How to Invest in the SPI

In this guide, Felix Oeschger from moneyland.ch answers the most important questions about investing in the SPI.

Which stocks does the SPI track?

The SPI is the second most popular Swiss stock index, after the Swiss Market Index (SMI). Covering 205 different stocks, the index tracks nearly all of the Swiss stocks listed on a stock exchange, including the stocks that are tracked by the SMI.

The SPI includes the stocks of all the companies with primary listings on the SIX Swiss Exchange that meet these criteria:

• The freely tradable portion of the company’s stock (the free float) must make up at least 20 percent of total stock. This is meant to increase the liquidity of SPI stocks.
• Holding companies are only included in the SPI if they do not invest in Swiss companies. This measure is meant to prevent the double-representation of Swiss stocks in the index.
• Foreign companies with a primary listing on the SIX exchange must apply to be included in the index, and must meet additional criteria.

Although the SPI 205 covers many different stocks, the number of companies represented is somewhat lower. One reason for this is that some companies have more than one stock title listed on the exchange. For example, Roche has separately-listed bearer shares and participation certificates, and the Swatch Group has registered shares and bearer shares.

How does the SPI work?

The SPI’s going rate is based on the average prices of the 205 stocks that it tracks, but the weightings used vary between stocks. The larger the market capitalization of a company’s freely tradable stocks is, the bigger its impact on the SPI’s rate is. There are no limits on how heavy an individual stock’s weighting in the SPI can be.

The SIX exchange calculates two different versions of the SPI. When people in the space talk about the Swiss Performance Index (SPI), they normally mean the Swiss Performance Index SPI TR with the ticker symbol SPIX. That index is a performance index, and is calculated on the assumption that dividends paid out by SPI stocks will be reinvested back into the index. Accounting for dividends has a positive impact on the SPI’s long-term performance because of the compounding interest effect.

The second version of the SPI is the price index, which does not account for dividends. This index is called the SPI PR or just SPIX, but is rarely mentioned in the media.

What is the SPI Extra?

The SPI Extra is the SPI minus the 20 biggest stocks – those tracked by the SMI.

Like the SPI and SMI, the SPI Extra weights individual stocks based on the freely tradable portion of the company’s stock. The SPI Extra is published both as a price index (SPIEX) and as a performance index (SPIEXX), although media reports are more likely to mention the performance version of the index.

How well do the SPI and SPI Extra actually replicate the Swiss stock market?

The SPI is considered the benchmark for the entire Swiss stock market, and covers around 99 percent of the Swiss stock market (when measured by free float market capitalization).

Important: The fact that the SPI has broad market coverage, tracking 205 different stocks, should not distract from the fact that its performance is largely determined by the biggest stocks. The three biggest stocks in the SPI have a combined weighting of more than 30 percent. The ten biggest stocks make up around 66 percent of the index’s weighting.

The SPI Extra includes all small and mid-sized Swiss companies in the SPI, and is considered the benchmark for this sector of the market. It covers around 20 percent of the Swiss stock market (based on free float market capitalization).

But both the SPI and the SPI Extra only include companies with primary listings on the SIX exchange. Companies that are not listed on the stock exchange, such as those whose stocks are traded on the OTC-X over-the-counter exchange, are not included in these indexes.

There are also Swiss companies which are listed on foreign stock exchanges, and therefore are not included in the SPI because they are not listed on the SIX exchange. Examples include sports equipment manufacturer ON and commodities giant Glencore.

How can I invest in the SPI and the SPI Extra?

Swiss investors who want to invest in the SPI can choose from numerous index funds as well as two exchange-traded funds (ETFs). There are also two index funds based on the SPI Extra. For investors who want to passively invest in the Swiss stock market over long terms, both index funds and ETFs are a good option. Because of that, we get into further detail about both of the specific ETFs and index funds in question further down.

Aside from ETFs and index funds, there are also other ways to directly or indirectly invest in the SPI, the SPI Extra, or individual SPI stocks.

• Buy shares in individual companies tracked by the SPI

If you have the know-how, more risk capacity, and are willing to put in some time and effort, then putting together your own SPI-based stock portfolio can make sense. But accurately replicating the SPI using individual stocks is hardly possible.

