Shareholder letter

Dear Shareholders,

Bellevue Group had to contend with stubborn market headwinds in 2024 stemming from the prolonged underperformance of the healthcare sector, Bellevue’s primary investment universe. Those headwinds held back the performance of our healthcare strategies and the weaker performance of healthcare in general compared to the global stock market intensified the reallocation of client assets to other sectors. Strict cost management and the measures taken to streamline the Group’s product portfolio and strengthen its investment processes were unable to completely offset the negative impact of these market developments.

The healthcare sector continues to offer attractive prospects. The positive market setting in the US and the widespread deployment of artificial intelligence systems that enable the huge amounts of data that are available across the healthcare landscape to be used even more efficiently in the pursuit of medical innovation are fertile grounds for promising investment opportunities. The currently low valuations also offer an interesting entry. The MSCI World Healthcare Index is trading at an 11% discount to the MSCI World Index (based on forward 1-year P/E ratios), whereas, historically, healthcare has traded at an average premium of 3% to the total market over the past 10 years.

Still no upturn in the healthcare sector – attractive upside potential

2024 was another positive year for most of the world’s stock markets. Driven by declining rates of inflation, the pivot in monetary policy across the globe, and high investor expectations about the future potential of artificial intelligence systems, a number of stock markets climbed to new record highs, with Wall Street taking the lead.

The global healthcare sector ended 2024 with a gain of 1.6% in USD (+9.9% in CHF), which placed it near the bottom of the sector performance rankings. After a promising start, healthcare stocks corrected during the latter half of 2024 although Donald Trump’s second term as president is expected to provide positive impetus to the healthcare sector, as already seen during his first term.

Lower earnings base due to market-induced reallocation of client assets

After a stable period during the first six months of the year, assets under management at the end of 2024 were 17% lower yoy at CHF 5.8 bn. Investors shifted more of their assets from healthcare to other sectors such as IT and communication services. Total outflows amounted to almost CHF 1.5 bn and were only partially offset by new client assets of more than CHF 600 mn, most of which flowed into Bellevue’s traditional healthcare strategies. Non-healthcare strategies also experienced a slight outflow.

The average level of assets under management for 2024 was 18% lower compared to the previous year, which resulted in a corresponding decline in management fees to CHF 65.4 mn. Thanks to an increase in other net fee and commission income and in financial income, total operating income declined by only 14% to CHF 70.2 mn. Operating expenses declined by 8% to CHF 53.5 mn. Additional expenses due to personnel changes and organizational optimization as well as the company’s move back to its original location in the city of Zurich prevented a more significant reduction in the cost base. Consolidated net profit for 2024 came in at CHF 9.2 mn. The resulting cost-income ratio of 76% is clearly above our target range of 60–65%.

The reported results are not consistent with our ambitions. We want to generate value for clients and shareholders as a specialist asset manager but we managed to achieve that with only a few of our products last year. We have taken action to further optimize our organization and structure to ensure that we are well-positioned to take full advantage of a change in trend for the healthcare sector.

A sturdy financial foundation

Pleasing returns from selected strategies

Despite the difficult market environment, Bellevue managed to create value with several of its healthcare investment strategies. The Bellevue Medtech & Services Lux Fund gained 8.8% in USD (+17.2% in CHF), for example, beating its benchmark. The Bellevue Digital Health Fund also showed a pleasing return of 4.7% in USD (+12.7% in CHF). Bellevue AI Health and Bellevue Obesity Solutions, two recently launched funds that invest in attractive long-term growth trends, had a successful start in 2024. After performing very well during the first half of the year, both funds came under pressure towards the end of the year, resulting in full-year returns, respectively, of 2.8% and 0.5% in USD (+10.7% and +8.3% in CHF).

The Bellevue Medtech & Services Lux gained 8.8% in USD (+17.2% in CHF) and also exceeded its benchmark.

Our flagship product BB Biotech reported a 3% increase in the Net Asset Value (NAV) of its portfolio, but its share price declined by 13.5%. As a result the discount to NAV widened, especially towards the end of the year. Its new leadership is strongly committed to guiding the company back to its former growth trajectory. The new year began on a good note for BB Biotech with Johnson & Johnson’s announcement in January 2025 of a USD 14.6 bn bid for Intra-Cellular Therapies, a core position in BB Biotech’s portfolio.

Turning to Bellevue’s traditional and alternative investment solutions, Bellevue Option Premium stood out with a positive return of 7.8% in EUR. The Bellevue Global Macro Fund also showed a solid investment performance of 6.5% in EUR. The Bellevue Entrepreneur Europe Small Fund returned 3.5% in EUR and outperformed its benchmark.

Thanks to a well-diversified and mature portfolio, our Private Markets business remains a source of attractive additional income flows that we intend to tap. Bellevue Private Markets focuses on proprietary growth equity investments in SMEs in the DACH region. Bellevue’s exclusive group of investors enhances its prospective investment opportunities while giving it access to a deep pool of entrepreneurial know-how. This led to two new investments in 2024. In view of the currently still challenging environment for M&A, any exits in the near future are likely to be arranged in a very opportunistic manner. We offer a broader group of investors access to attractive direct equity opportunities through Bellevue Entrepreneur Private. There are plans to expand this product range as soon as the targeted exits from the first vintage have been successfully executed.

Various measures taken to increase efficiency – improving environment for healthcare

We continued to optimize the Group’s organizational structure last year in order to further improve operating efficiency. The Group Executive Board was strengthened through the appointment of Fabian Stäbler as Chief Operating Officer. Client activity picked up after the sales team for our domestic Swiss market was enlarged. Our move back to the Group’s original location in the city of Zurich should help boost client activity as well. The establishment of our own office in Singapore marks another milestone in the Group’s development. A greater local presence enables us to build on our existing client base and assets under management and to take better advantage of the growth opportunities that Asia offers. As for our product portfolio, some minor adjustments were made and we merged or closed smaller funds. Changes were also made to the organizational and management structures of our fixed income and multi-asset strategies. Initial, encouraging signs were observed during the course of 2024.

Returning to a growth path in small steps

Bellevue Group has had to contend with a very challenging market environment and, consequently, a slower-than-expected business development for the past few years. In 2024 we continued to focus on the optimization of our Group to ensure that we are optimally prepared for a sustained recovery in our investment universe. We are convinced that the healthcare sector remains an enticing investment proposition. In the US, the most important market for the healthcare industry, the Republican Party has traditionally stood for private-sector innovation and a strong economy. Tax breaks and fewer regulatory constraints represent clearly positive factors for companies active in the fields of biopharmaceuticals and medical technology. There are also expectations that the regulatory approval process for new drugs and medical devices will be shortened. These considerations are another reason why we view the current valuations in the healthcare sector as attractive, especially for the small and mid-sized companies that we focus on.

The various measures we have taken represent stepping stones that will bring Bellevue back to its former growth path in small steps. We strive to create value for our clients and shareholders as a specialist asset manager, even in difficult markets. A more constructive market environment is also needed for us to resume our former growth dynamics. Bellevue employees are working diligently every day to optimally meet the needs and expectations of our clients. We thank them for their dedication and can-do spirit. We thank our valued clients and shareholders for their enduring trust and loyalty, which is clearly appreciated in the current situation.

Veit de Maddalena

Chairman of the Board

Gebhard Giselbrecht

Chief Executive Officer