Bellevue Medtech & Services

Global equity markets posted positive returns in June, with the broad market gaining 1.5%. The US technology sector (Nasdaq 100) performed slightly better, advancing 2.1%. Within the technology sector, performance dispersion across the various AI clusters remained significant. Slowing momentum and diverging performance trends unsettled investors for the first time, triggering profit-taking in AI-related stocks. This benefited sectors with substantial catch-up potential, most notably the healthcare sector, which gained 7.4%. The medtech sector rose 2.1%, broadly keeping pace with equity markets, while the Bellevue Medtech & Services Fund advanced 3.1%, clearly outperforming its benchmark. The long-awaited rotation back into the healthcare and medtech sectors appears to be taking shape, supported by historically low valuation levels and the sector's relative underperformance over the past 18 months. The next important catalyst will be the reporting season for the second quarter. We expect stable patient volumes and a healthy investment environment in healthcare, which should attract further investor inflows and reinforce the ongoing sector rotation.

Industry leaders Medtronic (+9.3%), Abbott (+8.4%), Edwards (+7.0%) and Stryker (+5.8%) were among the first beneficiaries of the renewed investor interest in the medtech sector. Stryker's management repeatedly expressed confidence that the company's full-year targets can be achieved or even exceeded despite the cyberattack in the first quarter. Glaukos (+38.3%) and Cooper (+19.8%) also delivered strong performances. Glaukos benefited from positive physician feedback regarding the reimbursement criteria for iDose. Cooper reported solid second-quarter results, while the strategic review of its CooperSurgical division (potential sale or spin-off) attracted investor attention. The life science tools companies Danaher (+6.8%) and Thermo Fisher (+4.2%) also recorded positive performance.

Boston Scientific (-9.7%), Dexcom (-6.6%), EssilorLuxottica (-6.3%), Intuitive Surgical (-4.2%) and Hoya (-4.1%) weighed on portfolio performance. Boston Scientific continued to be affected by slowing growth in WATCHMAN, while increasing competition also weighed on the share price. Meta's launch of lower-priced AI glasses and uncertainty surrounding the future ownership structure of the EssilorLuxottica founding family's holding company also weighed on the stock. Hoya's businesses supplying the semiconductor and data storage industries remain its key value drivers, leaving the shares exposed to the broader uncertainty in the technology sector.

US health insurers performed exceptionally well. Molina (+34.7%), Humana (+33.3%), UnitedHealth (+12.4%) and Centene (+10.1%) generated outstanding returns, while Cigna (+2.2%) and Elevance (+1.0%) lagged somewhat behind. The recovery of the US managed care sector in June reflected a broad market re-rating, primarily driven by expectations of easing medical cost trends (MLR) and improving analyst sentiment. In addition, strategic AI investments, particularly at UnitedHealth, created new growth drivers extending beyond the recovery in medical cost ratios. UnitedHealth estimates that AI-driven initiatives could generate cost savings of more than USD 3 billion. Second-quarter results will be the key test of whether earnings power across the health insurance sector is recovering sustainably. Despite the strong performance over the past two months, share prices of US health insurers continue to offer significant upside potential and remain well below their previous highs.

All performance figures refer to EUR B share classes.

Over recent years, a gap has opened between the medtech sector's consistently solid operating fundamentals and its depressed valuation multiples. We expect this gap to begin closing.

There are also clear signs that M&A activity is accelerating again and that large-cap companies will use their strong balance sheets to drive additional external growth. The most important long-term success factor remains the approval and successful commercialization of innovative new products, which should continue to support robust revenue growth.

We continue to expect a significant recovery in profit margins for US health insurers in 2026 and the years beyond, particularly in the Medicare Advantage segment. Persistently elevated interest rates could provide additional support to earnings growth.