Bellevue Obesity Solutions

Global equity markets continued to progress positively in May, with the MSCI World Index rising 4.6%, driven by the artificial intelligence (AI) narrative. Healthcare underperformed the broader market, with the MSCI World Health Care Index up 1.9% in the month. Against this backdrop, the Bellevue Obesity Solutions (Lux) Fund – I shares returned 2.2%, outperforming its benchmark by 27 bp.

The US-Iran conflict continued to dominate headlines. While a resolution was not reached, the overall trend was one of de-escalation. This sent oil prices down and US equities to record highs, led by a return of the AI thematic. Yields climbed, pricing in persistent inflation and a higher likelihood of a rate hike. Healthcare sector performance over the month was driven by Pharma (+4.2%) and Life Science Tools (+6.7%) offset by Medtech (-3.6%).

Top positive contributors to sector performance were Eli Lilly (+18%, momentum following strong Q1 2026 results, expanding Zepbound coverage), Merck & Co (+8.7%, strong Q1 2026 results and sac-TMT cancer updates) and AbbVie (+3%, defensive rotation) while the biggest detractors were Zoetis (-32%, Q1 2026 results miss and-full year guidance cut), Boston Scientific (-16%, guidance downgrade) and Intuitive Surgical (-7%, product recall).

In May, the healthcare sector saw a mix of clinical, regulatory, and commercial catalysts. Cytokinetics reported positive Phase III ACACIA-HCM topline results, while Viridian's Phase III REVEAL-2 study met its primary endpoint. Regeneron's Phase III LAG-3 melanoma trial failed, whereas AstraZeneca's Enhertu received regulatory approval. Biogen reported a Phase II Alzheimer's disease setback. At ASCO, Merck & Co presented lung cancer data from its Kelun-partnered sac-TMT program, while Akeso/Summit's HARMONi-6 study demonstrated a statistically significant overall survival benefit. Separately, Merck secured approval for sac-TMT in endometrial cancer, and Eli Lilly reported TRIUMPH-1 results for retatrutide. The month also saw unexpected FDA leadership turnover, with the departures of Commissioner Marty Makary and the head of CDER.

Top absolute performers in the fund included Humana (+29%; strong Q1 2026 results and management commentary), Dexcom (+20%; strong Q1 2026 results), and Cytokinetics (+20%; positive Phase III ACACIA-HCM topline results).

Top relative positive contributors included Dexcom (overweight; +28.9 bp contribution; positive Q1 2026 results), Apple (overweight; +25.1 bp; AI narrative), and Zoetis (not invested; +22.0 bp contribution, negative Q1 2026 results and guidance cut). Top relative negative contributors included ROVI (overweight; -16.3 bp; 2026 guidance cut), Eli Lilly (underweight; -15.4 bp; strong momentum post positive Q1 2026 results), and McKesson (overweight; -15.1 bp; mixed Q1 2026 results for the drug distributors).

The near-term backdrop remains uncertain, with elevated oil prices, higher-for-longer interest rates, and unresolved geopolitical tensions. Despite this, equity markets have recovered significantly. Rate sensitivity and supply chain complexity warrant vigilance, though healthcare's defensive characteristics should provide relative resilience 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. Healthcare contributes approximately 18% of US GDP yet represents only around 10% of the S&P 500, a disconnect we expect to narrow over time.

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, 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.