Most investors believe that stock is the most traded asset in the world. The truth is that there’s another asset class that is 1.5 times the size of stocks.

We are talking, of course, about bonds. In 2017, the global bond market was sized at over $100 trillion, which dwarves the equity market (at $70 trillion). Your surprise would be forgiven because if you read the news, over 80% of the coverage concentrated exclusively on stocks.

In this article, we will dive deep into the bond world and explore the magical combination it has with Switzerland.

Bonds: a quick overview

Bonds are contractual debt instruments between a borrower (the debtor) and a lender (the creditor). There are usually 5 key characteristics of a bond:

• Principal amount – the total amount borrowed by the debtor from the creditor.
• Coupon rate – the interest rate paid on the principal by the debtor to the creditor.
• Coupon interval – the frequency at which the coupon will be paid. Normally it is quarterly.
• Duration – the length of the bond. The principal will need to be repaid at the end of the duration.
• Collateral – debtor’s assets pledged to creditors as security on the loan, in case of default.

Just like stock investors, bond investors make money in 2 forms: income and capital gains. However, the mechanisms of how these 2 types of gains come into play are very different.

Unlike dividend (which is a payout from the profit a company makes to its shareholders), which can be variable and unpredictable, coupon (interest) on bonds that are paid out to bondholders is fixed and must be met no matter the circumstances. Failure to observe such a covenant would be treated as a default, which carries a significant penalty, not least the ability of bondholders to institute insolvency proceedings against the borrower.

The way how capital gains works in a bond is also different. Unlike stocks, where the price is based on discounting future earnings expectations into the present day, the principal bond amount (nominal value) should stay, theoretically at least, the same from issuance to maturity. If the par value is $100 at issuance, then at the end of the duration (e.g. in 20 years), investors should still get paid $100. Yet there are 2 factors which affect the price of bonds (assuming it is being publicly traded):

• Risk-free return offered by alternative assets: due to the time value of money, where $100 in 20 years will be worth far less than $100 today (due to inflation and the cost of delayed gratification), investors are faced with alternatives when investing in fixed income assets. For example, when the base rate for bank deposits (which is considered to be risk-free) goes up, it makes deposits relatively more attractive than before, when compared to bonds. As a result, the demand for bonds will shift away (in magnitude proportional to the extent of the rise in the rate) towards deposit; thus causing a fall in bond prices.
• Credit risk of the borrower: if a borrower could not pay back the principal at the end of the loan period (or it could not pay the coupon during that period), then the borrower would have defaulted on the bond. This degrades the creditworthiness of the borrower and makes it significantly more risky, thereby decreasing the attractiveness of its debt and hence leading to a decline in its bond price.

The charm of bonds

Bonds have quite different characteristics compared to stocks. As the coupon rate is normally fixed, investors can expect to receive a steady return over the duration of the bond (that’s why they are also known as fixed income). Bonds also enjoy liquidation preference over shares. This means in the event of financial distress by the debtor, bondholders will be paid first (once liquidation of a company has been completed) before shareholders (who hold stocks). These 2 key features make bonds less risky than stocks.

Furthermore, like stocks, most bonds can be publicly traded in exchanges, thereby increasing their liquidity and offering capital movement in addition to the income element. This makes bonds enjoy quasi-stock like features and broadens its appeal to investors.

The charm of investing in Switzerland

Switzerland has long been a popular investment destination as evidenced by the large flow of foreign direct investment (FDI) and a high current account surplus. There are 3 key reasons behind such popularity:

1. High social-political stability – Switzerland is a landlocked, mountainous Alpine country in Western Europe. As a result, it has been historically incredibly difficult to invade. Combined with its declared political neutrality, it has experienced virtually no wars in the past few centuries.
2. A diversified and highly advanced economy – the high level of stability has enabled Switzerland to focus its energy on developing its internal economy and as a result, it is a sophisticated, service-orientated advanced economy that is highly integrated with the EU (but not part of the union, thereby it enjoys a certain degree of autonomy).
3. A sophisticated financial sector – also a result of Swiss stability, European aristocracy have for centuries, shielded their wealth in Switzerland, enjoying the anonymity and security it brings. Consequently, Switzerland has developed a more highly sophisticated financial sector (relative to its size) than rivals such as Paris and Frankfurt.

