Safe-Haven Currency and Sequence Risk A State-Dependent Swiss Franc Overlay for Global Portfolios

Abstract

Sequence-of-returns risk (SoRR) arises because the order of returns—not only their long-run average—determines whether real, inflation-indexed spending plans survive the first critical withdrawal years. For households that spend in EUR or JPY yet invest in globally diversified, USD-centric portfolios, SoRR is jointly shaped by equity, bond, inflation, and foreign-exchange paths measured in the spending currency. This paper evaluates SoRR explicitly in the spending currency and introduces a small, state-dependent overlay in Swiss franc cash or bills (CHF) as crisis insurance rather than as generic permanent hedging. Motivated by documented safe-haven behavior of CHF and evidence that global bonds are generally best held fully hedged into the home currency, the paper specifies a transparent trigger rule based on a composite stress score and evaluates sequence-sensitive objectives including CVaR(95), maximum drawdown, time-underwater, cumulative sequence shortfall depth (CSSD), and the 5th percentile of sustainable real withdrawals. FX and index procedures follow the WM/Refinitiv 4pm Fix and MSCI index methodology. The design is fully auditable, modular, and directly implementable with standard global portfolio building blocks. The central argument is that, for non-USD households, currency is not merely a reporting detail but an independent policy dimension in retirement and withdrawal design, especially during the early years when sequence damage is most difficult to reverse.