The Hedge Fund Known As The Swiss National Bank Posts A Record $23 Billion Loss, Down 4%, On EUR, AAPL, VRX

Tyler Durden's picture

To some it is the independent and impartial Swiss National Bank; to others it is the world's biggest hedge fund with $584 billion in assets or about the same as the Swiss GDP, whose former chief suddenly resigned in 2012 following a family FX trading scandal.

Whatever it is, the SNB had an abysmal year: first and foremost it was its terrible bet on maintaining a EURCHF floor which imploded almost exactly a year ago, when the bank was forced to scrap its attempts to keep the Swiss Franc weak, in the process suffering tens of billions in losses.

Then it was its unprecedented buying spree of US stocks, which in the first quarter of 2015 saw the SNB become one of the world's biggest buyers, and holders, of AAPL. Since then the stock price entered a bear market, having tumbled to levels not seen since late 2014.

 

Among its other holdings, the SNB also had substantial exposure not only to the crushed US shale and energy sector, but to the recent bete noire of the US pharma industry, the company everyone now loves to hate, after loving to love for years, leveraged roll-up expert, Valeant.

 

And, as was to be expected in a year in which the smartest money around the world failed to generate any profit, the SNB was likewise slammed, and earlier today, it announced in a preliminary report (the full results will be out on March 4) that it had suffered a CHF23 billion ($23.05 billion) loss in the past year, or about 4% of its assets under management. In retrospect, considering some of the double-digit losses recorded by the marquee hedge fund names, a 4% loss looks downright respectable by funds who "hedge" only in name.

From the SNB:

Swiss National Bank expects annual loss of CHF 23 billion

 

Ordinary profit distribution, thanks to large distribution reserve

 

According to provisional calculations, the Swiss National Bank (SNB) will report a loss in the order of CHF 23 billion for the 2015 financial year. The loss on foreign currency positions amounted to CHF 20 billion. A valuation loss of CHF 4 billion was recorded on gold holdings. The net result from Swiss franc positions was CHF 1 billion. The allocation to the provisions for currency reserves is approximately CHF 1.4 billion. Taken together, the annual loss and allocation to provisions totalling some CHF 24.5 billion are less than the distribution reserve, which amounts to CHF 27.5 billion. Thus, despite the annual loss, the resulting balance sheet profit will allow a dividend payment of CHF 15 per share as well as the ordinary profit distribution of CHF 1 billion to the Confederation and the cantons. After these payments, the distribution reserve will amount to CHF 2 billion. A detailed report on the annual result with definitive figures will be released on 4 March 2016; the Annual Report will be published on 24 March 2016.

This, naturally, was good news because, drumroll, it was "better than expected." From the WSJ

"A big loss was expected and it is no surprise given the exchange rate volatility over the last year," said Karsten Junius, chief economist at J. Safra Sarasin, a Swiss bank. "But losses like this put pressure on central bankers who need support from the general public to keep their independence."

 

"The public don't like central banks that make losses, which could then be forced to be recapitalized by the central government," said Mr. Junius. "This result should persuade [SNB Chairman Thomas Jordan] to be more cautious about intervening in the markets in future."

Don't hold your breath.

What is more interesting is how the SNB actually calculated a loss of only CHF23 billion, bcause based on our calculations using the bank's publicly disclosed filing, just its holdings of public stocks have generated billions in losses, in addition to the CHF 20 billion in FX losses disclosed previously. We will be curious to reconcile the SNB's own numbers with ours as soon as the SNB's 13-F hits the docket in one month.

For now, however, the SNB's distributions to the local cantons are safe.

While the SNB doesn’t need to generate a profit for monetary-policy purposes, municipalities have come to rely on an annual handout from the central bank to fund local spending. Their circumstances are already straitened by slower economic growth, brought on by the currency’s ascent from the cap of 1.20 per euro to about 1.09 now.

