and the Greater Zurich Area exemplify this synergy between science and business.
The key factors of Zurich’s regional innovation ecosystem are its strong research and university systems, its strong private sector with high levels of private investments in R&D and innovation activities, and its flexible and stable innovation and labor regulations.
– Zurich Innovation System
Development of the Innovation Park Zurich campus
Sources: Innovation Park Zurich
Zurich’s startup and fintech sectors are also flourishing. The city produced three unicorns in 2022 and was ranked the 36th best startup ecosystem globally by Startup Genome in 2023. Additionally, it was recognized as “the most innovative Swiss region” by the Regional Innovation Scoreboard. In fintech, Zurich ranks even more highly, securing 5th place worldwide in the Global Financial Center Index.
Zurich’s count of high-quality universities such as ETH Zurich, one of the world’s leading institutions in science and technology, and [a] number of Fintech-related academic publications contribute to its high performance in the Talent factor and help it secure the top spot in the ranking.
– The Global Startup Ecosystem Report: Fintech Edition by Startup Genome
Zurich truly knows how to leverage its strengths, and today every savvy investor can benefit from its ecosystem and the opportunities available.
Many investors select shares (public and private) and bonds of companies connected to Zurich as the most preferable assets for building their wealth. According to a recent survey from moneyland.ch, 36% of Swiss residents have invested at least part of their wealth in Swiss stocks, while 28% have invested in bonds.
The table below shows the performance comparison of the shares of five Zurich-based companies with the highest capitalization included in the SMI index over the 10 years from January 1, 2014, to August 1, 2024*.
| SMI Index | UBS Group AG | Zurich Insurance Group | Swiss Re | Sonova | Swiss Life | |
| Return (in %)** | 50.37% | 119.24% | 225.06% | 147.49% | 148.50% | 403.59% |
| Annualized Rate of Return (in %) | 3.81% | 7.92% | 13.00% | 9.71% | 9.32% | 16.37% |
| Standard Deviation (by Q Returns) | 0.05 | 0.11 | 0.08 | 0.10 | 0.14 | 0.10 |
| Sharpe Ratio | 0.39 | 0.42 | 0.66 | 0.61 | 0.44 | 0.94 |
| The Max Drawdown (in %) | -9.39% | -14.90% | -23.31% | -36.09% | -30.58% | -29.56% |
| Market Capitalization (in CHF billion) | – | 83.191 | 68.683 | 31.088 | 17.109 | 18.462 |
| P/E Ratio | 19.76 | 61.81 | 16.42 | 11.80 | 28.56 | 17.96 |
| Earnings per Share (EPS) | 2.62 | 0.42 | 29.05 | 9.07 | 10.05 | 37.04 |
| Forward Dividend and Yield (in %) | – | 0.64 (2.41%) | 26.00 (5.49%) | 6.19 (5.84%) | 4.30 (1.49%) | 33.00 (4.98%) |
* The calculations were made using UBS Group AG, Zurich Insurance Group, Swiss Re, and Swiss Life as companies that have headquarters in Zurich (only Sonova has its office in Stäfa, canton of Zurich) and SMI Index as a benchmark. Source: Yahoo Finance.
** Data provided here and below as of Aug. 15, 2024.
All analyzed companies have outperformed the SMI Index over the same period (which had an annual return of 3.81%), while two of those stocks had higher P/E ratios, which means that those shares’ prices are high relative to earnings and are overvalued. One of those, Swiss Life, has a Sharpe ratio of almost 1, which shows that it had an above-average level of returns per unit of risk over the 10 years.
Investors’ choice to include public stocks, including those such as Swiss Life and Zurich Insurance Group, in their portfolios is often based as much on their return-risk profile as on their liquid nature. Yet among the downsides, shares are extremely volatile while their returns are increasingly affected by rising inflation and other factors.
Comparison of returns of the SMI Index as a benchmark and five analyzed Zurich-based companies for the past 10 years
Source: Trading View
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High-quality corporate bonds are also commonly used assets that provide a regular income stream from their coupon payments. Although corporate bonds are usually less volatile than stocks, their returns tend to be lower as well. In real terms, the annual average return for Swiss bonds over 10 years is 2.0% compared with 5.6% for Swiss equities.
Since 1926, the average annual return for a 10-year investment in Swiss bonds has been about half that of Swiss equities (3.9% versus 7.7% (in CHF)) in nominal terms. In real terms, the annual average return for 10-year Swiss bond investment is 2.0% compared with 5.6% for Swiss equities.
– The Pictet Group Report
So, which bonds from Zurich-based companies are worth paying attention to now?
