Bellevue Digital Health

The broad equity market (-1.2%) closed lower in September, while the US technology sector (Nasdaq 100 +3.3%) posted a strong gain. The broader healthcare sector (-1.8%) also declined, although higher-growth segments such as biotech (NBI -0.1%) fared better than more defensive areas such as medtech (-6.1%). The Bellevue Digital Health Fund (-0.1%) benefited from stronger demand for growth stocks and significantly outperformed both the broad equity market and the healthcare sector. The Digital Health Fund (+15.0%) delivered an excellent performance in Q3 2026, significantly outperforming the US technology sector (+0.6%), the broad equity market (+1.9%) and the healthcare sector (+3.3%). The long-awaited rotation back into digital health is taking place, and investors in general are beginning to recognize the investment opportunities in the healthcare sector again.

13 of the 35 companies in the fund's portfolio made a positive contribution to performance in the month under review, including 10X Genomics (+44.7%), Natera (+28.4%), Illumina (+28.1%), Adaptive Biotech (+16.0%), Kestra (+9.9%), Intuitive Surgical (+7.9%), as well as smaller holdings such as Metis TechBio (+38.2%) and XtalPi (+9.8%).

Life sciences tools stocks performed well, supported by positive comments from Thermo Fisher CEO Marc Casper regarding the recovery of the Chinese market. This, together with the expected surge in demand for biological experiments to build comprehensive AI biology models, helped drive the share prices of 10X Genomics and Illumina, as well as Chinese autonomous lab operators Metis TechBio and XtalPi, higher. Natera announced the submission of 11 new indications to CMS (Centers for Medicare & Medicaid Services), which should increase the company's average selling price (ASP) per test from USD 1275 to at least USD 2000 within a 12-month period. After a prolonged period of underperformance, Intuitive Surgical's share price performance was primarily driven by multiple expansion. In addition, the company plans to allow customers to use surgical instruments for longer periods from 2027, combined with a below-average price increase. This should 1) accelerate procedure volume growth as lower instrument costs per procedure stimulate demand, 2) improve profit margins thanks to the price increase, and 3) help keep new competitors such as Medtronic at bay.
Large-cap, lower-growth companies in particular, such as Stryker (-14.7%), EssilorLuxottica (-11.4%), Abbott (-10.4%) and Dexcom (-5.2%), weighed on fund performance during the month under review. Smaller companies such as Globus Medical (-8.0%), Glaukos (-8.6%), Align (-9.0%), Procept BioRobotics (-14.1%) and Omada Health (-15.2%) also detracted. Stryker did not lower its full-year guidance but reported production issues at recently acquired Inari and stronger competition in hip implants. Investor impatience and nervousness surrounding Dexcom is increasing as the market awaits an announcement from CMS on expanded reimbursement for continuous glucose monitoring sensors to the important group of diabetes patients who are not yet using insulin.

All performance data in USD/B shares.

Looking at the fundamentals, digital health companies are on a stable, above-average growth trajectory that we expect to remain intact throughout the year. Positive sector momentum and renewed investor interest in healthcare make us very confident about the remainder of 2026 and the coming year. Inflows into the broader healthcare sector should also benefit digital health.

The approval and subsequent launch of relevant new products should continue to support strong sales growth. Besides innovation as the key driver of value, other factors such as attractive valuation levels and the anticipated acceleration in M&A and IPO activity also speak in favor of an investment in the Bellevue Digital Health Fund.