 

“The good news is that the cantons and the government aren’t going to have to go without their money,” said David Marmet, an economist at Zuercher Kantonalbank. “From a political point of view, it removes some pressure on the discussion about the right monetary policy. ”

Actually, based on a mark-to-market of its holdings, the loss would be far greater and certainly prevent the SNB from distributing any cash, making us wonder if someone at the very top isn't cooking the books once again.

We look forward to reconciling this difference in a few short weeks.

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eyesofpelosi's picture

Banks playing the stock market....

BRILLIANT!

KnuckleDragger-X's picture

Fiduciary responsibility is for the little people........

Looney's picture

They should’ve stuck with Swiss Army Knives and Swiss Chocolate… ;-)

Looney

SoilMyselfRotten's picture

Ackman loves him some backstops

philipat's picture

They should have stayed with Gold....

matinee55's picture

I assume the bank criminals will all get a big raise & join the US democrap party for further pillage

Yen Cross's picture

   lol. The Tylers are crafty today.

kliguy38's picture

David Tice just brought out on CNBS and they literally cut him off in mid speech when he was talking about the FED......hehehehehheehehhehe......Mandy said technical difficulties......BWAAAAAAAAAAAAA

KnuckleDragger-X's picture

Well, technically the truth can be very difficult for some people.......

Yen Cross's picture

 I saw that!   Truth is treason, in an empire of lies...

 He made some very good points. Kyle Bass had an nice segment earlier. The Tylers will probably post it later.

buzzsaw99's picture

the usa ceos drink your swiss milkshake

Dr. Engali's picture

I thought that the world's biggest hedge fund was the Federal reserve with 4 trillion in "assets", and that doesn't include it's subsidiaries.  

KnuckleDragger-X's picture

Naa, the PBOC has the lead right now.......

venturen's picture

I think you meant to say that Goldman was the world's largest Hedgefund...with its subsidiary THE FED holding $4 Trillion in "leverage". Can we learn who SNB's adviser is....would it by chance be Goldman?

Yen Cross's picture

 Is the SNB buying ,

Twitter Inc NYSE: TWTR - Jan 8 2:10 PM EST 20.080.18 (0.89%)
  1. max
Dr. Engali's picture

Don't worry, it will come back..., Lolololo...

markar's picture

That works out to how much per Swiss taxpayer?

RamzaBehoulve's picture

Nothing, we made much bigger profits from selling our gold when it was at the top. This is of no consequence for us AT ALL. Fact is, the country makes a ton more than that from different things. It just happens we have one of the only national bank being honest and telling exactly what's going on with the money.

If anything bad happens, we'll be one of the last countries to be hit by the global crisis, if at all. Don't ask me how, but it's been like that since the creation of the country.

markar's picture

So the SNB has 100%(or more) of the entire GDP of the country on its balance sheet and that's not cause for alarm?

samjam7's picture

I agree, and I am also Swiss. The other user is mildly put overly optimistic or just simply naive. And the SNB sold its gold when it was at roughly 700 USD way below peak. In any case that gold should have never been sold and was a travestiy which will come to hunt every Swiss down the road. 

Sheeps be sheep... 

Kaiser Sousa's picture

so today cause everything that unfolding this week in fiat currency's was fixed, its a great time to sell phony paper Gold and Silver....

only in London and New York that is....

irishlink's picture

Just watched CNBC for the first time in months only to see some poor bear cut off by Mandy Drury because she was obviously told yo cut him. The usual excuse of interference on the line!!! Oh please.! This show is like a comedy act. They can hardly say the word beat and they make the constant noise about the free markets in USA versus controlled China. Are the ratings still dropping??

Squid Viscous's picture

she went from hot to not pretty fast...annoying cunt

Omen IV's picture

So all these countries buy dollar based stocks to offset and control the value of the currency - the value of the company via  market position of their products or cash flow measures have no relelvance.

so in the old days they would buy or sell gold now it is stocks - im not sure economics means anyhting any more

Soul Glow's picture

I wonder how much apple the Fed is holding.

