Bellevue AI Health

July was marked by renewed conflict in the Middle East, which pushed interest rates higher through rising crude oil prices and higher inflation expectations. At the same time, key US economic data for June was weaker: Core inflation came in slightly below expectations, while the labor market was also weaker than expected.

The MSCI World gained 0.5%, while the S&P 500 declined 0.1% and the Nasdaq 100 fell 3.6%. As in the previous month, the technology sector weighed on performance. The high levels of debt-financed AI investment by large US technology companies are increasingly raising concerns among investors. The healthcare sector gained 1.4%, driven by medtech, life science tools and healthcare services. The Bellevue AI Health fund gained 1.2% but trailed its benchmark.

Biopharma (59.5% weighting at the end of the month) contributed 3.2% to absolute portfolio performance but detracted -0.5% from relative performance. AbbVie (+15.6%), Johnson & Johnson (+12.7%) and Eli Lilly (+8.5%) made positive contributions, while Otsuka (-9.1%), Pfizer (-8.0%) and Gilead (-5.4%) detracted.

Biopharma (59.2% weighting at the end of the month) had a neutral impact on both absolute and relative performance. Regeneron (+22.3%), Amgen (+6.4%) and Roche (+6.2%) made positive contributions, while Alnylam (-31.7%), AstraZeneca (-9.0%) and Eli Lilly (-4.2%) detracted. Regeneron benefited from strong Q2 results, driven by Dupixent, Eylea HD and Libtayo, as well as encouraging pipeline commentary. Alnylam came under pressure after sales of Amvuttra for the treatment of transthyretin amyloidosis (ATTR), a rare disease characterized by harmful protein deposits primarily in the heart and nerves, fell short of expectations and the company unexpectedly lowered its sales guidance for the ATTR portfolio by USD 200 mn.

Medtech (24.3% weighting) contributed +1.2% to absolute performance but detracted -0.1% from relative performance. Dexcom (+23.9%), Abbott (+17.3%) and Thermo Fisher (+14.5%) made positive contributions, while Beta Bionics (-18.1%), Intuitive Surgical (-11.2%) and Kestra Medical (-10.3%) detracted. Dexcom beat sales and earnings expectations, raised its full-year guidance and reported record new patient additions as well as improving profitability. Beta Bionics came under pressure as growth in new patient additions lagged the pace of previous years despite solid Q2 results, while its outlook provided no positive surprises.

Healthcare services (12.6% weighting) contributed 0.2% to absolute performance but detracted -0.1% from relative performance. BillionToOne (+15.5%), McKesson (+13.3%) and LabCorp (+10.4%) made positive contributions, while Omada Health (-9.6%), Humana (-8.4%) and Elevance (-2.8%) detracted. McKesson benefited from increasing clarity on the regulatory environment. Humana and Elevance beat earnings expectations in Q2 but disappointed with their earnings guidance for 2026.

The fund’s tech exposure (3.4%), which includes companies from both the healthcare and information technology sectors, contributed 0.2% to absolute performance and 0.1% to relative performance. Microsoft (+24.6%) and Veeva Systems (+14.8%) made positive contributions, while Qualcomm (-20.1%) and Oracle (-11.1%) detracted. Microsoft benefited from significantly better-than-expected growth at its Azure cloud platform and robust margins despite high AI investment. Qualcomm came under pressure after reporting an in-line quarter and a weaker outlook, as high memory chip prices weighed on smartphone demand.

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.