What active management actually costs in Switzerland

Actively managed funds sold through Swiss banks typically charge total expense ratios of 1.2 to 2.0 percent per year. This annual cost is deducted from the fund's performance regardless of whether the fund produces positive returns. A CHF 100,000 investment in a fund charging 1.5 percent pays CHF 1,500 per year in fees. Over 20 years at a 7 percent gross return, those fees reduce the final portfolio value by approximately CHF 85,000 compared to a passive alternative charging 0.2 percent.

What the performance evidence actually shows

The SPIVA scorecard tracks the percentage of actively managed funds that outperform their benchmark index after fees. Across most major markets and most time periods, 80 to 90 percent of active funds underperform their index over 15-year horizons after fees. In the Swiss market specifically, MSCI Switzerland index trackers have outperformed the majority of active Swiss equity funds over every measured 10-year period since such tracking began.

Why active funds are still sold if passive is better

Active funds generate higher margins for the financial institutions that sell them. The annual management fee on a CHF 500,000 active fund portfolio at 1.5 percent generates CHF 7,500 per year for the fund house and typically pays a distribution fee to the advisor who placed the client in the fund. Passive ETFs at 0.2 percent generate CHF 1,000 per year on the same capital and pay no such fee. The incentive structure of the distribution system actively works against the client's interest.

A practical passive investing approach in Switzerland

For most Swiss resident investors, a simple three-fund approach covers the relevant universe at minimal cost. A global developed market ETF in UCITS form, a small allocation to emerging markets, and a short-duration bond fund for stability if desired. Total annual costs below 0.3 percent are achievable. Within Pillar 3a, VIAC and Finpension offer comparable passive strategies with expense ratios around 0.45 to 0.55 percent all-in including platform fees.