Bellevue Diversified Healthcare

MSCI World Healthcare outperformed MSCI World in February 2025 by 184 bps (MSCI World Healthcare +1.1% vs MSCI World -0.7%). The sector continued to rebound in February 2025 after a very weak end to 2024, supported by strong full year results / 2025 guidance and a general switch into quality/value in global equities. Bellevue Diversified Healthcare (Lux) Fund (I-shares: +1.4%, in USD) outperformed its healthcare index benchmark by 26 bps.     

As in prior months, there was a large dispersion of performance across MSCI sectors. Consumer staples (+4.9%) was once again strong, followed by real estate (+3.1%). Consumer discretionary (-6.7%) was the weakest sector, followed by communication services (-5.1%).

Within the MSCI World Healthcare Index, there was also a considerable dispersion of monthly performance between subsectors. In somewhat of an reversal of the prior month, biotechnology (+6.3%) was the best performing subsector in the month, followed by pharmaceuticals (+5.0%), medtech (-0.3%), healthcare services (-4.5%), and life science tools (-11.3%). From a geographical point of view, European healthcare performed best (+3.2%), followed by the US (+1.0%) and emerging markets (+0.5%). The performance of Asian healthcare (-2.2%) was disappointing in February.

Within the fund, strong absolute performances were reported during the month from Gilead (+17.6%; solid results and guidance), Verona (+15.6%; positive prescription commentary on key launch of Ohtuvayre), and Chugai (+14.8%; solid pipeline emerging, including orforglipron royalties). On the other hand, negative absolute performances were seen for Glaukos (-23.3%; disappointing 2025 guide), Vaxcyte (-17.3%; negative sentiment around vaccines), and Hoya (-14.3%; full year results & guidance not enough to match high expectations).  

We see the sell-off and de-rating of healthcare stocks in late 2024 as reflective of maximum fear around potential US healthcare reform. The healthcare sectors current discounted relative valuation (MSCI World Healthcare is trading at an 9% discount to MSCI World on blended 1-year forward P/E versus a 10-year average of 3% premium) presents a good entry opportunity, in our view. While it is too early to quantify and far from certain, we expect an manageable impact to sector earnings from any tariffs put in place by President Trump. Across the sector, relatively high gross margins should protect any impact on the bottom-line from reform or tariffs. Biopharmaceutical manufacturing supply chains are complex, but now largely regional, and may be exempt from tariffs. We remain focused on high-conviction names from a bottom-up perspective, and broadly exposed in terms of subsector and geography from a risk perspective.