Market commentary, June 25, 2020
 

Sustainable Healthcare: crisis-resilient and growing fast
 

The BB Adamant Sustainable Healthcare Fund stood remarkably firm in the face of exceptional volatility. A global investment approach coupled with a systematic focus on sustainability contributed to the fund's absolute and relative strength during the market turmoil.

Stability in the current situation

Even during the worst weeks of the coronacrisis, the healthcare sector showed resilience and lived up to its reputation as a defensive investment theme with lower levels of volatility compared to the overall market. Investor hopes that effective treatments for Covid-19 would soon be available gave the sector an additional performance boost. Meanwhile business activity in cyclical industries nearly ground to a halt. That did not go unnoticed on stock markets either: Most cyclical stocks were marked down in recent months, whereas most healthcare companies performed fairly well.

The companies in the portfolio of the BB Adamant Sustainable Healthcare Fund generally show very little economic sensitivity. Healthcare products and services are often absolutely essential and will be prescribed by doctors or purchased even during economic downturns. Not only that, the sector benefits from structural growth drivers. Most of the companies the fund is invested in have very solid balance sheets and stable cash flows too. This is another reason why the portfolio companies performed so well during the recent market meltdown.

Healthcare is an attractive, fast-growing sector even without a pandemic

The healthcare sector is growing at an annual rate of 5%, or twice as fast as gross world product. This trend is likely to continue going forward because the growth drivers specific to this sector - demographics, lifestyles and innovation - remain intact. Demographic aging is becoming an issue across the globe, as is the rapid spread of obesity and diabetes. Meanwhile demands for innovative and efficient solutions that target the root cause of diseases are growing louder. Healthcare companies that help to slow the spread of lifestyle diseases can profit from this huge market.

Strong sector innovation remains a constant

The innovative capacity of healthcare firms is plain to see even in today's crisis. Almost 600 clinical trials investigating drugs and vaccines for treating Covid-19 were launched in record-breaking speed within just three months, from March to June of 2020. Some of the companies in the fund's portfolio are active in these fields too. Japanese pharma giant Chugai and its partner Roche, for example, are testing whether Actemra, an IL-6 receptor antibody drug that is indicated for the treatment of rheumatoid arthritis, could also be effective in treating the hyper inflammatory response observed in some Covid-19 patients. This drug has already been authorized for emergency use in China after proving beneficial for patients with severe cases of Covid-19. Phase III trials investigating Actemra in Covid-19 are under way in Europe and the US.

The road map towards a sustainable healthcare system has become timelier than ever

Certain themes on the road map to a sustainable healthcare system have moved to the forefront again. Prevention, for example, has become a top priority in the fight against the coronavirus pandemic. Prevention is not just about developing vaccines. It also entails the production of personal protective equipment such as face masks and gloves, and disinfectants as well as other products. An important aspect is the speed with which potential treatments for coronavirus disease are being investigated around the world. In addition to solo efforts, numerous international collaborative research projects have been initiated. Diagnostics has also garnered plenty of attention. South Korea was more successful than other countries in halting the spread of the coronavirus disease thanks to mass testing. Amid the virus crisis, telemedicine has also become very relevant as a means of delivering patient care. Government agencies, telemedicine vendors and insurance companies are pushing this technology because it is very efficient and cost-effective. Access to medicine, a long-standing debate in the healthcare sector, has become a hot-button issue in the current situation. While researchers are racing to develop medical solutions for Covid-19 on various fronts, people are also asking whether the products that prove to be effective will be equally available around the world.

BB Adamant Sustainable Healthcare: USD 100 mn mark passed for the first time

Launched in July of 2018, the BB Adamant Sustainable Healthcare Fund was the first investment fund with a clear focus on healthcare and sustainability. Its investment process is similar to the methodology behind the Adamant Healthcare Index that has been successfully compiled by Bellevue Asset Management since 2007. The fund portfolio has a PEG ratio of 1.2, which is not overly expensive - especially compared to the broader market. Average estimated sales growth of the 40 stocks in the portfolio is approximately 13% and the average EBITDA margin is about 26%, which we consider attractive. The fund has returned 9.8% (USD/I shares) from the beginning of the year to June 16. That represents an excess return of 8.6 percentage points compared to the MSCI World Healthcare Net Return Index and 14.9 percentage points compared to the MSCI World Net Return Index. Total invested capital recently passed the USD 100 mn mark for the first time ever, which inspires further confidence in the fund and makes it even more attractive to institutional investors.