Yen Cross's picture

Ask Barbara Boxer & Nancy Pelosi.

itstippy's picture

Somebody's going to win the big Powerbucks jackpot, now up to $800M.  That's about $300M after taxes.  Congrats!  Now you have an enormous chunk of money that you have to do something with.

U.S. Real Estate?  No, it's subject to real estate taxes every year, so it has to be "productive" or you lose money every year.  I have no desire to try to profitably be a landlord or a farmer.  Way too stressful for a guy who has $300M.

Foreign Real Estate?  No way!  I'd be subject to political upheavals, restless natives, etc.   Way too stressful for a guy who has $300M.

Stocks?  Get real.  I'm a ZH regular - I don't "do" stocks as an investment.  As speculation at times, but that would be way too stressful for a guy who has $300M.

Paper Gold?  - see stocks above.  

Physical Gold?  That much physical gold wouldn't be very practical for many reasons.    Way too stressful for a guy who has $300M.

Physical Cash?  - see physical gold above, plus it has the distinct possibility of becoming worthless.

As much as I hate U.S. Treasuries, I imagine that's what I'd end up in.  

My point being, if you're managing as much money as the SNB your options are pretty shitty.  They end up in Facebook or Apple stocks out of desperation.  Where in Hell do you put huge sums of money that's safe and holds its value?

scraping_by's picture

The classic inflation play is to invest in whatever's being inflated. But I don't know of any market that includes employment figures, Muslim immigrants, or finance industry bonuses.

Guns. Sales of guns and ammo being juiced by Barry's tears. Maybe.

Overflow-admin's picture

All that because they don't have me at their CAB... Miffed.

scraping_by's picture

...who need support from the general public to keep their independence."

...which could then be forced to be recapitalized by the central government,"

Is it just being an old guy, or is the contradiction here some higher logic? Talking out of both sides of your mouth used to be more subtle.

Seal's picture

I feel so sorry for all the Swiss citizens who have been sodomised by the SNB and the international bank cabal - the hard working people who go to work every day  and make Pilatus planes and Swiss watches while a bunch of scumbag bankers fuck them over. 

 

The SNB is trading the goodwill and earnings of generations of Swiss "because we can" - not unlike the GW Bush Admin invasion of Iraq "B W C"

falak pema's picture

Apparently the Scheizer Bank is not part of Cerberus... thee headed banksta CB Oligarchy that runs the world.

Amish Hacker's picture

If a central bank buys bonds, and the bonds go down, they can always pretend they're going to "hold till maturity."

If they buy stocks, and the stocks go down, then what can they pretend?

The Swiss, of all people! (I told them not to put Dennis Gartman in charge of their portfolio.)

 

FrankieGoesToHollywood's picture

They wont revalue the asset.  They will hold it on the books at the purchase price.  No gain, but no loss either.

irishlink's picture

The Swiss must be very angry. The elite did not like their freedom and independence so they screwed them over . The Swiss are very clever and I expect they have something up their sleeve.

hooligan2009's picture

ponders why there4 is no referendum in switzerland on allowing 5-6 individuals to lose 23 B, when the country's gdp is around 700B for 8 million people

switzerland is a tiny country with no expertise in anything in particular other than chocalte, wacthes and nuclear reactors

a street cleaner or junkie in basel would have lost less if they kept their day jobs/addictions running...

time for another petition to abolish the SNB, cancel all its derivatives and buy gold instead....

muppets are not needed in zurich, interlaaken, or half way up the jungfrau

 

sheikurbootie's picture

Apple makes great products, but billions in profits year after year?  Technology comes and goes as do those billions in profits. 

As for the stupid SNB, what the fuck!  The first rule of a bank should be NEVER to lose money.  How the fuck can a bank lose that much money.  Who runs this POS?  What an idiot.

bastoune's picture

The market is in a Pavlov mode considering the CHF as a safe heaven any more...