Bellevue Obesity Solutions

Global equities continued to be mixed in October, with MSCI World Index down 0.8% in USD on a net return basis. The S&P500 returned -0.9% in USD while the NASDAQ Composite returned -5.3% in CHF, weighed down by a selloff in the tech and AI space.

Healthcare strongly outperformed, with the MSCI World Health Care Index up 9.9% in USD on a net return basis during the month of October.

October was a challenging month for markets, with the broad market finishing slightly in the red. The primary headwind was a broad selloff in the tech and AI space, which weighed on sentiment across risk assets. This was further compounded by a risk-off tone ahead of the early November midterm elections, persistently elevated yields, and continued market expectations of at least one additional interest rate hike by the Federal Reserve before year-end.

In the healthcare space, the month's main events centered on the first wave of Q3 earnings from many of the sector's larger constituents. Results were broadly constructive and helped support healthcare from the wider market weakness.
Large-cap biopharma was the largest contributor to sector performance during the month, underpinned by solid earnings beats and guidance raises. The segment also benefitted from a rotation into defensive names, both from investors moving out of tech and from within the sector itself.

Managed care performed well, supported by a favorable reimbursement environment and positioning ahead of potential Democratic gains in the midterms.

Overall, end-market demand across the sector remains robust, driven by a combination of ongoing therapeutic innovation and structurally increasing healthcare consumption across key demographics.

The Bellevue Obesity Solutions (Lux) Fund - I shares returned 7.2% in USD, underperforming its benchmark by 264 bp.
Top absolute performers in the fund included Glaukos (+44.7%; Q3 beat on Epioxa, 2027 revenue guided to around $1 billion), Eli Lilly (+22.5%; Q3 beat and third guidance raise of the year to USD 91-92 bn), and Galderma (+18.0%; Q3 beat and guidance raise, ZO Skin Health acquisition).

Top relative positive contributors included Glaukos (overweight; +65 bp; Q3 beat on Epioxa, 2027 revenue guided to around USD 1 bn), Sandoz (overweight; +37 bp; record high after core EBITDA margin guidance upgrade despite Q3 sales miss), and Galderma (overweight; +29 bp; Q3 beat and guidance raise, ZO Skin Health acquisition).

Top relative negative contributors included Eli Lilly (underweight; -45 bp; Q3 beat and third guidance raise of the year to USD 91-92 bn), Alphabet (overweight; -41 bp; Q3 miss as AI Mode cannibalised search revenue), and Gilead Sciences (not invested; -33 bp; Q3 beat and raised guidance on HIV strength).

The near-term backdrop remains uncertain, with elevated oil prices, higher-for-longer interest rates, and unresolved geopolitical tensions. The approaching US midterms as well as unstable interest rate expectations may lead to increased volatility.

Despite this, equity markets have been resilient. Rate sensitivity and supply chain complexity warrant vigilance, though healthcare's defensive characteristics could support relative performance if conditions deteriorate further.

The structural case for healthcare remains intact and increasingly compelling. Regulatory uncertainty has materially eased, valuations remain near decade lows, and biopharma fundamentals continue to stabilize.

At current valuations, medtech looks increasingly attractive, with strong fundamentals driven by innovation in new therapeutic areas such as renal denervation and pulse-field ablation. Healthcare contributes approximately 18% of US GDP yet represents only around 6% of the S&P 500, close to 20-year lows.

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

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