Bellevue Healthcare Opportunities

Despite rising oil prices and unexpectedly high core inflation, the yield on 10-year US Treasuries fell by 40 bps to 4.9% in October. The main drivers were share price declines in AI-related stocks and weaker-than-expected US labor market data.

The MSCI World declined -0.8%, the S&P 500 fell -0.9%, and the Nasdaq 100 lost as much as -6.6% amid a sharp sell-off in AI-driven IT stocks. The healthcare sector gained +9.9%, driven by biopharma, healthcare services and medtech, with biopharma accounting for around 70% of the sector's performance. The Bellevue AI Health fund gained +8.9%, slightly underperforming its benchmark.

Biopharma (60.8% weighting at the end of the month) contributed +6.5% to absolute performance but detracted -0.5 percentage points from relative performance. Eli Lilly (+22.5%), Roche (+17.1%) and AbbVie (+13.4%) made positive contributions, while Metis TechBio (-37.1%), Alnylam (-33.1%) and Daiichi Sankyo (-1.8%) detracted. Eli Lilly benefited from strong international demand for its diabetes and weight-loss drug Mounjaro, as well as unexpectedly high utilization under the US government health insurance program Medicare. This led to strong quarterly results and an upgrade to its full-year guidance. Alnylam, meanwhile, disappointed investors with its sales outlook for therapies targeting abnormal deposits of the protein transthyretin (TTR), which can damage the heart and nerves. Full-year sales are expected to reach only the lower end of the guidance range. In addition, US sales growth of Amvuttra, a drug used to treat this condition, slowed. One-off inventory build-ups and favorable reimbursement effects had partially masked the slowdown.

The medtech segment (23.8% weighting) contributed +1.4% to absolute performance but detracted -0.1% from relative performance. Medtronic (+11.9%), Hoya (+11.0%) and Abbott (+8.1%) made positive contributions, while Beta Bionics (-11.7%), Medline (-7.4%) and Dexcom (-4.6%) detracted. Medtronic completed the spin-off of its MiniMed diabetes business with better-than-expected results. Hoya exceeded investor expectations in its Life Care and IT segments in the second quarter of 2026. Due to strong demand, Hoya plans to bring forward its capacity expansion for glass-based data storage media. Beta Bionics disappointed investors with its full-year sales guidance and withdrew its application for FDA approval of its «3D Intelligence» algorithm.

Healthcare services providers (11.6% weighting) contributed +1.2% to absolute performance but detracted -0.2% from relative performance. LabCorp (+17.3%), McKesson (+16.5%) and UnitedHealth (+10.9%) made positive contributions, while Omada Health (-10.0%) slightly weighed on performance. McKesson benefited from the extension of its pharmaceutical distribution agreement with CVS Health. UnitedHealth reported strong quarterly results, with lower medical costs driving better-than-expected earnings and prompting management to raise its earnings guidance for 2026.

The fund’s tech exposure (3.7% weighting), which includes companies from the healthcare technology and information technology industries, had no significant impact on absolute or relative performance. Veeva Systems (+9.6%) and Waystar (+10.5%) made positive contributions, while Nvidia (-10.4%) detracted. Veeva shares benefited from growing investor confidence in their AI products, Vault AI and Falcon Agents. Nvidia, a chipmaker, came under pressure during the sell-off in AI stocks in October 2026.

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.