100 Years of Swiss Equities: The Silent Compounders — Summary

A note on where to read this: This page is a summary. The complete 100-year study — all seven chapters, eighteen charts, our full Swiss coverage map and the research findings in detail — is published on the arvy Substack (click here).

One Franc, One Century

CHF 1,743,563.

That is what CHF 1,000 became if you invested it in Swiss equities at the end of 1925 — and then did the hardest thing in investing.

Nothing.

For one hundred years.

No Big Tech. No moonshots. No leverage, no lucky timing, no genius required. Just a diversified basket of Swiss companies, dividends reinvested, left alone for a century — through a world war, the end of the gold standard, two oil shocks, a dotcom bubble, a global financial crisis, and a pandemic.

The scoreboard reads 7.75% per year, in Swiss francs — the hardest currency human beings have managed to produce. Strip out inflation and you are still left with 5.73% real, per year, for a hundred years. The same CHF 1,000 in Swiss bonds grew to CHF 47,898. Perfectly respectable. Also thirty-six times less.

And here is the part worth pausing on: this was achieved by a landlocked country of nine million people. No oil. No ocean. No empire. Not even a common language — the Swiss needed four. A country whose most famous exports are discretion, chocolate, and the concept of being on time.

That country's stock market quietly kept pace with the loudest market on earth, the S&P 500, once you measure both in the same currency.

The question our study set out to answer is simple.

How?

Chart 1: CHF 1,000 becomes CHF 1.74 million: nominal value of Swiss equities, bonds and consumer prices, 1925–2025 (log scale, rebased to 100 at end-1925)

The Century in Ten Numbers

• CHF 1,743,563 — what CHF 1,000 in Swiss equities became over exactly one hundred years
• 7.75% / 5.73% — the century's annual return, nominal and after inflation, in the world's hardest currency
• 36x — how much more wealth the equity investor ended with than the bond investor, from the same franc
• −71% — the real drawdown of 1913–1920 that forged Switzerland's monetary religion
• +59.4% — 1922, the single best real year in 126 years of data, one breath after the worst
• 14 years — the longest any Swiss equity investor has ever had to wait for a guaranteed nominal gain
• 92% — the share of SMI companies' revenue earned outside Switzerland
• 8.54% vs 3.43% — annual returns of high- versus low-ROIC Swiss companies, 2000–2025 (our study with the University of St. Gallen)
• 37% — the share of the Swiss index still carried by just three companies — roughly half, at their peak
• 2x — how much the quality premium grows when one year of proof becomes five

The Country That Had to Survive

In 1291, three mountain cantons swore an oath of mutual defense on the Rütli meadow. No conquest plan. No exit strategy. Just a covenant: we survive together, or not at all. It is still outstanding after 735 years — the most successful long-term contract in European history. Most companies cannot keep a strategy alive for 735 days.

Switzerland was dealt a terrible hand. Mountains everywhere, romantic on a postcard and brutal in an economy. No coastline, so no navy, no colonies, no cheap sea trade. Almost no coal, no iron worth mentioning, certainly no oil. And no shared language.

Lacking everything that made other nations rich, the Swiss were forced to develop the only resources that cannot be found in the ground: trust, precision, and patience. Scarcity became the mother of quality — and every industry that made the country famous is a survival strategy in disguise. Finance: if you have no commodities to sell, sell trust. Watches: if your goods must cross an Alpine pass on a mule, value density is your friend. Chocolate: Switzerland grows exactly zero cocoa beans, yet owns the category — because you do not need the raw material if you own the refinement, the process and the reputation.

Conservative by necessity. Opportunistic by design. It is the national investment style, and it shows up in the data a century later.

The franc problem is the point

Since 1973, the Swiss franc has been the strongest major currency on earth. The US dollar has lost roughly 2–3% per year against it for five decades.

Consider what that means for a Swiss exporter. Your costs are in the world's hardest money. Your customers pay you in currencies that lose value against your cost base every single year — automatically, structurally, forever.

There are only two possible responses. Compete on price, and the currency grinds you into powder within a generation. Or become so good, so differentiated, so essential that your customers pay the franc price without blinking, decade after decade. The companies that chose the first path no longer exist.

This is the point most investors miss. The strong franc is not an unfortunate side effect of Swiss success. It is the filter that produced it — a permanent, compounding fitness test that quietly bankrupted the mediocre and relentlessly rewarded pricing power, brand, precision and indispensability.

Winners Keep Winning: our study with the University of St. Gallen

An average is a machine with the hood welded shut. The 7.75% belongs to the brilliant and the mediocre alike — it says nothing about how the return was earned, or by whom.

So we opened the hood. Together with the University of St. Gallen, we tested 25 years of Swiss market data — every SPI-listed company excluding financials, 2000 to 2025 — using the classic Fama–French portfolio-sorting method, alongside sixteen in-depth interviews with Swiss equity portfolio managers. The quality measure: return on invested capital, tested over one-, three- and five-year windows.

Three findings, in short.

Quality is a staircase. Sorted by ROIC, Swiss companies line up in order: the high-ROIC bucket returned 8.54% per year, the market 6.43%, the low-ROIC bucket 3.43% — with a Sharpe ratio more than three times that of the low bucket.

Quality is a track record, not a snapshot. One year of high ROIC predicts almost nothing: the premium is 3.18% per year and statistically insignificant. Three years: 5.78%, significant. Five years: 7.16%, highly significant. The factor return more than doubles from one year to five. The market pays a premium for quality — but it systematically underpays for proven quality.

The premium lives in small and mid caps. Monthly high-minus-low ROIC spreads run at +0.82% for small caps and +0.63% for mid caps — and −0.16% for large caps. Where analyst attention is scarce, proof goes underpriced.

Chart 2: Winners keep winning: annual factor returns of 1-year vs 3-year vs 5-year ROIC

Source: arvy research / S. Ramhapp, University of St. Gallen (HSG); SPI ex-financials, 2000–2025

One unbroken chain

Step back and the argument assembles itself. The country's scarcity produced a culture of precision and trust. The culture produced companies built on six unfashionable values. The currency stress-tested those companies for a hundred years, bankrupting the pretenders. The survivors show up in the data as persistently high returns on invested capital. And persistently high ROIC produced market-beating shareholder returns that the market still underprices.

Geography → culture → currency → ROIC → returns. One unbroken causal chain, a hundred years long. That is the machine under the hood of the 7.75%.

Read the complete study

The full essay runs to seven chapters and eighteen charts, and covers everything this summary leaves out:

• The stress test nobody remembers — how neutral Switzerland lost 71% in real terms through the First World War, and what it taught the country about money
• The six values a Swiss watch company wrote into its annual report — and the company from our coverage that embodies each one
• The 14-year rule: in a hundred years, no Swiss equity investor holding fourteen years or longer has ever lost money
• What the century says about bonds — including why the worst year for bond purchasing power since 1918 was 2022
• A note for dollar investors on what hedging the franc currently pays
• Our full Swiss coverage map: fourteen companies in four clusters, each with a verdict and a full deep dive
• The seven strongest arguments against everything above, steelmanned — including no tech in an AI world, and a 1970s-style stagflation rerun

Full study: «100 Years of Swiss Equities: The Silent Compounders» on the arvy Substack