2.50 JB 23-30
Issuer: Bank Julius Bär
Maturity date: 06.09.2030
Price (as of 12/08/2024): CHF 105.40
Coupon rate: 2.500% (paid annually)
Yield to maturity: 2.12%
Minimum tradable unit: CHF 5’000
4.375 SL 16-46
Issuer: Swiss Life AG
Maturity date: 24.09.2046
Price (as of 12/08/2024): CHF 106
Coupon rate: 4.375% (paid annually)
Yield to maturity: No provided data
Minimum tradable unit: CHF 5’000
3.6 ZKB 17-99
Issuer: Zürcher Kantonalbank
Maturity date: 31.12.9999
Price (as of 12/08/2024): CHF 100.20
Coupon rate: 3.600% (paid annually)
Yield to maturity: No provided data
Minimum tradable unit: CHF 5’000
3 UBSG 19-99
Issuer: UBS Group AG
Maturity date: 31.12.9999
Price (as of 12/08/2024): CHF 98.05
Coupon rate: 3.000% (paid annually)
Yield to maturity: No provided data
Minimum tradable unit: CHF 5’000
In comparison with shares, bonds provide lower yields, ranging from 2.5% to 4.3%, but their regular coupon payments and affordability due to the low minimum investment amount are substantial advantages. Not to mention their steadier nature compared to public stocks, often resulting in lower overall volatility and maximum drawdowns.
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Zurich’s real estate market is experiencing growth, driven by the city’s appeal as an innovative hub and a desirable location for both living and business operations. This demand has driven a notable increase in property prices.
In the second quarter of 2024, Zurich’s real estate prices rose by 1.1% compared to growth of 0.6% overall in Switzerland, continuing a consistent upward trend. This trend is expected to continue due to the high demand and relatively low construction activity, with experts predicting further price increases for residential properties in the medium term.
This sharp rise in prices is partly driven by Zurich’s growing population, which includes a significant proportion of foreign residents. As of February 2024, 19.1% of Zurich’s population were permanent foreign residents, the highest percentage in Switzerland. This demographic factor is further fueling demand in the housing market.
We have low supply, but at the same time we have increasing demand due to employment growth and immigration.
– Alexander Koch, an economist at Raiffeisen Switzerland
The rental market in Zurich is experiencing similar conditions. The average gross rental yields in Zurich are currently at 2.74%, which is lower than the national average of 3.05%. This reflects the high property prices and sustained demand, although the momentum in rent increases is stabilizing.
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Despite these low yields, the demand for rental properties remains strong, underpinned by Zurich’s economic vitality and attractiveness as a place to live and work. However, the question arises: How can you invest in Zurich’s real estate? For an answer, consider a few of the most common approaches to investing and their key benefits and drawbacks.
First, Zurich’s real estate offers the potential for significant capital appreciation, similar to the stock market. For instance, property prices in Zurich have seen a remarkable increase of 175% since 2000, highlighting the long-term profitability of investing in this market. However, be aware that property value appreciation is not guaranteed and can fluctuate based on factors including location and broader market trends.
Second, in addition to potential capital gains, real estate investment provides a consistent source of income, particularly through the “buy-to-let” model. Zurich’s strong local and international demand for residential and commercial properties ensures a steady cash flow for investors. As the city expands, the prospects for substantial returns on real estate investments remain robust.
Of course, the capital required to invest in real estate can be significantly higher than for stocks or bonds. The median price on the market is CHF 3 million for a house and CHF 1.7 million for an apartment as of August 2024, which is a real hurdle for many investors. There is also the liquidity issue to consider – finding a buyer when you need to sell your property can be hard.
Issues mentioned in the previous section can be overcome by investing indirectly through ETFs, crowdfunding platforms, and fractional real estate investing. They offer accessible investments in real estate and provide much greater liquidity than investing in a property outright.
Le Bijou offers a great opportunity for individuals who are looking for indirect investing in Zurich real estate through a carefully curated portfolio. With a minimum investment starting at just CHF 100’000 one-time or CHF 500 per month, investors can anticipate returns of up to 11.57%. This portfolio targets prime properties in the heart of Zurich, including sought-after locations like Bahnhofstrasse, Lintheschergasse, and Limmatquai.
Since its launch in 2018, the Zurich portfolio has consistently delivered an average annual return of 11.57%, even during the challenging pandemic years. Impressively, the A-Shares in this portfolio are projected to achieve an equity multiple (MOIC) of 2.21x over the next 10 years. This means that an investment of CHF 100’000 could potentially grow to CHF 221’000 within a decade.
Investing in private Zurich-based companies provides greater returns than public shares by multiples of two, three, or even more and with low volatility that’s similar to bonds (given there is no daily marking-to-market). Our partner, Moonshot, provides access to several Zurich-based private companies, including Le Bijou’s Diversified Portfolio: Zurich, Climeworks, Piëch Automotive, and Synhelion.
What drives the potential for such extraordinary returns? Investing in private companies allows you to enjoy returns similar to those of venture capital and angel investors. Private companies are taking longer than ever to offer shares to the public; if you don’t invest when they are private, you can miss out on the lion’s share of their early growth – this is illustrated by the red line in the diagram below.
The financing cycles of growing companies
Source: The IT Factory
Zurich continues to bring together people with big ideas and the ability to realize them. The city confidently maintains its status as the financial center of Europe, attracting more and more major companies and enabling new companies to grow, and through their innovations benefit both investors and humanity at large. This has made Zurich one of the most sought-after investment markets in Europe, and this trend will only continue to grow. As Lake Zurich mirrors the elegance of its surroundings, so too does the city present a landscape filled with exceptional investment possibilities.
