Bellevue AI Health

The US economy remained resilient in May despite the conflict in the Middle East. A stronger-than-expected labor market, surprisingly high consumer confidence, and core inflation in line with expectations supported economic activity.

The MSCI World gained 4.5%, the S&P 500 advanced 5.3%, and the Nasdaq 100 rose 10.6%. The technology sector was the primary driver of performance, as semiconductor and hardware manufacturers benefited from the AI boom and accounted for the majority of market gains. The healthcare sector gained 1.9%, supported by pharmaceutical companies, life science tools companies, and healthcare services providers. The Bellevue AI Health Fund advanced 2.2%, outperforming its benchmark.

Biopharma (58.9% weighting at the end of the month) contributed 2.1% to absolute performance and 0.1% to relative performance. Eli Lilly (+18.4%), Merck & Co (+8.7%), and AbbVie (+3.0%) were the largest positive contributors, while Zoetis (-32.4%), Regeneron (-12.9%), and Johnson & Johnson (-1.4%) detracted. Eli Lilly gained on continued strong demand for its diabetes and obesity drug Mounjaro, the launch of the oral GLP-1 therapy Foundayo, and positive Phase III data for retatrutide, a novel triple agonist for obesity that is viewed as a potential next growth driver due to its particularly strong weight-loss efficacy. Zoetis shares came under pressure after its US pet care business disappointed expectations due to inventory reductions at retailers, as well as ongoing competitive and economic headwinds.

The fund’s medtech exposure (24.2%) detracted 0.8% from absolute performance and 0.6% from relative performance. Dexcom (+23.8%), IQVIA (+15.1%), and Thermo Fisher (+2.8%) made positive contributions, while Medline (-17.8%), Boston Scientific (-16.1%), and Hoya (-6.9%) detracted. Boston Scientific came under pressure after lowering its near-term expectations for the US WATCHMAN business. Continued weakness in standalone WATCHMAN procedures, capacity constraints, and changing referral patterns were cited as the key reasons. Despite solid quarterly results, Medline disappointed investors by maintaining its EBITDA guidance for fiscal year 2026 unchanged.

Healthcare services providers (11.2%) contributed 0.2% to both absolute and relative performance. BillionToOne (+31.9%), Omada Health (+23.1%), and UnitedHealth (+2.7%) made positive contributions, while HCA Healthcare (-12.9%) and McKesson (-8.9%) detracted. BillionToOne and Omada reported strong quarterly results. UnitedHealth benefited from management comments at an investor conference indicating that medical costs remained well under control based on April data. This weighed on HCA Healthcare shares.

The fund’s technology exposure (3.8%), which includes companies from both the healthcare and information technology sectors, contributed 0.4% to both absolute and relative performance. Qualcomm (+39.8%), Oracle (+39.9%), and Microsoft (+10.4%) made positive contributions, while Waystar (-6.9%) was the only detractor. Qualcomm outperformed on growing investor optimism regarding its opportunities in AI-enabled datacenters and custom silicon solutions.

All performance data in USD/B shares.

The rapid development of generative artificial intelligence (GenAI) is ushering in an unprecedented technology-driven transformation that ranks alongside major milestones such as the Internet, cloud computing, and the smartphone. GenAI is creating tremendous opportunities for businesses and investors, particularly in the healthcare sector. A growing number of studies conclude that healthcare is among the sectors most likely to benefit from the adoption of GenAI. This is primarily due to the sector’s significant potential for efficiency gains, the vast amount of available data, and the substantial financial resources dedicated to healthcare.

We are already seeing medications being developed more quickly and with higher probabilities of success, new diagnostic and treatment approaches delivering better clinical outcomes, and GenAI helping healthcare professionals make more informed and effective decisions. We focus on healthcare companies that have made GenAI a core element of their business strategy and are investing substantial resources in this technology, enabling them to gain a sustainable competitive advantage and achieve above-average value creation. The technology risk is more predictable in healthcare because it is a highly regulated sector.