Product and distribution highlights
Amid a challenging environment distinguished by financial market volatility and a global economic slump, Bellevue demonstrated its strength as an active asset manager and ended 2020 with a very positive set of results.
The healthcare sector was a dominant factor and it became a compelling investment theme for a growing number of investors as the coronavirus pandemic evolved. In meeting this demand Bellevue successfully grew its business with existing clients and attracted a considerable number of new clients as well. 79% of all assets under management beat their respective benchmarks during the past year. In a broader performance comparison, 10 of its 14 funds placed in the first or second performance quartile within their category. This impressive achievement would not have been possible without a high level of investment team continuity: 16 of the 19 lead portfolio managers have held this role since the day their funds were launched.
Attractive product offering and solid investment performance
Core healthcare strategies attract more than CHF 1 bn for the first time
Assets under management grew by 13.6% to a record high of CHF 12 bn thanks to new money inflows and good performance. Investment strategies in the core segment of healthcare attracted more than CHF 1 bn in new money for the first time in the company’s history and inflows were observed across the entire range of healthcare products. Differentiated alternative investment solutions – including the recently established Private Markets unit – displayed stability in the face of dramatic market turmoil. Asset outflows from traditional investment vehicles subsided somewhat compared to the previous year, but the bond and multi-asset strategies continued to experience intense structural competition.
Healthcare – from a niche growth story to investment topic number one
2020 was highlighted by health and healthcare: Bellevue recorded a strong inflow of new money at its innovative healthcare strategies, an area where it is an acknowledged leader and shared in the commercial success of numerous drugs and technologies. Once again, the non-cyclical growth aspects of the healthcare industry, which make the sector an ideal diversification during phases of weak global economic activity, proved to be a positive driver.
BB Biotech shares advanced 30.4% (in USD) over the year and outperformed the Nasdaq Biotechnology Index by a wide margin. Its preference for small and mid cap companies pursuing novel treatment approaches paid off once again. One of the strongest performance drivers in BB Biotech’s portfolio has been Moderna, a company it first invested in in 2018. Moderna is one of the pioneers of mRNA technology and it has played a crucial role in fighting the coronavirus pandemic. Moderna's stock price rose more than five-fold over the course of 2020 and the company is now the second-largest position in BB Biotech's portfolio. BB Biotech also profited from having two takeover targets in its portfolio, Myokardia and Alexion Pharma, both of which were acquired by other companies during the second half of 2020. In personnel matters, BB Biotech added two renowned experts to its Board of Directors – Prof. Dr. Mads Krogsgaard Thomsen, CSO of Novo Nordisk, and Dr. Susan Galbraith, Head of Oncology at AstraZeneca.
Interview with Head Investment Team BB Biotech
Dr. Daniel Koller is looking back on the challenging pandemic year 2020 in a video interview. First he discusses the groundbreaking success of the biotech industry. It has developed successful and safe vaccines in record time and is leading the fight against the SARS-CoV-2 virus pandemic with these vaccines and therapeutic antibodies. In addition, he explains why BB Biotech had already invested in Moderna in 2018 and what opportunity he sees for the mRNA technology in the future. Finally he gives an insight into the portfolio and tells why he has added Biogen to the portfolio.Full Interview
The London-listed BB Healthcare Trust gained 32.9% (in USD) and likewise outperformed its benchmark, the MSCI World Healthcare Index. Its portfolio is focused on companies that are benefiting from the rapid change sweeping through healthcare systems. The biotech, life science tools and diagnostics subsectors are currently overweighted. BB Healthcare Trust’s admission to the FTSE 250 in June 2020 has raised its profile with international investors.
In the healthcare fund franchise, the BB Adamant Digital Health Fund was the top performer with a return of 68.4% for 2020 (in USD), which compares with an advance of only 13.5% for the MSCI World Healthcare Index, the global index for healthcare stocks. The COVID-19 pandemic drew attention to the urgent need for a digital transformation of the healthcare system in the face of an emergency medical situation and in order to make the system more cost-efficient. Consequently, healthcare providers, patients, hospital administrators and payers displayed a growing acceptance of digital tools and a willingness to invest in them. The Digital Health Fund participated in 11 IPOs last year and profited from rising M&A activity, which contributed to its dynamic development.
The two regional funds BB Adamant Asia Pacific Healthcare and BB Adamant Emerging Markets Healthcare also delivered impressive returns of 45.0% and 50.7% (in USD). Digitization is on the advance across Asia as well and China is reaping the rewards of an innovation offensive. More than 50 Chinese healthcare companies were listed on the stock market in 2020, for example, and Chinese biotech companies are advancing their product pipelines across a broad front, both in their domestic market and abroad. Wuxi Biologics is an example of this progress, having become a leading global technology and manufacturing platform in the wake of the COVID-19 pandemic.