Types of bonds to invest

There are many different types of bonds to invest in, but they can be broadly broken down into 5 categories:

• Government
• Municipal
• Corporate
• RE bonds
• P2P lending (mini-bond)

A deep dive into the different bonds in Switzerland

10-Year Government bonds

QuickFacts

Underlying asset overview: lending capital to the Swiss government in return for a fixed interest payment.

Capital input requirement: CHF 10,000

Yield: -0.5% for the 10-year government bond

Capital value fluctuation: Nil

Income risks: N/A

Capital risk: very low

Payback period: 10 years

Liquidity: high as the bond is publicly traded

Ongoing management cost: very low (less than 0.5% of AUM)

Transaction cost: depending on the broker, around CHF 10 to 15 per trade

The Swiss Government’s 10-year bond is quite a conundrum. On the one hand, it is immensely popular with institutional investors (e.g. central banks, pension funds, mutual funds). On the other hand, it is a negative yield bond.

What does that mean? Instead of the borrower (i.e. the Swiss Government) paying a coupon (interest) to the creditors, a negative yield means the relationship is inverted. So, investors need to pay, regularly, for the privilege of lending money to the Swiss Government. This bond was issued with a -0.055% coupon rate, which meant that for every CHF 10,000 invested, investors were expected to fork out CHF 5.5 every year, until the maturity of the bond.

Why are the returns negative?

Swiss Government bonds are perceived to be an extremely safe asset class by investors (for the reasons outlined in the previous section). Consequently, demand for such bonds vastly exceeded supply and therefore the yield was naturally lowered. Furthermore, this bond was denominated to CHF, an extremely strong safe-haven currency that was expected to appreciate against others. As a result, even if investors had to forego the coupon payment (and even pay a small fee to the borrower), they were happy to do so as the gain in CHF (against their native currencies) would vastly outpace the loss in income.

Other examples of Swiss Government Bonds:

• 5-yr bond
• 20-yr bond
• 30-yr bond

15-Year Geneva canton bond

QuickFacts

Underlying asset overview: lending capital to the canton government to fund its operating and capital expenditures

Capital input requirement: CHF 50,000

Yield: 2.875% nominal coupon yield

Capital value fluctuation: usually within +/-10%

Income risks: very low

Capital risk: very low

Payback period: 15 years

Liquidity: relatively high as the bond is publicly traded

Ongoing management cost: very low (less than 0.5% of AUM)

Transaction cost: depending on the broker, around CHF 10 to 15 per trade

The 15-year Geneva Canton Bond is very similar to the 10-year Swiss Government Bond in many ways:

• They are both issued by the public authority
• They are both used to fund public expenditures and investments
• They are both traded on exchanges thereby ensuring a high degree of liquidity

The key difference lies with the issuer: whereas the former was issued by the Swiss central government, the latter was released by the local authority in Geneva. In reality, as the financial viability of both institutions is fairly stable (as a result of healthy tax revenue and prudent fiscal policies), the creditworthiness of both are fairly high.

One important area to note, however, is that the volume of the canton bond is much less than government bonds (by a factor of 100). This means the volume of canton bond traded will be significantly less than the government one and thus impact on its liquidity.

9-year Roche Holdings corporate bond

QuickFacts

Underlying asset overview: lending capital to companies to fuel their operating and capital expenditure programmes

Capital input requirement: CHF 1,000

Yield: 2.375% nominal coupon yield

Capital value fluctuation: usually within +/-10%

Income risks: low

Capital risk: low

Payback period: 9 years

Liquidity: relatively high as the bond is publicly traded

Ongoing management cost: very low (less than 0.5% of AUM)

Transaction cost: depending on the broker, around CHF 10 to 15 per trade

Companies often need capital to grow (e.g. marketing, acquisition). They can achieve this using 2 primary methods: issue shares (rights issue) or issue debt. Shares are cheaper in the short-run because there are no regular coupon payments required. However, they erode the long-term value of existing shareholders through dilution. Bonds are the reverse. They are more expensive to maintain in the short-run but they do not lead to dilution of existing shareholder values. This is why most companies prefer borrowing to issuing more share capital.

