Bellevue Sustainable Healthcare (Lux)

Global stock markets suffered more losses during the final month of a challenging investment year. The all-share MSCI World Index retreated 4.3% in USD. Healthcare stocks as depicted by the MSCI World Healthcare Index also closed the month in the red with a negative return of 1.2% but – as seen over the entire 2022 investment year – they fared better than the overall market. The Bellevue Sustainable Healthcare (Lux) Fund also gave up some ground (-0.6%; USD / I shares) but it still beat its benchmark. Several central banks raised their interest rates to bring inflation under control. These decisions had been widely anticipated by investors with one big exception – the monetary tightening announced by the Bank of Japan. That and the general commentary regarding central bank policy action in 2023 cast a cloud over stock market sentiment and led to falling prices in both the benchmark and the fund's portfolio. The fund's relative performance was helped by the continued recovery in the fund's China holdings after the government there began to ease its zero-COVID policies. December was a month of shadows and light for Gedeon Richter (+4.8%, total return in USD), a Hungarian company in the fund’s portfolio. Together with its distribution partner Abbvie (not a portfolio holding), Gedeon Richter announced mid-month that Vraylar had been approved by the US FDA as an add-on therapy for adults with major depressive disorder, which represents a significant label extension for the drug. Unfortunately, there was also some negative news for Gedeon Richter on December 24: The Hungarian government, in an effort to plug some holes in the state budget, is imposing a windfall tax on drug producers based on net revenues in 2022 and 2023 – which Gedeon Richter will also have to pay.
 

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 600 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 600 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.