The two healthcare funds targeting the global universe, BB Adamant Healthcare Strategy and its ESG-focused counterpart BB Adamant Sustainable Healthcare, both of which underweight pharma and the US and overweight mid caps, gained 27.9% and 29.2% (in USD). Their regional and sector diversification paid off once again as positive performance contributions were made by different subsegments, such as biotech and life science tools & services and, from a regional perspective, Chinese stocks.
The BB Adamant Biotech Fund ended the year with a return of 23.9%. This performance was fueled in part by the portfolio's exposure to COVID-19 themes, which occasionally accounted for up to 35% of total portfolio investments. COVID-19 had a temporary negative impact on fundamental factors in the medtech & services sector during the period under review. Pushed to the brink in 2020, hospitals were forced to put many non-emergency surgical procedures such as hip and knee implant operations on hold. Those operations will be rescheduled at some point in the future, though, and then give overall demand a corresponding boost. The BB Adamant Medtech & Services Fund outperformed the broader healthcare market by 3 percentage points and closed the year with a gain of 16.6% despite the challenging environment.
Alternative strategies – momentum in private equity business
The BB Global Macro Fund, an absolute return strategy, delivered a positive return of 2.7% amid the volatile market environment. The March drawdown was followed by a quick recovery fueled by equities and non-government bonds. Portfolio hedging was particularly challenging in 2020 due to the unattractive valuations of safe-haven assets.
In the venture capital space, BB Pureos Bioventures has attracted USD 168 mn in assets since its launch in 2018. The fund invests in ten private biotech companies with an emphasis on novel biological drugs and emerging treatment modalities. Dr. Anja Harmeier was named a new partner at Pureos and the Advisory Board was enlarged with the appointment of Dr. Omar Khwaja as a new member.
Bellevue expanded its range of private equity solutions with the launch of the BB Entrepreneur Private Fund in January 2021. This fund is a growth financing vehicle for small and mid-sized Swiss companies that will help to strengthen the Swiss SME landscape. The Private Equity team is being steadily expanded post-launch.
In the direct equity investing business, the adbodmer team continued to add reputable companies and families to its investor group in 2020 and it closed two transactions involving Swiss technology leaders. Its pipeline for 2021 is very sound as well.
Traditional strategies – small cap stocks make up for lost ground
Turning to traditional strategies, the Entrepreneur funds delivered a convincing performance in 2020. All BB Entrepreneur funds generated a positive return for the year and beat their benchmarks by wide margins in some cases. Their investment strategies offer an interesting mix of value, growth and high growth and they are placing a greater emphasis on innovation and sustainability as structural growth drivers.
African stock markets did not recover as strongly as other emerging market regions due to low levels of domestic liquidity and the dearth of foreign inflows. High real bond yields in Egypt diverted capital away from the stock markets and the BB African Opportunities Fund was unable to profit from the rally in Nigeria because of the foreign-exchange crisis, which precluded investments in that country. Nevertheless, the fund’s portfolio is attractively valued and has demonstrated considerable resilience and it is well-positioned to benefit from a rebound in its core markets.
The classic, broadly diversified equity, bond and multi-asset strategies offered by StarCapital remained under pressure. StarCapital’s team revised its investment concepts over the past year and modified some products in order to better address the current market situation and sharpen its profile as an active, benchmark-independent asset manager. StarCapital is focusing on a modern mix of anti-cyclical and value-driven investing styles. Consequently, it merged the two subfunds StarCapital Priamos and StarCapital Starpoint into StarCapital Equity Value plus. The StarCapital Argos bond strategy shifted its focus to crossover corporate bonds (BB- to BBB+) and its name was changed to StarCapital Dynamic Bonds to reflect the new investment strategy. Furthermore, StarCapital will work even more closely with Bellevue Asset Management to improve distribution and actively offer Bellevue’s healthcare funds, for example, to clients in Germany.
Steady expansion in international markets
Business developments in the core target markets of Switzerland – which accounts for approximately 30% of assets under management – and Germany and the United Kingdom, where clients are served by local subsidiaries, were pleasing. Growing momentum has been observed with large and private banks, thanks in no small measure to the increasing size and maturity of the products on offer. Strategic peripheral markets have also displayed growth momentum. Developments in Spain, where Bellevue has partnered with Atlas, a local firm based in Madrid, were very encouraging as assets under management in the country have now passed the CHF 500 mn mark. Bellevue has established a solid network of clients in Austria as well and it is steadily growing its presence in the Benelux countries. Asia, led by Singapore and Hong Kong, both major hubs of international private banks, is clearly on the rise. As its Digital Health, Medtech & Services and Global Healthcare strategies have grown in size, Bellevue has become a viable alternative for relevant platforms in Asia. Bellevue clearly reaffirms its strategy as a B2B asset manager in wholesale banking – first and foremost in the key financial centers of Singapore and Hong Kong – which in retrospect has proved to be the right strategy.
Client and growth momentum
In addition to the ongoing expansion of its market presence in its strategic markets, Bellevue has designated Italy, a country with particularly attractive institutional prospects, as a new target market. Bellevue is also exploring Israel as a potential new market and initial developments there have been positive.