This is why Roche Holdings, a Swiss pharmaceutical giant, issued an $850 million 9-year bond in 2016 to make industry acquisitions as well as funding its R&D programmes. With a 2.375% nominal coupon rate and biannual payment frequency, Roche is able to raise capital cheaper and deploy it to more productive areas, thus garnering a higher ROI.

Le Bijou 5-year development bond

QuickFacts

Underlying asset overview: lending capital to Le Bijou for the leasing and refurbishment of apartments in prime locations in Switzerland and convert them into short-term luxury accommodations

Capital input requirement: CHF 50,000*

Yield: 5% per year*

Capital value fluctuation: none

Income risks: low

Capital risk: low

Payback period: 5 years

Liquidity: illiquid as the bond is not publicly traded

Ongoing management cost: none

Transaction cost: none

Not only can big corporations issue bonds, but smaller and more agile ones can also do so too; especially in this Age of Technology. In fact, profitable smaller companies can often move a lot faster than large multinationals, thereby reducing the cost of raising capital.

Le Bijou’s development bond* is a prime example where a company pitched a proven business model to investors and achieved successful scale-up. The underlying business operation is remarkably simple: the company either buys or takes out long leases on apartments in prime locations across Switzerland, before converting them into luxury short-stay accommodation. This is an extremely profitable business model fuelled by the popularity of Switzerland as a tourist and business destination. Furthermore, the above-average yield and the collateralization of the property as a security of the loan has proved to be an alluring combination for investors.

* Update: currently this bond issue is sold out. New issues may become available – press “Get Started” to receive updates.

Lend.ch P2P lending

QuickFacts

Underlying asset overview: pooling capital from individuals in order to lend to private individuals or businesses

Capital input requirement: CHF 10,000

Yield: 5-7% per year

Capital value fluctuation: none

Income risks: medium

Capital risk: medium to high

Payback period: 1-5 years

Liquidity: illiquid as the bond is not publicly traded

Ongoing management cost: none

Transaction cost: none

Traditionally individuals and businesses that require access to capital often had to resort to bank loans, which exerted monopoly on the interest rates and terms. But recent technological advancements, as well as deregulation, now make it possible for private investors to pool funds together in order to lend to eligible businesses and individuals. Platforms like Lend.ch assess the creditworthiness of borrowers and match them with investors with the appropriate risk appetite. The amount of risk undertaken is directly proportional to the rate of interest. Borrowers deemed to be of greater risk are charged a higher interest level.

While this has been an excellent alternative to other fixed-income products, it is not without risks. The two principal risk areas are lack of capital security and liquidity. These loans tend not to be secured (collateralised) against any particular assets. Therefore, in the event of a default, investors need to take bankruptcy proceedings against the individual or businesses, rather than simply claiming ownership of the collateral asset. Furthermore, these bonds are not publicly traded and a viable secondary market is yet to exist, so investors are expected to hold them to maturity.

FAQ

1. How do I invest in Swiss bonds?

For bonds that are publicly traded, simply go to your stockbroker and outline either your requirement or the exact identity of the bond that you wish to purchase and they should be able to execute the deal for you. For non-public bonds (i.e. real estate bonds, P2P lending), get in touch with the issuer directly and they should be able to advise.

2. How much of my portfolio to allocate to bonds?

It depends entirely on your risk appetite and investment objective. Normally it is recommended to maintain a 60-40 spread between equity and bond in a classic balanced risk pension portfolio. Obviously, investors who seek regular income or greater capital security might increase the allocation for bond; whereas these seeking capital growth might favour equity.

