Bellevue AI Health

In March, equity markets were dominated by the conflict in the Middle East. The sharp rise in oil prices fueled inflation concerns and pushed market interest rates higher. The yield on 10-year US Treasuries rose by 0.4% to 4.3%, weighing on markets alongside increasing recession concerns.

The MSCI World declined -6.4% in March, the S&P 500 -5.0% and the Nasdaq 100 -4.8%. The broad healthcare sector fell -8.3%, with pharma, medtech and healthcare services stocks exerting the greatest pressure on the sector. The Bellevue AI Health Fund (-8.1%) developed negatively but slightly outperformed its benchmark.

Biopharma, with a weighting of 59.1% at month-end, detracted -4.1% from absolute performance and -0.1% from relative performance. Pfizer (+1.6%) and Otsuka (+0.9%) made positive contributions, while Eli Lilly (-12.6%), Roche (-11.7%) and Novartis (-8.4%) were the main detractors. Pfizer gained after reporting that atirmociclib demonstrated a statistically significant and clinically meaningful improvement in progression-free survival in a Phase II trial in pretreated patients with HR-positive, HER2-negative metastatic breast cancer. Eli Lilly, by contrast, came under pressure after Structure Therapeutics released Phase II data on aleniglipron in obesity.

The medtech segment, with a weighting of 26.2%, detracted -2.9% from absolute performance and -0.1% from relative performance. Procept BioRobotics (+10.2%) and Masimo (+1.4%) contributed positively, while Boston Scientific (-18.3%), EssilorLuxottica (-14.0%) and Abbott (-11.8%) weighed on performance. Procept BioRobotics advanced after management outlined a clear growth trajectory at its Investor Day, targeting revenue of more than USD 500 mn by 2027, rising margins and the achievement of operating profitability from the end of 2026. Medtech stocks were negatively affected primarily by higher interest rates and negative sentiment surrounding Obamacare. Boston Scientific reported strong data from the CHAMPION-AF trial, showing that left atrial appendage closure with Watchman FLX was non-inferior to anticoagulation for the composite efficacy endpoint and significantly reduced non-procedural bleeding. However, many investors used this as an opportunity to take profits, increasing selling pressure on the stock.

Healthcare services, with a weighting of 9.4%, detracted -0.7% from absolute performance but contributed +0.5% to relative performance. BillionToOne (+3.4%) and Omada Health (+2.4%) were positive contributors, while McKesson (-12.3%), HCA Healthcare (-10.5%) and UnitedHealth (-7.0%) weighed on performance. BillionToOne and Omada Health both reported solid quarterly results and provided guidance for 2026 above expectations. McKesson came under pressure amid the Middle East conflict; in addition, the announced resignation of CFO Britt Vitalone weighed on sentiment, although the underlying business remained stable.
The technology segment, with a weighting of 3.2%, which includes companies from the healthcare and information technology sectors, detracted -0.1% from both absolute and relative performance. Oracle (+1.2%) contributed positively, while Waystar (-6.0%) and Microsoft (-5.7%) were the main detractors. Oracle shares rose after the company reported results for the third quarter showing an acceleration in cloud growth, robust margin development and an increased revenue outlook. Waystar and Microsoft shares, by contrast, came under further pressure due to concerns about potential AI-driven disruption.

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 milestones such as the internet, cloud computing and the smartphone. This creates substantial opportunities for companies and investors, particularly in the healthcare sector. A number of studies conclude that healthcare is among the sectors likely to benefit most from the adoption of GenAI, driven by its significant potential for efficiency gains, the large volumes of available data and the substantial financial resources within healthcare systems.

We already see today how drugs are being developed more quickly and with higher probabilities of success, how new diagnostic and treatment methods are leading to better clinical outcomes, and how GenAI is helping healthcare professionals make more informed and better decisions. We focus on healthcare companies that use GenAI as a core element of their business strategy and invest substantial resources in this technology, as this can deliver a sustainable competitive advantage and support above-average value creation. The technology risk is more manageable, given that healthcare is a highly regulated sector.