In principle, low interest rates are not a bad thing. We mustn't forget that they are allowing many companies to take advantage of very favorable financing, and this is also reflected in Switzerland's positive economic development. However, when companies have excess liquidity in the current environment, negative interest rates are leading to new kinds of costs that were not present in the past.
In the case of the dollar, Credit Suisse expects the US Federal Reserve to raise interest rates in 2022. In the euro zone, however, we believe that the European Central Bank will leave interest rates as they are for the time being. We therefore anticipate that monetary policy will remain unchanged in Switzerland as well. Interest rates are likely to remain at historically low levels, so companies will continue to be faced with the costs of negative interest rates on sizable liquidity holdings.
It is important to distinguish between owner-managed companies and publicly traded companies. In the case of companies with strong individual shareholders or shareholder families, it makes sense in the current situation to think about whether liquidity should be transferred from business to private ownership. Obviously, this can only be done in line with the company's liquidity planning and strategic objectives and with a thorough review of the tax implications. With the involvement of tax experts, Credit Suisse helps owner-managed companies to formulate a long-term withdrawal strategy that takes into account both personal and company needs.
I recently visited an SME company in the Mittelland region that is planning to make a replacement investment of CHF 8 million in five years. Instead of seeking financing, however, the company wants to take advantage of its excess liquidity. In a situation like that, it can certainly make sense to invest the liquidity, in accordance with the company's time horizon and risk profile, to avoid negative interest rates.
We work with our clients to develop a liquidity plan and adapt investment solutions to their liquidity needs. Possible intra-year solutions might include dual currency transactions, for example if a company is already in need of foreign currency for its operational business and also wants to earn a premium.
I'm currently talking with many companies that are trying to break even and are willing to take manageable risks in that context. One option is Credit Suisse's Swiss Mortgage Fund. This fund provides investors with an opportunity – not subject to time limits – to invest in a short-term mortgage portfolio of existing Credit Suisse mortgage clients. Because of the portfolio's low level of interest sensitivity and high credit quality, the fund's performance has been very stable and positive, despite the negative interest rate environment.