3. What happens when the borrower defaults on the bond?

This depends on whether the bond is secured against any asset or not. If it is, then it’s relatively simple to apply to a court for seizure (repossession) of the asset for liquidation. If it isn’t, then a generic insolvency proceeding against the borrower may commence; in which the court will attempt to isolate and liquidate the assets of the borrower in order to repay the loan.

After five years of in-depth research into the lives of assorted millionaires, finance expert Tom Corley looked at his data and saw a clear pattern. The author of “Rich Habits”, had discovered that almost all millionaires had more than one income stream. Most of them had three or more.

Upon further investigation, it was discovered that most of their income was derived from ownership of assets rather than exchanging labour for money. But what kind of assets? Asset ownership includes many different types but two of them dominate. They are:

• Real estate
• Equity (also known as stocks – both private and public)

In this article, we will focus on how to successfully invest in Swiss stocks.

What are stocks?

Stocks simply represent ownership in businesses. When you buy 100 Roche shares, you become the legal shareholder of part of Roche. This entitles you to certain rights, for example attending shareholder meetings and voting in key strategic decisions relating to the company.

There are economic benefits to being a shareholder as well: you can receive part of the profit the company makes every year (in the form of a dividend), should the board of the company decide to make a payout. You may also sell your shares at a profit (or loss) to other willing buyers in the open market (making a capital gain or loss).

Lastly, as shareholders participate directly in the economic benefit of a company, they also bear the most risk when it comes to the liquidation of the firm (for example in the event of bankruptcy). It means that any proceeds from the sale of the company will be used to pay off other creditors first before reaching shareholders (if any).

Investing in the best Swiss stocks

With the hundreds of companies listed in exchanges in Zurich and Bern, it can be daunting to decide which stock to include in your portfolio. After all, it’s important to make money, but it’s far more crucial not to lose any! Here we have composed an easy-to-follow guide on how to invest in the best Swiss stocks.

1. Decide how much to invest

There are many theories about the amount of capital you should commit to the stock market. If you ask 10 different professionals, you are likely to get 12 different answers.

Most investment managers would advise their clients by asking them to commit capital they won’t need for the next 5 years or are happy to lose. We think this is suboptimal for 2 reasons:

1. Five-years is way too short a time horizon to be investing in stocks. We are in the midst of a decade-long bull market and the end is still not in sight.

2. Encouraging investors to think about “happily losing money” is not only wrong but also reckless. It is effectively framing investment as quasi-gambling scheme and legitimising the flawed concept that losing money is part of life. In reality, with proper risk control and due diligence, investors with spare cash should expect much more than the unexpected.

Instead, it is better to start by considering the amount of capital that may not be needed in the next 10 years. A decade is a really long time and if you won’t need the funds during that time, chances are you can plan for the long-term.

Then calculate that amount as a percentage of your net worth and think instinctively about whether you are comfortable committing that portion of your wealth in the stock market. This exercise puts the nominal value of the capital into perspective. If you feel uneasy, then reduce the percentage to a level that you are comfortable with.

2. Open a brokerage account

It may sound obvious but your best investment ideas won’t take off unless someone is willing to facilitate and execute the trade. For that, you need a stock brokerage account.

Thankfully as a commodity service, brokerage services are  both plentiful and competitively priced. Chances are, your local bank will offer such a product and a simple online application alongside your proof of identity and address are usually sufficient to open one. Alternatively, there are dedicated stock brokerage  service providers (e.g. Interactive Brokers) that provide no-frill low-cost self-services. They can be an affordable and effective solution for many investors.

Given that you’ll be holding a significant amount of cash in the account at one point or another, it is prudent to ensure that your account is insured with the Swiss deposit insurance scheme in the unlikely event of your broker going out of business.

If you live outside of Switzerland, simply check with your local broker to see if they offer trades in Swiss stocks as most reputable brokers in the EU and the OECD countries do.

3. To manage or to be managed?

There will come a point that every investor will need to confront: do I manage the portfolio myself or shall I outsource to a professional?

