Bellevue Healthcare Strategy

Global equity markets were positive in July, with the MSCI World Index gaining 0.5%. Healthcare outperformed the broader market, with the MSCI World Health Care Index up 1.4% in the month. Against this backdrop, the Bellevue Healthcare Strategy (Lux) Fund – I shares returned 0.7%, underperforming its benchmark by 73 bp. An overweight allocation to Asia and Emerging Markets regions contributed positively, but it was offset by weak performance from structural and disruptive-growth healthcare holdings.

Global equities reported a modest gain in July, though beneath the surface the drivers shifted materially. The Federal Reserve held its target range at 3.5-3.75%, but an unusual three-way dissent and the absence of forward guidance left the September decision unclear, pushing the 10-year Treasury yield to 4.7% and the 30-year above 5.2%, its highest since 2007. Trade policy re-emerged as a live risk after the administration responded to the Supreme Court's rejection of its earlier tariff regime with fresh 10-12.5% levies on some 60 economies. A late-month rally in mega-cap technology and semiconductors carried the index into positive territory. Healthcare sector performance over the month was driven by Life Science Tools (+8.0%), Healthcare IT (+6.8%), Medtech (+4.8%), Healthcare Services (+2.0%), and Biotech (+0.8%), while Pharma (-0.4%) detraced. Within healthcare, geographic performance was led by Emerging Markets (+5.1%), Asia (+4.1%), and the US (+2.1%), while Europe (-0.9%) lagged.

The month's defining event was the failure of AstraZeneca and Ionis' eplontersen in the Phase III CARDIO-TTRansform trial in ATTR cardiomyopathy: Ionis fell 23% while BridgeBio rose 15% due to reduced competition. Merck won early approval for Lipfendra, the first oral PCSK9 inhibitor, and Vera's atacicept was approved in IgA nephropathy. Second-quarter results favoured medtech and life science tools. Abbott rose 11%, Thermo Fisher 9% and Dexcom 8.5%, while Intuitive Surgical fell 10% and Elevance 9% as ACA exchange attrition emerged as the dominant US demand theme. M&A activity was unusually heavy, led by Vertex's USD 10 bn purchase of Crinetics. On policy, CMS's draft CY2027 outpatient rule cut 340B reimbursement sharply, and the administration proposed tariffs on imported generic drugs rising to 100% from 2028.

Top absolute performers in the fund included Tenet Healthcare (+36.2%; Q2 EBITDA approximately 50% ahead of consensus), Dexcom (+23.9%; strong Q2 with revenue up 20% in constant currency), and Eisai (+21.0%; approval of subcutaneous Leqembi).

Top relative positive contributors included Tenet Healthcare (overweight; +31 bp; Q2 EBITDA approximately 50% ahead of consensus), Samsung Biologics (overweight; +25 bp; Q2 sales +30% year-on-year), and Eli Lilly (underweight; +24 bp; slower-than-hoped orforglipron launch trajectory). Top relative negative contributors included Abbott (not invested; -34 bp; Q2 beat with Medical Devices +8.4% organic), Sandoz (overweight; -33 bp; proposed US generic drug tariffs), and Bristol Myers Squibb (not invested; -21 bp; Q2 results exceeded estimates).

The near-term backdrop remains uncertain, with the Federal Reserve offering little forward guidance, long-dated yields at multi-year highs, and trade policy unresolved. Healthcare's defensive characteristics should provide relative resilience if conditions deteriorate.

The structural case for healthcare remains compelling. Regulatory uncertainty has materially eased, valuations remain near decade lows, and biopharma fundamentals continue to stabilize. Healthcare contributes ~18% of US GDP yet only ~10% of the S&P 500, a disconnect we expect to narrow over time.

Biotechnology continues to shift toward cash-generative, launch-driven 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, global approach, positioned to capture the structural recovery and near-term catalyst-driven opportunities.