Bellevue Obesity Solutions

Global equity markets fell sharply in March, with the MSCI World Index declining 6.4%, as escalating Middle East tensions weighed on oil prices, inflation expectations, and growth prospects. Healthcare underperformed the broader market, with the MSCI World Health Care Index declining 8.3%. Against this backdrop, the Bellevue Obesity Solutions (Lux) Fund – I shares returned -8.2%, a small outperformance versus its benchmark.

All healthcare subsectors posted negative returns in March, though with notable dispersion. Healthcare IT (-5.5%), biotechnology (-5.8%), and pharmaceuticals were the relative outperformers, albeit pharmaceuticals failed to exhibit their typical defensive characteristics. Life science tools (-7.5%), healthcare services (-9.8%), and medtech (-12.1%) lagged. Declines were broad-based across regions: US (-7.8%), Asia (-8.8%), Europe (-9.8%), and emerging markets (-10.0%).

The month opened with the US attack on Iran, which rapidly led to a closure of the Strait of Hormuz. This sent oil prices up by 60%. The uncertainty on duration and magnitude of the conflict, which increased during the month, weighed on markets, yields (US 10 year +36 bp) and rate cuts (first Fed cut rate repriced from Summer 26 to Autumn 27) in particular. Deteriorating financing prospects and increasing supply chain complexity weighed most on industrial and materials sectors performing most negatively over the month.

The month was shaped by three themes: significant clinical readouts, continued momentum in IgA nephropathy (IgAN), and a reacceleration in M&A activities. Boston Scientific's CHAMPION-AF trial supported the Watchman platform in a broader first-line setting, while United Therapeutics' TETON-1 readout was among the quarter's most consequential pulmonary hypertension catalysts. Johnson & Johnson / Protagonist's Icotyde received FDA approval, and BridgeBio delivered encouraging Phase III data in achondroplasia. In IgAN, Otsuka advanced the sibeprenlimab launch and Vertex reported positive Phase III data for povetacicept, reinforcing our conviction that nephrology remains one of the most attractive areas in specialty care. Strategic activity picked up, with Eli Lilly acquiring Centessa, Biogen acquiring Apellis, and Gilead acquiring Arcellx.

Top absolute performers in the fund included Madrigal (+21%; takeover rumors), Protagonist (+15%; FDA approval of Icotyde), and BridgeBio (+12%; strong clinical trial data).

Top relative positive contributors included EssilorLuxottica (not held; +14 bp; -14%; competition concerns), Gilead (not held; +13 bp; -6%), and Cencora (not held; +13 bp; -16%). Top relative negative contributors included Chugai (overweight; -30 bp; -19%; GLP-1 competition concerns), Sandoz (overweight; -19 bp; -13%; strong prior period), and Teva Pharma (overweight; -18 bp; -11%; Middle East conflict).

The near-term backdrop remains uncertain, with elevated oil prices, higher-for-longer rates, and unresolved geopolitical tensions weighing on risk assets broadly. Rate sensitivity and supply chain complexity warrant vigilance, though healthcare's defensive characteristics should provide relative resilience should 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 ~18% of US GDP yet represents only ~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.