Tareno View July 2025

This significant devaluation comes as no surprise: the USD was clearly overvalued at the start of the year, supported by capital inflows due to attractive yields. All that was missing was a catalyst, and that was the unpredictable US policy. This caused the dollar to lose its shine and confidence. The role of the US dollar as the backbone of the global financial system is increasingly being called into question. However, there is currently no viable alternative in sight. Nevertheless, global investors and governments will try to reduce their dependence. In the medium term, we therefore expect the US dollar to weaken further towards purchasing power parity.

From a short-term perspective, however, we believe that the weakness of the USD is exaggerated. In combination with the high hedging costs of currently 4.5% p.a., we have therefore reduced our currency hedging ratio in the CHF portfolios from 50% to 40%.

Investment policy

Taking asset allocation further

The political surprises and divergent market developments in the first half of 2025 once again reinforce our investment policy, which is based on a balanced, forward-looking and dynamic asset allocation.

Balanced.

Many investors focus too heavily on sub-optimal indices and thus unintentionally take on high cluster risks. For example, the world stock index is US and technology-heavy, while the Swiss index is heavily dominated by a few stocks and lacks sectors such as technology, commodities and energy. Efficient risk management, on the other hand, requires genuine diversification across currencies, regions, sectors, investment styles and asset classes.

Forward-looking.

The asset management industry has traditionally based its strategic allocation primarily on historical return and risk metrics. The disadvantage of this approach is that investments focus mainly on the winners of the past and important changes and trends in the investment world are often overlooked. For example, it can be observed that portfolios are unintentionally increasingly geared towards the US currency after a prolonged period of USD appreciation or continue to be invested in CHF bonds, even though these hardly generate any income with negative interest rates.

A forward-looking and successful asset allocation, on the other hand, is based on forecast returns and risks. Although these key figures cannot be observed directly and must be carefully estimated, it is precisely this sophisticated approach that promises the decisive added value. Only with such a forward-looking strategy can investors invest early in new asset classes such as Bitcoin and emerging sectors such as cyber security.

Dynamic.

Financial markets are prone to exaggerations and regime changes that require portfolio adjustments. A purely static allocation would therefore be too inflexible and inefficient. At the same time, frequent tactical reallocations in anticipation of short-term market movements are usually not very promising and often result in high costs with manageable or even negative returns. Our approach is therefore deliberately dynamic with a medium-term horizon of several years. In practice, this means that we react anti-cyclically to short-term exaggerations, identify new technologies and long-term economic changes and continuously and carefully adjust the allocation to the investment environment. As the focus of the financial markets can quickly shift from one topic to another, agility is also required. We have recently increased this further by adding our “Hawk-Eye” to our portfolios. This innovative equity strategy has been very successfully identifying global trends and the winners of tomorrow since the beginning of 2023.