There are 3 key ways to manage an investment portfolio and we will explore the pros and cons of each.

As you can see, both DIY and the Advisory approach require investors to have a certain level of knowledge about investing and the market. As a result, if you are a complete novice, hiring a professional to manage the portfolio is probably the most appropriate solution.

There are several areas that you should pay attention to when outsourcing to an investment manager:

• Most investment managers underperform market benchmarks. Even veteran stars can fail that hurdle, sometimes abysmally.
• Investment fees can have a tremendous drag on performance when compounded over time.
• Investment managers’ key incentive is to generate fees for themselves. Providing good service and performance is likely to be a byproduct for many of them.

As a result, we highly recommend all investors to educate themselves as quickly as possible and turn to manage their portfolios themselves.

4. DIY: passive vs active

Assuming you’ve decided to forgo the hefty fees and manage the portfolio yourself, you will soon face the question of whether to run it passively or actively.

Passive investing is also known as index investing. It means that instead of attempting to beat market benchmarks (also known as indices), an investor simply tried to replicate its performance and achieve the same level of gains and losses as the indices. Passive investing makes extensive use of index-tracking mutual funds and ETFs.

Active investing, on the other hand, refers to the practice of trying to achieve returns that is over and above market benchmarks (also known as alphas). This strategy usually involves screening, analysing and picking individual stocks to create a diverse but concentrated portfolio which in turn attempts to beat the specific index being tracked.

Comparing active and passive investing:

It is quite evident that unless you possess deep investment knowledge, have superb financial management skills as well as access to a large amount of capital, most investors would be  best served by pursuing the passive route.

5. Passive investing and the common pitfalls

It is very easy to think that once you’ve bought several index funds and ETFs, all is well and you can just sit back and relax. The truth is much more nuanced. There are several common pitfalls that every passive investor should avoid at all costs:

• Replication error – it sounds obvious  but if your chosen fund cannot accurately replicate the index it is tracking then it is not very useful. Make sure you check the deviation of the fund from the index it is tracking. Anything over 1.5% is unacceptable. You can avoid this by picking a reputable fund provider (e.g. BlackRock).
• Spiralling costs –  believe it or not, some index funds or ETFs carry pretty hefty costs, like this one. The 0.8% TER is 10 times that of a generic S&P500 index fund and the effect of fees will compound over the years, dragging the performance. As a result, make sure you really understand the objective the fund serves in the portfolio before purchasing and whenever in doubt, just buy a cheap generic all-share index fund/ETF.
• Forget to rebalance – every portfolio will deviate from the target objective as time passes and it is important to rebalance to ensure it remains on track. Whilst this can be an entire article to itself, the easiest way is to analyse and determine if the asset allocation based on the current value is still in line with the target.  If not, then change it to the desired allocations. Rebalancing should be performed annually on a passive portfolio.

Best-performing Swiss index funds and ETFs

How to pick your own stocks?

If you’ve decided to venture out solo and believe you have the skills to beat the market, then stock picking is for you. You’ll enjoy an array of freedom and if you could identify the next Amazon (which turned $1 in 1997 into over $1,350 today), then you could be richly rewarded.

Warning: we strongly advise you against investing a large portion of your capital in individual stocks. The evidence says even the most professional investors rarely can beat the market. If you want to try yourself as a money manager, start from safer options like investing in Swiss real estate and always remember to diversify.

There are many different styles depending on your objectives and risk tolerance, however, it can be mainly broken down into 3 categories:

• Value – identifying and purchasing stocks that are below their inherent market value whilst waiting for the market to realise their true values.
• Dividend – identifying and buying stocks with an increasing dividend yield in order to maximise the income potential.
• Adventurous – identifying the next company with exponential revenue and profit potential during its infant stage in order to maximise on capital gains.

Experienced stockpickers usually have set criteria (e.g. market cap, dividend yield, earnings ratios) and they use stock screening tools (screeners) to shortlist candidates. They then perform extremely detailed due diligence based on publicly available investor materials to verify their investment hypothesis, before forming a view. They will then often wait until the stock value has reached an attractive number before making the purchase.