• Buy an SPI or SPI Extra tracker certificate

The purpose of a tracker certificate is also to replicate an index. But unlike physically-replicating ETFs and index funds, your money is not invested directly in SPI stocks, so the issuer risk is higher. What is more, tracker certificates are complicated financial instruments that can be difficult to understand. At least for long-term investors, ETFs and index funds are more suitable.

• Open a fund savings plan that uses the SPI or SPI Extra

With a fund savings plan, you make regular, recurring payments that are then invested into the fund of your choice for you. But not all Swiss fund savings plans let you invest in pure SPI ETFs or SPI index funds. You can find more information about Swiss fund savings plans here.

• Invest in the SPI or SPI Extra through a robo advisor

Digital asset management services are another solution for investing in Swiss stocks. But most digital asset management services do not let you invest specifically in SPI stocks or SPI ETFs. You can find more information about Swiss online asset management services here.

• Invest in SPI stocks through a conventional asset management service

You can also invest in SPI stocks – either indirectly using funds, or directly in individual stocks – using a conventional asset management service. However, the fees charged by conventional asset management and investment advisory service providers are often high. You can compare Swiss asset management services here.

• Buy shares in actively-managed mutual funds that invest in SPI stocks

In Switzerland you can choose from a broad array of actively-managed mutual funds that invest in SPI stocks, among other things. But mutual funds have rarely managed to outperform the SPI or SPI Extra over the long term. Additionally, mutual funds normally have higher costs. Tip: In most cases, passively-managed funds like ETFs and index funds deliver better performance than actively-managed mutual funds.

Here, we show you which ETFs and index funds you as an investor in Switzerland can use to invest in the SPI or SPI Extra.

Which ETFs can I use to invest in the SPI and SPI Extra?

The selection of ETFs that Swiss investors can use to invest in the SPI is small. There are just two investment products of this type that make sense to use.

Table 1: Swiss-domiciled ETFs that replicate the SPI

Exchange-traded fund	ISIN	Ongoing cost (TER)	Are dividends distributed or accreted?
iShares Core SPI ETF (CH)	CH0237935652	0.1% per year	Distributed
UBS ETF (CH) SPI (CHF) A-dis	CH0131872431	0.15% per year	Distributed

 

There are no ETFs that replicate the SPI Extra index. But you can find two index funds that offer a viable alternative in table 3.

Which index funds can I use to invest in the SPI?

There are many SPI index funds that you can invest in as a Swiss investor. In table 2, moneyland.ch lists these, sorted by their ongoing costs (TERs).

Table 2: Swiss-domiciled Index funds that replicate the SPI

Index fund	ISIN	Ongoing cost (TER)	Are dividends distributed or accreted?
iShares SPI Equity Index Fund (CH)	CH0342181622	0.13% per year	Accreted
Swisscanto (CH) Index Equity Fund Switzerland Total (I)	CH0315622990	0.15% per year	Distributed
UBS (CH) Index Fund - Equities Switzerland All NSL	CH0190771862	0.161% per year	Accreted
UBS (CH) Investment Fund - Equities Switzerland Passive All	CH0356569118	0.17% per year	Accreted
Swisscanto (CH) Index Equity Fund Switzerland Total (II)	CH0025417491	0.19% per year	Distributed
LLB Aktien Schweiz Passiv (CHF)	CH0421963825	0.21% per year	Accreted
Pictet CH-Swiss Market Tracker	CH0010396734	0.37% per year	Distributed
Raiffeisen Index Fonds – SPI	CH0120927568	0.42% per year	Distributed

 

Which Index funds can I use to invest in the SPI Extra?

There are two suitable index funds for Swiss investors who want to invest in the SPI Extra.

Table 3: Swiss-domiciled Index funds that replicate the SPI Extra

Index fund	ISIN	Ongoing cost (TER)	Are dividends distributed or accreted?
UBS (CH) Index Fund - Equities Switzerland Small & Mid	CH0222624659	0.1819% per year	Accreted
Swisscanto (CH) Index Equity Fund Small & Mid Caps Switzerland	CH0315622966	0.3% per year	Distributed

 

Should I use an ETF or an index fund?

