Bellevue Healthcare Strategy

Global equities recovered in August 2025, with the MSCI World Index rising 2.6%. Healthcare outperformed broader equities, with the MSCI World Health Care Index up 5.1% on the back of improved operating certainty and rebounds in several megacaps, bringing the sector back into positive territory ytd at 2.8%. The Bellevue Healthcare Strategy (LUX) Fund (I shares) gained 3.1% in US dollars, underperforming its benchmark for the month by 208 bps. This was driven by its higher exposure to Asian healthcare, which underperformed in August but has been strong ytd.

Policy developments provided support to sector performance for the first time in many months, as the US and EU clarified that tariffs on imported EU-manufactured drugs will begin at zero and be capped at 15% regardless of any 232 investigation outcomes. At the Jackson Hole Symposium, Fed Chair Powell signaled support for September rate cuts, which lifted sentiment in biotechnology.

Sector heavyweight UnitedHealth rebounded 24% after Berkshire Hathaway disclosed a USD 1.6 bn stake (not invested, but the news supported healthcare services valuations within the fund). Beyond healthcare services, Teva Pharmaceuticals gained 19% on the back of strong Q2 results and supportive generic tariff commentary, Novo Nordisk rose 18% due to mixed competitor data in obesity, AbbVie climbed 11% after posting strong Q2 results, and Galderma advanced 11% following the successful launch of Nemluvio.

President Trump’s July 31 letters highlighted frustration with the lack of progress on his most-favored nation (MFN) Executive Order, pressing for Medicaid pricing alignment, MFN guarantees on new drugs, revenue returns to US taxpayers, and direct MFN pricing from biopharma. While the focus on Medicaid rather than Medicare points to a possible compromise, significant uncertainty remains. The importance of Section 232 drug investigations has diminished following the US-EU tariff agreement capping drug tariffs at 15%, in our view. A potential policy outcome could involve industry guarantees of essential medicine supplies, limited MFN adoption, and US CapEx commitments – measures that can be presented politically as victories but would have relatively modest earnings implications for the sector.

Healthcare equities remain derated, now accounting for less than 9% of the S&P 500 despite representing around 18% of US GDP. Greater clarity on drug pricing policy could attract value investors back, while weakening US economic indicators may also restore interest in the sector as a defensive hedge. Structurally, long-term drivers such as aging populations, growing healthcare access in emerging markets, and innovation in areas like robotics and AI continue to provide support. Innovation remains key to addressing rising societal healthcare costs by improving efficiency and reducing the burden of long-term care. Against this backdrop, the fund maintains a selective, high-conviction approach with diversified exposure across global healthcare.