The bottom line

Stock is an extremely attractive asset that can deliver both capital returns and income potential. Equally, Switzerland is home to many of the world-leading businesses. If the appropriate technique is deployed, it forms the bedrock of any sensible portfolio and you’ll be richly rewarded for your effort.

What do you get when you make a substantial investment that rewards with a reliable income you can depend on every quarter? Fixed income (FI) of course. But which classes of this asset are best for you and why?

What are fixed-income assets?

As the name implies, fixed-income assets generate a preset amount of income at regular intervals. Just like a bank deposit you pay in a certain amount for a predetermined period at an agreed rate. The bank then credits the equivalent interest every month.

Broadly speaking, fixed income usually refers to debt assets (i.e. investor lending capital) as opposed to equity assets (i.e. investor exchanging capital for ownership). Investors become creditors to the entity that they invest in. In exchange, they are compensated by regular coupon/interest payments at an agreed rate.

Below is a list of common fixed-income assets:

Why invest in fixed-income assets?

Most investors dedicate a significant portion of their portfolio to fixed-income assets, especially pensioners and those close to retirement age. There are 3 key reasons behind such a move:

1. Income regularity – investors receive a fixed level of income at a regular interval (hence the name!)

2. Lower capital volatility – as a fixed income investor, you are a creditor to the investee (rather the owner of). Consequently, in the event of bankruptcy, you will recover your capital before shareholders (although as we’ll see later, this can be deceptive).

3. Securitisation and diversification – fixed-income assets can be securitised and be traded like stocks, achieving liquidity and help to increase diversification (through lower transaction costs).

How to choose profitable fixed-income opportunities?

Like any other investment, the core of a profitable FI asset is the balance between the risk taken on and the reward it generates (risk-reward profile).

There are 2 principles ways to reap the return from FI assets:

• Yield: the fixed coupon/interest payment as stipulated under the terms of the asset.
• Capital price movement: when the underlying par value of the asset changes from the original issuance value. This only really happens with publicly traded bonds.

Equally, there are several intrinsic and extrinsic risks associated with these assets:

• Credit risk: where the issuer defaults and fails to return interest and/or capital.
• Pricing risk: where the selling price of the security is lower than the purchase price.
• Interest risk: where a rise in the central bank base rate renders the security a less attractive investment option, reducing the price.
• Inflation risk: where the rate of inflation outpaces the coupon rate, decreasing the purchasing power of the capital.
• Liquidity risk: how easily an asset can be sold and turned into cash.

The key is, therefore, to ensure for a given level of risk taken on, you are maximising the return.

A glimpse into the most profitable fixed-income assets in Switzerland today

The most common fixed-income assets available to retail investors these days are:

• Government bonds
• Corporate bonds
• Property bonds
• Mini-bonds

Each asset has different characteristics and understanding their risk-reward profile is critical in deciding how to deploy them in the portfolio.

It is evident from the above comparison that at one end of the risk-reward spectrum, we have government bonds that are extremely stable and yet delivering below-inflation returns. On the other hand, we have minibonds issued by SMEs that provide a superior return, but investors might not recoup their capital!

Corporate and property bonds rest somewhere in the middle of the two ends. They both have a similar overall return profile (5-6% per annum). The question, therefore, boils down to liquidity versus credit risk:

• Corporate bonds are highly liquid instruments and can be easily sold over the counter. However, it requires investors to understand the underlying performance of the business in order to gauge the credit risk. Equally, when a default occurs, the process of recouping the capital can be lengthy, onerous and uncertain.
• Property bonds are highly illiquid instruments (since not publicly traded) and require holding until maturity. However, their principal risk lies in the valuation trend of the specific property it is collateralised against, which is easier to understand. Equally, once default occurs, bondholders can simply sell the property and be compensated, which is a simpler and faster process than corporate debt restructuring.