 

For further information:

Bellevue Asset Management AG, Seestrasse 16 / P.O. Box, CH-8700 Küsnacht/Zurich
Tanja Chicherio, Tel. +41 44 267 67 09, tch@bellevue.ch
www.bellevue.ch
 

Bellevue Asset Management

Bellevue Asset Management and its sister company StarCapital based in Oberursel outside Frankfurt, Germany are part of Bellevue Group, an independent, Swiss financial group registered in Zurich and listed on the Swiss Exchange SIX. Bellevue was established in 1993 and is a leading investment boutique specialized in healthcare equities and traditional as well as alternative investment strategies with assets under management of CHF 10.6 billion.

Disclaimer: This document is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. It is particularly not intended for US persons, as defined under Regulation S of the U.S. Securities Act of 1933, as amended. The information and data presented in this document are not to be considered as an offer to buy, sell or subscribe to any securities or financial instruments. The information, opinions and estimates contained in this document reflect a judgment at the original date of release and are subject to change without notice. This information pays no regard to the specific or future investment objectives, financial or tax situation or particular needs of any specific recipient and in particular tax treatment depends on individual circumstances and may be subject to change. This document is not to be relied upon in substitution for the exercise of independent judgment. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in the light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional. The details and opinions contained in this document are not to be considered as recommendation or investment advice. Every investment involves risk, especially with regard to fluctuations in value and return, and investors' capital may be at risk. If the currency of a financial product is different from your reference currency, the return can increase or decrease as a result of currency fluctuations. Past performance is no indicator for the current or future performance. The performance data are calculated without taking account of commissions and costs that result from subscriptions and redemptions. Commissions and costs have a negative impact on performance. For more information about the associated costs, please refer to the related costs and fees section of the prospectus. Any benchmarks/indices cited herein are provided for information purposes only. No benchmark/index is directly comparable to the investment objectives, strategy or universe of the subfund. The performance of a benchmark shall not be indicative of past or future performance of the subfund. Financial transactions should only be undertaken after having carefully studied the current valid prospectus and are only valid on the basis of the latest version of the prospectus and available annual and halfyearly reports. Please take note of the risk factors. Countries of distribution and local representatives The Bellevue Funds (Lux) is registered and admitted for public distribution in Austria, Germany, Luxembourg, Spain and Switzerland. Austria Paying and information agent: ERSTE BANK der oesterreichischen Sparkassen AG, Am Belvedere 1, A-1100 Vienna Germany Information agent: ACOLIN Europe GmbH, Reichenaustrasse 11a-c, D-78467 Konstanz Spain Representative: atl Capital, Calle de Montalbán 9, ES-28014 Madrid - CNMV under the number 938 Switzerland The Bellevue Funds (Lux) SICAV is registered for public offering and distribution in Switzerland with the Swiss Financial Market Supervisory Authority. Representative agent in Switzerland: ACOLIN Fund Services AG, Leutschenbachstrasse 50, CH-8050 Zurich. Paying agent in Switzerland: DZ PRIVATBANK (Schweiz) AG, Münsterhof 12, Postfach, CH-8022 Zürich. You can obtain the sales prospectus, Key Investor Information Document ("KIID"), statutes and the current annual and half-yearly reports, the current share prices and further information about the fund free of charge in German from the management company Bellevue Asset Management AG, Seestrasse 16, CH-8700 Küsnacht, the representative agent in Switzerland or online at www.bellevue.ch. In respect of the units distributed in or from Switzerland, the place of performance and jurisdiction is at the registered office of the representative agent.