ETFs and index funds are very similar, but there are several differences. One of the most important differences is that shares in index funds are only sold once per day. Shares in ETFs, on the other hand, can be bought and sold on the stock exchange throughout the trading day, just like stocks. But this difference is hardly important for long-term investors. You can learn more about the differences between index funds and ETFs here.

As a general rule, it makes no difference whether you decide to use an ETF or an index fund. Important factors to consider when choosing the right fund apply to both ETFs and index funds. These are the costs, whether the fund distributes or reinvests (accretes) dividends, and how the fund replicates the index (physically or synthetically).

How can I buy SPI ETFs and index funds?

Most Swiss online stock brokers offer a wide range of ETFs. If you want to invest through your bank, whether or not SPI ETFs are offered varies broadly between individual banks. Larger banks, at least, should give you the option of buying shares in an SPI ETF.

Options for investing in index funds are more limited. Depending on which stock brokerage account you have, there is a good chance that some or even all of the index funds listed in the table above will not be available.

Example: The online stock broker Swissquote lets you buy shares in all of the SPI and SPI Extra index funds listed above, but Cornèrtrader only lets you buy shares in the UBS (CH) Index Fund - Equities Switzerland Small & Mid index fund. The two SPI ETFs, on the other hand, are available on both Swissquote and Cornèrtrader.

How much does using SPI index funds and ETFs cost?

The most important costs are the ongoing fund costs (the total expense ratio or TER). In the tables above, moneyland.ch shows you the yearly TERs as a percentage of invested capital. If you want to use an ETF or an index fund to invest in the SPI or the SPI Extra, and there are several options to choose from, you should generally use the cheapest fund available. The only exception to this rule is if there are other factors that are important to you, such as whether dividends are distributed or accreted.

Index funds may also charge you fees – such as sales charges, contingent deferred sales charges, and subscription fees – when you buy or sell their shares. These fees are usually small. In the case of the SPI and SPI Extra index funds in the tables above, these fees are negligible for long-term investors.

In addition to the fund’s costs, your bank or online broker also charge fees. You can compare these fees using the online trading comparison on moneyland.ch.

Should I use a distributing or an accreting fund?

With both distributing and accreting ETFs and index funds, you receive the dividends paid out by the SPI stocks held by the fund. When you use a distributing fund, these shareholder dividends are paid out into your bank account. When you use an accreting fund, on the other hand, your dividends remain in the fund, with the money being used to buy additional stock in SPI companies.

If you are investing in the SPI or SPI Extra over a long term, and do not immediately need the money from dividends, then using an accreting fund is preferable. Unlike distributing funds, an accreting fund’s managers reinvest the dividends at a low cost while keeping the money in the fund. Over the long term, you benefit from the compounding interest effect – at least if the SPI goes up over time.

Using distributing funds can make sense if you need the ongoing dividends to cover your living expenses, or if you want to use your dividends for other investments.

Good to know: For you as an investor in Switzerland, there is no tax difference between accreting and distributing funds. The Swiss withholding tax on interest and dividends applies to dividends from SPI and SPI Extra funds whether they are accreted or distributed. However, you can reclaim the withholding tax in full declaring your dividends either in your tax return (in the case of distributing funds) or directly through the fund’s management (accreting fund). In both cases, the dividends count towards your taxable income.

Where are SPI index fund and ETFs domiciled?

All of the ETFs and index funds listed in the tables above are domiciled in Switzerland. You can normally find out where a fund is domiciled by simply referring to its fact sheet or other official information from the fund’s operators.

From a tax perspective, if you live in Switzerland and only want to invest in Swiss stocks, it is better to use ETFs or index funds that are domiciled in Switzerland.

Does the fund use physical or synthetic replication?

Physically-replicating funds largely invest directly in the underlying assets tracked by their reference index. That means an ETF or index fund that physically replicates the SPI or the SPI Extra actually buys shares in the companies tracked by the index they follow, to a large extent.

A synthetically-replicating ETF or index fund, on the other hand, only invests part of your capital into SPI stocks. The fund still aims to replicate the index’s performance, but uses swaps instead of buying actual stock.