In conclusion

There’s a huge array of different fixed-income assets to choose from, so choosing the one that suits your potential outlay and profile is key.  Corporate and property bonds are the most profitable assets. The key trade-off between them lies between the liquidity risk versus liquidation risk. The bottom line though is that property bonds tend to deliver higher returns in the long run. As well as offering better protection against default. However, one must accept the lower liquidity inherent to the asset.

The Secret’s Out: Le Bijou Unleashes the SL2 in Lucerne

It’s one of Europe’s hidden treasures and a place so delightful that enchanted tourists never want to leave. But today, the impossibly beautiful city of Lucerne is also attracting a new type of visitor. That’s because with the global economy stuttering, discerning investors are now flocking to one of Europe’s most trusted assets: Swiss bricks and mortar.

Now more popular than Venice, according to a recent report in news broadsheet Neue Zürcher Zeitung (NZZ), Lucerne is hard to beat as a destination for your cash in Switzerland this year. But if you’ve had your eye on the market, you’ll know the very best deals seldom pop up on the market. Although there are plenty of good pickings, investors who prefer cherries on their cake need a dash of patience and some fleet of foot to snatch the most prestigious deals.

The SL2 Lucerne Owners Club 

Zoom into view Le Bijou’s exceptional SL2 apartment-hotel complex in Lucerne – featuring four prestige, self-contained lakeshore units smack in the middle of the charming old town. And a unique opportunity to grab a stake in one of the Swiss apartment-hotel innovators’ sought-after property-share deals – which include some nifty perks on top of a healthy slice of the superb yields these sublime apartments generate.

Register to know more about SL2 Owners Club

Proven Track Record

Since opening in 2017 Le Bijou’s SL2 units in Lucerne have become the go-to venue in the city for corporate and media marketing events as well as for upscale tourists who want to experience the very best in Swiss comfort and hospitality. Featuring a market-leading occupancy rate of approaching 90%, the four units combined rake-in up to 2‘800 CHF per day.

With a 9.2/10 rating on Booking.com the SL2 units are literally in a class of their own, as the feedback resoundingly proves:

“The penthouse was stylish, in a very convenient location and has beautiful views of the lake and the wow factor. Day and night views from the apartment were magnificent. Appliances supplied were of high quality and include nice touches such as the Sonos system. Would definitely recommend to friends and family.”

Amanda, October 2019

Hitting exactly what the market needs

Although tourism is undoubtedly on the rise in this fairytale alpine town, and new hotels appear to open almost every month, SL2’s four apartments enjoy numerous advantages which make them stand out in what is still a rapidly evolving market.

Key to the success is the innovative business model pioneered by the Swiss hospitality developer, which aims to satisfy a new and rapidly-growing cohort of customers who are dissatisfied with the usual offerings from traditional hospitality providers.

Inside and out the SL2 units are built for a new kind of highly sophisticated traveler, who wants:

1. All the privacy advantages an apartment can provide

2. All the high-end door-to-door VIP services of a 5 star hotels

3. Downtown location with best panoramic views

4. Cutting-edge technology and luxurious, tasteful design

When you’re in a Le Bijou unit, you have the whole place just for yourself. Such comfort seduces frequent clients of five star hotels, even the royals.

Growing Market

Nestled on the shores of Lake Lucerne, dramatically encircled with majestic mountains, it is hardly surprising that tourism in the city is flourishing.

According to the Swiss Tourism Office, Lucerne in 2018 hosted 10% more American visitors and 11% more guests from Asia, compared to the previous year. Overall last year Switzerland’s tourist numbers swelled by 3.8% – hitting a record 38.8 million overnight annual stays.

Switzerland:

• Year after year, ever since 1982, Switzerland has witnessed an increase in tourism, unaffected by global crises

• Ranked first on the Global Peace Index (GPI)

• Stable political and economic outlook

• Low interest rates and mature financial markets

Lucerne:

• A staggering nine million tourists visit Lucerne every year

• By 2030 Lucerne will host 12-14 million tourists per year (According to research undertaken by Lucerne University)

• Increasing demand for high-quality tourist accommodation and according to the Lucerne Tourism Office, a 90% occupancy rate in high-season

Profitable Segment

Lots of tourists, yes, but these days they are spoiled for choice and increasingly picky about where they stay. Visitors to Switzerland are sophisticated and demanding. So the SL2 units were made to exceed even the loftiest of expectations.

