Bellevue Sustainable Healthcare (Lux)

There were a number of positive data readings on the world economy in April, such as remarkably stable economic growth in spite of higher interest rates. Purchasing managers' indices (PMI) in the US, the euro area and the UK were all higher than expected, as was Chinese GDP for the first quarter. It appears that the short-term risk of a recession has subsided a bit, but the failure of another financial institution in the US at the end of April shows that the cumulative effects of monetary tightening have not yet fully materialized. During the month, investor attention shifted from the economy to earnings announcements for the first quarter of 2023. Mega tech stocks reported strong earnings and led the market to higher ground. The all-share world stock index depicted by the MSCI World gained 1.8% in USD. April was also a very pleasing month for the healthcare sector. M&A deals in the biotech field and positive earnings announcements from medtech stocks helped the MSCI World Healthcare Index outperform the broader market and close 3.5% higher mom. The Bellevue Sustainable Healthcare (Lux) Fund also delivered a positive return, advancing 3.3% (USD / I shares) over the month. The following portfolio positions made positive contributions to the fund's monthly performance: Hong Kong-based healthcare services provider Sinopharm Group (+16.8% in USD, total return) extended its uptrend from the previous month without any specific triggers. There was a steady flow of positive news from Hikma Pharmaceuticals (+11.9%), a company focused on generic and specialty pharmaceutical products. The appointment of the new CEO and upgraded guidance for its generics business for 2023 led its shares higher. Investors also snapped up shares of the US medtech company Intuitive Surgical (+17.9%). Strong global demand from hospitals for the robot-assisted surgical systems that the company manufactures was reflected in the high first-quarter sales growth. Chinese CMO Wuxi AppTec (-16.5%) detracted from the fund's performance. Its first-quarter results indicated that earnings for the remainder of the year could be weak.

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.