Bellevue AI Health

The US economy displayed stable growth in January. The jobs report was very solid and inflation came in slightly lower than expected. The Federal Reserve kept its key interest rate unchanged at 4.25-4.5%, which had already been priced in on capital markets.

Major large-cap indices such as the MSCI World (+3.5%) and the S&P 500 (+2.7%) closed higher but were unable to keep pace with the broader healthcare segment (+6.4%). The debut of the new Chinese AI model DeepSeek R1 triggered a sector rotation in the stock market. Several of the largest listed tech companies with a high AI profile gave up ground, while a lot of capital flowed into the healthcare sector. The Bellevue AI Health Fund (+6.1%) performed well but was not quite able to keep up with its benchmark.

BioPharma (52.7% weighting at the end of the month) contributed 2.3% to the fund's absolute performance but had a slightly negative impact of -0.1% on relative performance. Roche (+11.6%), Johnson & Johnson (+5.2%) and Eli Lilly (+5.1%) were performance drivers, while Biogen (-5.9%), Regeneron (-5.5%) and Novo Nordisk (-2.5%) were detractors. At the J.P. Morgan Healthcare Conference, Roche made positive remarks about its product pipeline (e.g. Alzheimer's and obesity) and expressed an increased willingness to acquire biopharma companies with products in late-stage development. Novo Nordisk was marked down after the US government announced that its diabetes and weight-loss drugs Ozempic and Wegovy were among the 15 drugs selected for the next round of Medicare price negotiations, although the news was not unexpected. The lower prices will take effect in 2027.

Medtech stocks (29.3% weighting) contributed 2.8% to the fund’s absolute performance and 0.2% to its relative performance. Thermo Fisher (+14.9%), Boston Scientific (+14.6%), Abbott (+13.7%) and Intuitive Surgical (+9.6%) made positive contributions to performance, while Procept BioRobotics (-10.0%) and Danaher (-3.0%) were performance detractors. Thermo Fisher surprised investors with better-than-expected guidance for 2025, while Danaher's weak outlook for 2025 disappointed investors. Abbott, Intuitive Surgical and Stryker lifted stock prices across the medical technology sector after publishing excellent quarterly results and management guidance for 2025.

Healthcare services (11.7%) contributed a positive 0.8% to absolute performance and a negative -0.5% to relative performance. US health insurers CVS Health (+27.4%), Humana (+15.6%), UnitedHealth (+7.2%) and Cigna (+6.5%) traded higher thanks to the government's clearly higher-than-expected proposed payment increase to Medicare Advantage plans in 2026. CVS, Humana and Cigna (which are not in the fund's portfolio) explain the negative relative performance. UnitedHealth has already deployed more than 500 AI-powered applications, resulting in a double-digit percentage increase in efficiency. For example, the number of calls and the number of employees required for simple tasks have decreased, while response times have been shortened.

The fund's tech exposure (5.4%), which includes tech companies from both the healthcare and information technology industries, contributed 0.2% to both absolute and relative performance. Qualcomm (+12.6%), Veeva Systems (+10.9%) and Waystar (+9.5%) made positive contributions, while Nvidia (-10.6%) weighed on performance due to DeepSeek (see above). At the J.P. Morgan Healthcare Conference, Nvidia spoke about agentic AI – AI systems that can make decisions independently with minimal human intervention – and said that it was aiming for annual recurring revenue of more than USD 1 bn in the healthcare sector in 2025.

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 right next to other key milestones such as the internet, cloud computing and the smartphone. GenAI is creating tremendous opportunities for businesses and investors, especially in the health sector. According to a number of studies, the health sector will be one of the industries that will benefit the most from the deployment of GenAI. This forecast is mainly based on the considerable potential for efficiency gains in healthcare systems, on the large, readily available amounts of data in healthcare systems, and on the considerable financial resources available for healthcare needs.

Already today medications are being developed more quickly and with better rates of success, for example, new diagnostic and treatment methods are producing better clinical outcomes, and GenAI is helping medical professionals make better and more informed decisions. We focus on healthcare companies that have made GenAI a core element of their business strategy and that are investing substantial resources in this technology to gain a lasting competitive advantage and achieve superior value growth. The technology risk here is more calculable than in other industries because healthcare is such a heavily regulated industry.