Bellevue Medtech & Services (CH)

June was primarily shaped by the ceasefire and the temporary de-escalation of the conflict in the Middle East. The US economy remained broadly resilient. Core inflation came in slightly below expectations despite elevated crude oil prices, while the labour market proved more robust than anticipated. Against this backdrop, the Federal Reserve, under its new Chair Kevin Warsh, left interest rates unchanged.

The broader equity market gained 2.2% during the reporting month. In contrast to previous months, the information technology and communication services sectors weighed on performance as investors became more cautious about AI-related stocks due to elevated valuations. The healthcare sector advanced 8.7%, supported by pharmaceutical and biotechnology companies as well as healthcare service providers. The Bellevue Medtech & Services Fund returned 7.2%, in line with its benchmark, which also gained 7.2%. Medical technology holdings contributed 2.2% to performance, while healthcare service providers added 5.0%.

HCA Healthcare (+6.8%) advanced after management reaffirmed its 2026 outlook at an investor event and highlighted cost-saving initiatives and solid contract renewals despite the expected headwinds from the expiry of Affordable Care Act subsidies. Veeva Systems (+5.4%) and McKesson (+5.4%) also made positive contributions to performance.

All health insurers delivered positive returns and contributed to performance: Humana (+34.9%), CVS Health (+17.7%), UnitedHealth (+13.7%), Centene (+11.5%), Cigna (+3.4%) and Elevance (+2.2%). Positive management commentary at investor conferences and encouraging surveys on hospital utilisation supported the sector. Humana rallied after reaffirming its 2026 guidance for adjusted earnings per share of at least USD 9, easing concerns over rising costs in its Medicare Advantage business. CVS Health and UnitedHealth also benefited, as Medicare Advantage remains a key earnings driver for both companies.

Large-cap innovative medical technology companies, including Medtronic (+10.7%), Abbott (+9.7%), Edwards Lifesciences (+8.3%) and Stryker (+7.1%), made positive contributions to performance. Medtronic gained following better-than-expected quarterly sales and a solid outlook for fiscal year 2027, providing support for the broader medtech sector. Edwards Lifesciences advanced after the US Centers for Medicare & Medicaid Services (CMS) proposed easing reimbursement criteria for transcatheter aortic valve replacement (TAVR) procedures. Medtronic also benefited from the broader eligible patient population and improved access to treatment.

Boston Scientific (-8.6%), Dexcom (-5.5%), EssilorLuxottica (-5.2%) and Intuitive Surgical (-3.1%) weighed on performance. Boston Scientific came under pressure due to slowing growth of its WATCHMAN franchise and increasing competitive pressure. EssilorLuxottica weakened following Meta's launch of lower-priced AI-enabled smart glasses and uncertainty surrounding the future ownership structure of the founding family's holding company.

Life sciences tools companies Danaher (+8.1%) and Thermo Fisher (+5.5%) also contributed positively to portfolio performance.

All performance figures are based on the CHF AA share class.

Within healthcare services, we continue to see substantial upside potential among hospitals and US health insurers. Hospitals should benefit from persistently strong treatment volumes and moderately rising labour costs. For health insurers, we expect margins to recover in 2026 and 2027, particularly in the Medicare Advantage and Medicaid businesses. Persistently high interest rates could provide additional support for earnings growth.

Based on first-quarter results from medtech companies and our discussions with numerous management teams over recent weeks, we expect procedure volumes to remain robust in 2026. Operating leverage from solid procedure growth, a weaker US dollar and the annualization of the new tariffs should support stable earnings growth.

The approval and commercial launch of key new products should continue to support revenue growth across the medtech sector while underpinning valuations. Examples include Abbott's Volt PFA catheter and Boston Scientific's Farapulse system, the da Vinci 5 robotic platform from Intuitive Surgical, Medtronic's Hugo and Johnson & Johnson's Ottava robotic systems, as well as Medtronic's Symplicity Spyral catheter. A steady flow of clinical data publications and new reimbursement policies should not only strengthen investor confidence but also support revenue growth over the medium term.