Bellevue Obesity Solutions

Global equity markets started 2026 on a positive footing, with the MSCI World Index rising 2.2% in January, supported by resilient macro data and improving earnings momentum. The healthcare sector also advanced, though it underperformed the broader market, with the MSCI World Health Care Index up 1.1%. The Bellevue Obesity Solutions (Lux) Fund (I shares) declined by 0.3% in January 2026, underperforming its benchmark by 140 bps. The underperformance was driven by an underweight position in value-oriented biopharma, which performed strongly in the month, along with weakness in key medtech and healthcare services names.

Performance across healthcare subsectors was mixed in January. Pharmaceuticals (+4.2%) and biotechnology (+1.6%) outperformed, supported by improved policy visibility, renewed confidence in large-cap biopharma, and ongoing M&A expectations in SMID-cap names. In contrast, healthcare services (-3.8%), medtech (-2.0%), and life science tools (-1.0%) lagged amid cautious guidance and continued reimbursement concerns. Regionally, Europe led (+5.0%), followed by Emerging Markets (+3.5%) and Asia (+3.2%), while US healthcare underperformed (-0.4%).

Within the fund, biotechnology (-55 bps), healthcare services (-46 bps) and medtech (-33 bps) subsectors were the largest detractors, while pharmaceuticals (+26 bps) contributed positively. Within biotechnology, a shift in performance from high-growth SMID-caps to the more value-oriented large caps detracted from the funds’ performance in January, although we view this as a temporary shift. In terms of single stocks, the top-five positive relative contributors to fund performance were Structure Therapeutics (+27% absolute performance; strong clinical data), Sandoz (+16%; positive biosimilar dynamics), Teva Pharmaceuticals (+10%; positive Q4 results and 2026 guide), Penumbra (+10%; takeover offer accepted) and Johnson & Johnson (+10%; solid Q4 results and guidance). The largest negative relative contributors were Gilead (underweight; +16%; not part of the obesity theme), and UnitedHealth (overweight; -13%; weaker results).

Sector news flow during the month was dominated by early 2026 commentary at the J.P. Morgan Healthcare Conference, the full-year earnings season, and continued policy discussions around drug pricing and Medicare Advantage, which contributed to the aforementioned drawdown in UnitedHealth). M&A activity remained a key theme, reinforcing investor focus on pipeline depth and strategic value.

The healthcare sector is entering a new and durable phase of growth following several years of structural and policy-related headwinds. Policy and regulatory uncertainty has materially eased, valuations remain close to decade lows, and investor confidence is gradually returning as fundamentals stabilise across biopharma. Despite contributing approximately 18% of US GDP, healthcare equities still represent only around 10% of the S&P 500, highlighting a persistent disconnect between economic relevance and market representation. Key industry overhangs – pricing reform, FDA restructuring, and the implementation of the Inflation Reduction Act – have largely cleared or proven manageable.

Within this recovery, biotechnology has emerged as a primary growth engine, transitioning from binary R&D outcomes toward cash-generative, launch-driven business models supported by premium pricing, leaner cost structures, and disciplined capital allocation. At the same time, large pharmaceutical companies face a significant biologic patent cliff between 2029 and 2032 and hold strong balance sheets with over USD 200 bn in aggregate acquisition capacity, underpinning a multi-year M&A cycle. Investor participation continues to broaden, with specialist investors remaining highly engaged and generalist investors selectively returning via large-cap value, structural growth, and commercial-stage biotechnology opportunities.

Against this backdrop, the fund maintains a selective, high-conviction strategy with diversified exposure across obesity-, metabolism-, and fitness-related thematics, emphasizing biotechnology and life-science tools as core overweight positions to target structural and cyclical return potential.