As a general rule, ETFs with physical replication are preferable. The reason is that your money is largely invested in SPI stocks, so your wealth will be better protected in the case of the fund going bankrupt.

All of the ETFs and index funds included in the tables above use physical replication. The method that nearly all of the funds above use to replicate the index is called physical replication with optimization. That means the fund may not include certain smaller stocks from the index in its investment portfolio. The fund can still closely replicate the index because the excluded stocks have only a marginal impact on the index’s overall performance.

Only the SPI index fund from Raiffeisen (Raiffeisen Index Fonds – SPI) and the SPI Extra index fund from Credit Suisse (UBS (CH) Index Fund - Equities Switzerland Small & Mid) actually physically replicate the entire index.

What are the advantages of investing in the SPI?

• With 205 Swiss stocks represented by the index, the SPI represents most of the Swiss stock market.
• You can invest in the stocks of nearly all publicly-listed Swiss companies using just one investment fund.
• The selection of index funds and ETFs that replicate the SPI is larger than that of any other stock index.

What are the disadvantages of investing in the SPI?

• Many eggs in a few baskets: The three biggest stocks make up more than 30 percent of the SPI, and the ten biggest stocks make up 66 percent.
• Small and mid-sized companies are hardly represented: Although the SPI includes the stocks of 185 small and mid-sized companies, their weighting in the index is very low. When you invest in the SPI, more than 80 percent of your capital goes into the 20 biggest indexed companies.
• One-sided industry representation: The health and consumer goods industry sectors together make up over 50 percent of the SPI. The technology and commodities sectors are hardly represented.

What are the advantages of investing in the SPI Extra?

• The SPI Extra, with its 185 indexed stocks, covers practically all of the small and mid-sized companies listed on the Swiss stock exchange.
• When you invest in the SPI Extra, 100 percent of the capital goes into small and mid-sized companies – compared to less than 20 percent when you invest in the SPI.

What are the disadvantages of investing in the SPI Extra?

• The SPI Extra too is not very diversified, even if it is somewhat better than the SPI in this regard: The three biggest stocks make up around 14 percent of the SPI Extra. The ten biggest stocks make up around 36 percent of the index.
• While mid-sized companies are well represented in the SPI Extra, small companies have a lower weighting and play a secondary role in the index.
• One-side industry representation: Companies in the manufacturing and finance sectors make up 57 percent of the SPI Extra. The technology and commodities sectors are poorly represented, making up one percent and three percent of the index respectively.
• There are no ETFs and only two index funds that track the SPI Extra.

Are there more indexes in the SPI family?

There are many more sub-indices in addition to the SPI Extra. For example, there are three sub-indices that are based on company size: The 205 SPI stocks are divided between the SPI Large (20 stocks), SPI Mid (80 stocks), and the SPI Small (105 stocks). But apart from one ETF from UBS that tracks the SPI Mid index, there are hardly any solutions for investing in these indices.

SIX also maintains an SPI ESG index, with several sub-indices, for sustainability-minded investors. As an investor, you can choose between several index funds and one UBS ETF that track the SPI ESG Weighted sub-index.

Conclusion

Using an ETF or an index fund that replicates the Swiss Performance Index (SPI) provides a simply way to invest in practically the whole Swiss stock market. But the fact that the index uses different weightings for each of the 205 stocks means that the SPI primarily represents the biggest Swiss stocks. The 100 smallest SPI stocks have a very small influence on the index.

Using an index fund to invest in the SPI Extra lets you invest specifically in small and mid-sized SPI companies. The 20 SMI stocks that together make up more than 80 percent of the Swiss stock market are not included in the SPI Extra.

Unfortunately, there are currently no ETFs or index funds that let you invest specifically in the smaller Swiss companies tracked by the SPI Small.

For long-term investments, the ETFs and index funds shown in the tables above are good solutions for investing in the SPI or the SPI Extra. When choosing a fund, you should pay careful attention to the fund’s costs (the TER) and to the way in which you want to receive dividends (distributing or accreting).

More on this topic:
How to invest in the SMI
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