Bellevue Sustainable Healthcare

MSCI World Healthcare outperformed MSCI World in August 2024 by 285 bps (MSCI World Healthcare +5.5% vs MSCI World +2.6%). Mixed US economic data combined with large movements in the Japanese yen led to high volatility especially in the beginning of the month. The Bellevue Sustainable Healthcare (Lux) Fund (I-shares: +6.7%, in USD) outperformed (by 121 bps) its healthcare index benchmark.

Around the middle of the month, US CPI data showed further stabilized inflation in conjunction with more dovish comments by Fed president Jerome Powell indicating that time has come to cut rates. The combination of these events drove a strong recovery within equity markets. Large-cap names and mega cap rallied with small caps almost moving as strongly. Later in the month especially new orders came in light and big tech names like Nvidia could not live up to expectations despite beating consensus numbers.

Within the MSCI World Healthcare Index, pharmaceuticals (+8.3%) was the best performing subsector in the month. This was followed by medtech (+7.4%), biotechnology (+3.0%), HC services (+2.2%), with lifesciences tools being the clear laggard with a negative performance (-1.2%).

From a geographical point of view, the performance of the regions was pretty homogenous. The European healthcare (+6.2%, MSCI European healthcare) performed best, followed by Asia healthcare (all country) (+6.03%) supported by another strong month for Japanese equities. This was followed by Emerging Markets healthcare (all country, +5.8%), and lastly US healthcare (+5.2%; MSCI US healthcare).

Within the fund, strong absolute performances were reported during the month from Penumbra (+21.1% in USD, strong sales and earnings beat), Eli Lilly (19.5%; announced strong Q2 results), and Asahi Intecc (+16.0%; upbeat results). On the other hand, negative absolute performances were seen for Aspen Pharmacare (-2.4%; without news), Genmab (-1.9%; partner Biontech returns acasunlimab rights), and Hypera (-1.0%; after downgrades).

Bellevue's rule-based investment approach, which has been successfully implemented since 2007 and is also mapped by the Adamant Global Healthcare Index, serves as the basis for the fund. A universe with around 700 stocks​ ​is compiled from a global pool with over 4000 listed healthcare stocks based on a preselection. As an additional step compared to the conventional methodology, ESG risks of these 700 investable stocks are identified, which could affect the economic value of a company. Here we rely on the longstanding expertise of our research partner Sustainalytics.

In order to get into the fund portfolio, the companies must meet the following criteria: Appropriate ESG risk profile (best-in-class approach), not involved in severe ESG-relevant controversies and comply with the ten principles of the UN Global Compact. In the case of controversial business areas and practices, revenue thresholds are defined for inclusion. The results of the ESG filter application demonstrate that around 40-50% of the titles meet our strict sustainability requirements. The proven factor analysis is then carried out according to four quantitative and four qualitative parameters. The objective here is to select companies that are inexpensive, have strong growth and have an exceptional competitive position so that they can maintain their leading position also in the future.

The analysis results in a portfolio structure consisting of the 40 most sustainable stocks in the healthcare industry, ten of them per region (Western Europe, North America, Japan / Oceania, emerging markets). The application of the eight factors in the past has typically led to a focus on mid cap stocks and an underweight position in pharma and the North America region relative to the MSCI World Healthcare Index. The rebalancing takes place every six months.