Bellevue Medtech & Services (CH)

In March, the Iran conflict dominated equity markets. The sharp rise in oil prices fueled inflation concerns and pushed interest rates higher. The yield on the 10-year US Treasury rose by 0.4% to 4.3%, weighing on markets alongside recession fears.

The broad equity market declined by 2.4%, while the healthcare sector fell by 4.4%, with pharma and medtech exerting the greatest pressure on the sector. The Bellevue Medtech & Services Fund (-7.7%) also corrected and slightly underperformed its benchmark (-7.4%). Medtech companies detracted -5.5% from performance, while healthcare services contributed -2.2%.

Veeva Systems (+0.6%) made a positive contribution to performance, while Tenet Healthcare (-17.9%), McKesson (-8.6%) and HCA Healthcare (-6.8%) detracted. Veeva performed relatively well following a sharp share price decline in the previous month driven by AI-related disruption concerns.
Health insurers such as Centene (-24.0%), Molina (-9.8%), CVS Health (-6.3%), Humana (-4.7%), Elevance (-4.1%), Cigna (-3.6%) and UnitedHealth (-3.1%) weighed on performance. At an investor conference, Centene confirmed its earnings guidance for 2026 but stated that the decline in membership in its Obamacare business had reached the upper end of its Q1 guidance by the end of February. At the same time, higher utilization in the specialty pharmacy segment was observed. This unsettled not only Centene investors, but also those of Molina, which also has significant exposure to the Obamacare market. CVS and Humana were under pressure in March due to declining investor expectations regarding the final reimbursement rates for Medicare Advantage 2027, which we expect to be announced in early April.

New medtech positions such as Medline (-2.4%) and LivaNova (-6.2%), which were built up during the month under review, made a positive contribution to performance. Positions in faster-growing, large-cap and innovative medtech companies such as Boston Scientific (-14.9%), Stryker (-11.4%), Abbott (-8.1%), Medtronic (-6.8%) and Intuitive Surgical (-4.5%) detracted -3.4% from portfolio performance. The main headwinds were likely higher interest rates and negative sentiment surrounding Obamacare. Boston Scientific reported strong results from the CHAMPION-AF trial, showing that left atrial appendage closure with Watchman FLX was non-inferior to anticoagulants for the composite efficacy endpoint and significantly reduced non-procedural bleeding. However, many investors used this as an opportunity to take profits, increasing selling pressure on the stock. Medtronic, meanwhile, lowered its earnings guidance slightly for the current fiscal year following weak share price performance of its spun-off diabetes unit Minimed in the context of its IPO.

Life science tools companies Thermo Fisher (-1.6%) and Danaher (-6.0%) also weighed slightly on performance, although investor sentiment improved over the course of the reporting month.

All performance data in CHF/AA shares.

In the healthcare services segment, we see considerable value creation potential in hospitals and US health insurers. Hospitals are expected to benefit from sustained high treatment volumes and moderately rising personnel costs. For health insurers, we expect margin recovery in 2026, particularly in the Medicare Advantage segment. Persistently high interest rates could provide additional support to earnings development.

Based on Q4 results from medtech companies and our discussions with numerous management teams in recent weeks, we expect robust growth in procedure volumes in 2026. Operating leverage from higher procedure volumes, the weaker US dollar and the annualization of new tariffs are likely to further support earnings growth.

The approval and launch of key new products should continue to support revenue growth in the medtech sector and underpin valuations. Examples include Abbott’s Volt PFA catheter, Boston Scientific’s Farapulse PFA and Watchman FLX Pro, Intuitive Surgical’s da Vinci 5 robotic system, Medtronic’s Hugo and Johnson & Johnson’s Ottava, as well as Medtronic’s Symplicity Spyral catheter. Numerous clinical data readouts and new reimbursement frameworks should not only strengthen investor confidence but also increase revenues over the medium term.