Bellevue Obesity Solutions

Global equity markets were positive in July, with the MSCI World Index gaining 0.5%. Healthcare outperformed the broader market, with the MSCI World Health Care Index up 1.4% in the month. Against this backdrop, the Bellevue Obesity Solutions (Lux) Fund – I shares gained 0.3%, underperforming its benchmark by 117 bp. The fund’s higher exposure to structural and disruptive growth was a negative contributor in the month.

Global equities reported a modest gain in July, though beneath the surface the drivers shifted materially. The Federal Reserve held its target range at 3.5-3.75%, but an unusual three-way dissent and the absence of forward guidance left the September decision unclear, pushing the 10-year Treasury yield to 4.7% and the 30-year above 5.2% - its highest since 2007. Trade policy re-emerged as a live risk after the administration responded to the Supreme Court's rejection of its earlier tariff regime with fresh 10-12.5% levies on some 60 economies. A late-month rally in mega-cap technology and semiconductors carried the index into positive territory. Healthcare sector performance over the month was driven by Life Science Tools (+8.0%), Healthcare IT (+6.8%), Medtech (+4.8%), Healthcare Services (+2.0%), and Biotech (+0.8%), while Pharma (-0.4%) detracted. Within healthcare, geographic performance was led by Emerging Markets (+5.1%), Asia (+4.1%), and the US (+2.1%), while Europe (-0.9%) lagged.

Sandoz received approval for generic semaglutide in Brazil, with launch planned for the second half of 2026. Merck won early approval for Lipfendra (enlicitide), the first once-daily oral PCSK9 inhibitor, pursuing an aggressive low-price, high-volume strategy. AstraZeneca and Ionis' eplontersen failed in ATTR cardiomyopathy, lifting BridgeBio 15% and sending Ionis down 23%. Second-quarter results favored medtech, with Dexcom rising 8.5% on a 20% constant-currency revenue increase. On policy, the administration proposed tariffs on imported generic drugs rising to 100% from 2028.

Top absolute performers in the fund included Dexcom (+23.9%; strong Q2 with revenue +20% in constant currency), Garmin (+23.7%; strong Q2 results), and Glaukos (+19.3%; record Q2 sales up approximately 50% year-on-year).

Top relative positive contributors included Dexcom (overweight; +47 bp; strong Q2 with revenue +20% in constant currency), Garmin (overweight; +37 bp; strong Q2 results), and Thermo Fisher (overweight; +28 bp; Q2 beat and raised core growth guidance). Top relative negative contributors included Sandoz (overweight; -27 bp; proposed US generic drug tariffs), Abbott (underweight; -21 bp; Q2 beat with Medical Devices +8.4% organic), and Ionis (overweight; -18 bp; CARDIO-TTRansform failure impairing the eplontersen royalty stream).

The near-term backdrop remains uncertain, with the Federal Reserve offering little forward guidance, long-dated yields at multi-year highs, and trade policy unresolved. Healthcare's defensive characteristics should provide relative resilience if conditions deteriorate.

The structural case for healthcare remains compelling. Regulatory uncertainty has materially eased, valuations remain near decade lows, and biopharma fundamentals continue to stabilize. Healthcare contributes approximately 18% of US GDP yet only approximately 10% of the S&P 500, a disconnect we expect to narrow over time.

Biotechnology continues to shift toward cash-generative, launch-driven models, while large-cap pharma faces a biologic patent cliff between 2029 and 2032 and holds over USD 200 bn in acquisition capacity, underpinning a multi-year M&A cycle.

The fund maintains a high-conviction, diversified approach with a focus on obesity and metabolic disorders, positioned to capture the structural recovery and near-term catalyst-driven opportunities.