Bellevue AI Health

US core inflation data published in October came in lower than anticipated despite the markup on import tariffs. Meanwhile the ADP National Employment Report revealed more signs of weakness in the US labor market. The Fed cut its benchmark lending rate by 25 bps but sent mixed signals about a December cut.

Against this backdrop, the MSCI World gained 2.0%, the S&P 500 rose 2.3%, and the Nasdaq 100 advanced 4.8%. The healthcare sector was an outperformer, returning +3.1% month on month, driven by pharma, life sciences tools, and biotech stocks. Pfizer and the US government reached an agreement on most-favored-nation (MFN) pricing for its drug products. This was the first such agreement to date, and it gave the entire sector a boost. The Bellevue AI Health Fund delivered a positive return of 3.5% and beat its benchmark.

Biopharma (54.8% weighting at the end of the month) contributed 1.9% to the fund’s absolute performance and 0.1% to its relative performance. Regeneron (+15.9%), Eli Lilly (+13.1%), and AstraZeneca (+8.8%) were the top performers, while Novo Nordisk (-10.2%), Abbvie (-5.1%), and Pfizer (-3.3%) detracted. Regeneron exceeded investor expectations with strong Q3 results, driven by solid sales of Dupixent, a biologic drug for the treatment of inflammatory diseases such as atopic dermatitis and asthma, and Eylea, a drug used to treat retinal diseases such as age-related macular degeneration and diabetic macular edema. The company also provided a positive update on its R&D pipeline. Eli Lilly reported a very strong set of quarterly results and upgraded its guidance, topping investor expectations. Lilly’s growth was primarily fueled by booming sales of Mounjaro and Zepbound, two drugs for the treatment of type 2 diabetes and obesity.

Medtech stocks (29.0% weighting) contributed 1.7% to the fund’s absolute performance and 0.4% to its relative performance. The biggest positive contributions came from Intuitive Surgical (+19.5%), Thermo Fisher (+17.0%), and Danaher (+8.6%), while Dexcom (-13.5%), Medtronic (-4.8%), and Alcon (-0.3%) detracted. Intuitive’s Q3 results beat the consensus growth estimate by a wide margin, and management raised its guidance for 2025. Thermo Fisher and Danaher also released better-than-expected results, and both companies benefited from the improved sentiment toward the healthcare sector thanks to the Pfizer deal. Dexcom’s more cautious top-line guidance for 2026 disappointed investors.

Healthcare services (10.8%) had a neutral impact on the fund’s absolute performance and a slightly negative impact of -0.1% on relative performance. Omada (+11.1%), HCA Healthcare (+7.9%), and McKesson (+5.0%) made positive contributions, while Cigna (-15.2%), LabCorp (-11.5%), and UnitedHealth (-1.1%) had a slightly negative impact overall. HCA Healthcare exceeded consensus sales and profit estimates, and its management upped its forecast for 2025, whereas Cigna was marked down on the back of declining membership numbers and rising costs in its individuals and family health plans.

Tech exposure (5.3%), which includes healthcare and tech companies, had a neutral impact in absolute and relative terms. Qualcomm (+8.7%) and Nvidia (+8.5%) fueled performance, while Veeva Systems (-2.3%) and Waystar (-5.5%) detracted. Qualcomm announced the release of new AI accelerator chips. Although Waystar’s Q3 results topped expectations, its guarded outlook for Q4 came as a disappointment.

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 right next to other key milestones such as the Internet, cloud computing, and smartphones. GenAI is creating tremendous opportunities for businesses and investors, especially in the healthcare sector. According to a number of studies, the healthcare sector will be one of the industries that will benefit the most from the deployment of GenAI. This forecast is mainly based on the vast potential for efficiency gains in healthcare systems, on the large, readily available amounts of data in healthcare systems, and on the considerable financial resources available for healthcare needs.

Medications are already being developed more quickly and with better rates of success, new diagnostic and treatment methods are producing better clinical outcomes, and GenAI is helping medical professionals make better and more informed decisions. We focus on healthcare companies that have made GenAI a core element of their business strategy and that are investing substantial resources in this technology to gain a lasting competitive advantage and deliver superior growth. The technology risk here is more calculable than in other industries because healthcare is such a heavily regulated industry.