Bellevue AI Health

There were increasing signs of a slowdown in US economic activity in August. Inflation came in lower than expected and the jobs market showed clear signs of cooling off. Bond yields retreated as a result, particularly at the shorter end, and the US dollar weakened against major currencies.

This triggered buying on stock markets worldwide, as reflected in the monthly returns of major large-cap indexes such as the MSCI World (+2.6%) and the S&P 500 (+2.4%). The Nasdaq 100 (+1.2%) also advanced but clearly lagged the total market.

Amid this general environment marked by economic uncertainty, the broad MSCI World Healthcare Index (+5.5%) outperformed the total market, as could be expected. The Bellevue AI Health (Lux) Fund (+5.4%) also ended the month deep in the green.

Biopharma (59.5% weighting at the end of the month) contributed 3.8% to the fund's absolute performance and had a slightly negative impact of -0.1% on its relative performance. Eli Lilly (+19.2%), AstraZeneca (+10.4%) and Novo Nordisk (+5.6%) were performance drivers, while Moderna (-35.1%) and Pfizer (-5.0%) weighed on performance. Eli Lilly beat consensus sales expectations and revised its guidance significantly higher, citing the success of its weight-loss and diabetes drugs. Moderna disappointed investors when it cut its 2024 sales forecast for Spikevax, a vaccine for preventing COVID-19.

Medtech stocks (24.1%) contributed 1.4% to the fund’s absolute performance and 0.2% to its relative performance. Innovative, fast-growing large-cap medtech names such as Intuitive Surgical (+10.8%), Boston Scientific (+10.7%) and Stryker (+10.1%) made positive contributions to fund performance although there was no specific price-relevant news behind the gains. QuantumPharm (+66.5%), a company specializing in AI and robotics in the drug discovery space, and Tempus AI (+37.2%), a company specializing in AI-backed cancer diagnostics, both of which were added to the fund's portfolio during their IPOs in June, soared after reporting solid quarterly results.

Healthcare services (11.4%) delivered a positive absolute performance contribution of 0.2% and a relative contribution of -0.1%. LabCorp (+7.0%), Elevance (+4.7%), Sonic Healthcare (+3.6%) and UnitedHealth (+2.4%) made positive contributions to absolute and relative performance. LabCorp reported better-than-expected sales and earnings and increased its guidance for 2024. Elevance, which specializes in exchange plans, was marked up in the wake of better poll numbers for Kamala Harris, a staunch support of exchange markets. Ramsey Health (-7.5%) reported disappointing quarterly results.

The fund's tech exposure (4.4%), which includes tech companies from both the healthcare and information technology industries, contributed 0.2% to the fund's absolute and relative performance. Waystar (+18.3%) and Veeva (+12.8%) made positive contributions to absolute and relative performance, but Qualcomm (-3.1%) was a performance detractor. Waystar is an AI- and cloud-driven company whose products simplify payment processes in the healthcare system. We invested in its initial public offering in June 2024. 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 the smartphone. GenAI is creating tremendous opportunities for businesses and investors, especially in the health sector. According to a number of studies, the health sector will be one of the industries that will benefit the most from the deployment of GenAI. This forecast is mainly based on the considerable 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.

Already today medications are being developed more quickly and with better rates of success, for example, 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 achieve superior value growth. The technology risk here is more calculable than in other industries because healthcare is such a heavily regulated industry.