Le Bijou’s SL2 property caters to a growing segment of artisan travelers, unruffled by the cooling global economy; and while not wanting to be ostentatious or flashy they do still want the full flush of VIP butler services; usually only found in the very best hotels.

This new breed of discerning traveler demands the most convenient and most private location. Somewhere with the very nicest views too. No compromises. They want all these things combined and they want it delivered in a polished, professional and highly personalised way.

The SL2 Building

A short stroll from the glorious 8th Century Church of St. Leodegar, SL2’s lakeside units take up a whole floor of a converted 19th century building not far from the medieval Chapel Bridge and Water Tower.

Each of the four apartments was built with privacy in mind and made to exceed the highest benchmarks in Swiss design and construction.

Together, the SL2 units can cater for up to 150 event guests and each apartment is fully equipped with a kitchen, two bathrooms and sleeping accommodation for up to eight visitors.

All the units provide fantastic views over the city or the surrounding mountains and lake. And Le Bijou’s management team and digital butler silver service are always at hand. With tailored apartment services and ready advice on where to experience the local culture and fine dining.

In high-demand from well-heeled locals and globetrotters alike, the residences’ provide unrivalled levels of comfort, all wrapped up in Le Bijou’s unique signature style of timeless elegance and Swiss attention to detail.

Strategic Location

• Arguably the best location in the whole city – with unparalleled views of the cityscape, mountains and lake

• The property is one of only a dozen buildings located in the strategic heart of the city that can offer the above and also be capable of serving as a hotel

An Opportunity to Diversify Your Portfolio

• The fundamental principle of diversification is that owning several low-correlated investments with the same returns decreases risk, while the returns stay the same. As shown by Ray Dalio, one of the world’s most successful fund managers, owning 10 uncorrelated assets will improve your return to risk ratio by a factor of 5.

• When compared to Zurich, Lucerne has a much more touristy clientele. The property generates healthy returns and has low correlation with the profits of our LG23 property in Zurich, what makes it a good fit for diversification.

         • For Zurich properties think business travelers, brand events and family celebrations

         • For Lucerne properties think tourists, tourists tourists!

The Upcoming Improvement

The SL2 units are already functioning excellently but there is always room for improvement. For 2020, the following improvements and goals are planned:

• Installation of James, the AI butler

• Content marketing media campaigns and behavioural-targeted online ads

• An increase in event bookings

• Minor renovations of some areas needing renewal

The Scoop

Savvy investors tempted to make a pre-Christmas splurge can now hoover-up the many exciting benefits that the SL2 Lucerne Owners Club offering provides.

While shares last, investors are being invited to choose from a menu of custom investment kits that include several tiers of leverage.

Typically based on a 10-year franchise and lease, the shares provide safe, healthy, tax-free annual dividends of 7-14%, as well as the opportunity to actively participate in the success of a trend-setting business transforming the industry.

And if that wasn’t tempting enough, SL2 Lucerne Owners Club members also receive generous member-only privileges such as significantly reduced rates on hosting friends and family for special occasions.

Cherries for Christmas

Want some more cherries later on? Owners Club investors will also get preferential access to exclusive new investment opportunities as and when they arise, along with investor and expert insights exclusively available through the club platform.

So whether you are thinking of diversifying your portfolio, or looking for an opening in an exciting new market segment; in the last weeks of the year there is likely no better way of becoming a player in the 5-star hospitality industry.

Just days since the offering 40% of the shares are already reserved but for nimble investors there should still be just enough time to grab a remaining holding in one of the smartest and most rewarding real estate deals in Europe this year.

For investors

Register here to get more info

Update: unfortunately, all A-shares are sold out; although we may have a couple of other properties and investment options available, such as 6% development bonds and B-shares.