Bellevue Healthcare Strategy

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 Healthcare Strategy (Lux) Fund (I shares) increased by 0.5% in January 2026, underperforming its benchmark by 64bps. The underperformance was driven by underweight positioning in the more value-orientated biotechnology and pharmaceutical companies.

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, the pharmaceuticals (-34 bps contribution) subsector was the clear detractor, with our underweight positioning creating an headwind in the month. On the other hand, our underweight positioning in US managed care names was a key positive contributor. In terms of single stocks, the top-five positive contributors to the fund performance were Penumbra (+15% absolute performance; takeover offer accepted for an overweight position), Eli Lilly (+3%; underweight position which underperformed in the month due to GLP-1 competition and pricing concerns), Celltrion (+15%; strategic move to add US manufacturing taken positively), Sandoz (+16%; positive biosimilar dynamics), and Shionogi (+13%; positive Q3 results and strategic updates).

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. 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-long 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 biion 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. Innovation not only supports growth but also enhances healthcare system efficiency by mitigating long-term care costs.

Against this backdrop, the fund maintains a selective, high-conviction strategy with diversified global exposure to the healthcare.