Bellevue Medtech & Services

Global equity markets (MSCI World Net Index -8.1%) were clearly pressured by all the uncertainty stemming from the Trump Administration’s tariff policies and worries about their potential impact on global economic growth and inflation rates.

The medtech sector (MSCI World Healthcare Equipment & Supplies Net -8.1%) retreated in step with the global stock market, while the Bellevue Medtech & Services Fund (-7.9%) fared a bit better than its benchmark.

European equity markets (Dax -1.7%, Euro Stoxx 50 -3.8%) benefited from Germany’s defense and infrastructure investment plans and the easing of its constitutional borrowing limits. Meanwhile the euro appreciated significantly against the dollar, gaining 4.3% vs the USD over the month. This additional negative currency translation effect is clearly visible when viewing the performance of the medtech sector (-4.5%) and the Bellevue Medtech & Services Fund (-4.3%) in USD.

In the healthcare services space, HCA Healthcare (+8.7%), the largest hospital chain in the US, and US health insurers UnitedHealth (+6.5%), Elevance (+5.8%), Molina (+5.2%) and Cigna (+2.9%) made positive contributions to performance. All of these services providers generate all of their profits in the US and are therefore not affected in any negative way by Trump's tariffs.

HCA management also said that the course of business during the first quarter had been very positive.

Health insurers’ strong performance in March was fueled by two factors. On the one hand investors began to take an increasingly positive view of the government's 2026 Medicare Advantage payment policy update. Medicare Advantage also enjoys strong support from Republicans. On top of that, Elevance and Centene executives mentioned at an investor conference that analysts’ estimates of their first-quarter earnings are too low. Their remarks also had a positive impact on the stock prices of other health insurers.

In the medtech space, Zimmer Biomet (+4.5%) and Terumo (+1.8%) made positive contributions to portfolio performance. At this year’s American Academy of Orthopedic Surgeons (AAOS) conference, Zimmer Biomet presented seven new products that are expected to increase the company’s weighted average market growth rate from around 4% to 5% by 2027.

Large-cap medtech companies such as Intuitive Surgical (-16.9%), Abbott (-7.6%), EssilorLuxottica (-7.5%), Stryker (-7.1%) and Boston Scientific (-6.5%) weighed on the fund’s performance. These stocks were sold off on worries that the Trump administration would introduce new tariffs in early April, worries that triggered particularly heavy selling in Intuitive Surgical. Those worries were compounded by fears that cutbacks in federal funding for Medicaid would reduce patient demand at hospitals and have a negative impact on medical device manufacturers. We believe the US government has little interest in making things harder for the country’s poorest households.

Shares of life science tools companies Thermo Fisher (-9.5%) and Danaher (-5.0%) also declined on investor worries about new tariffs.

All performance data is in EUR / B shares.

In view of the very strong Q4 earnings announcements from medtech companies and their guidance for 2025 and based on our latest talks with company executives, we expect procedure volume growth rates will remain at high levels in 2025.

The approval and subsequent launch of relevant new products will continue to bolster sales growth, too. Examples here are Abbott’s Lingo, Libre Rio, Libre 3, TriClip and AVEIR products, Boston Scientific’s Farapulse PFA system and Watchman FLX Pro device, and the new da Vinci 5 surgical robot from Intuitive Surgical. We expect sector pricing power to remain above historical levels in 2025, too. Margins should continue to widen thanks to the above-average sales growth and a wave of new product launches with high margins.

In the healthcare services space, we believe hospital operators, healthcare technology companies and US health insurers have considerable upside potential. Hospitals should benefit from high patient volumes, higher prices, and only moderately higher personnel costs. We expect health insurers to report solid member growth and significantly higher profit margins in Medicare Advantage and Medicaid business lines. Continued high US Treasury yields could also have an accretive effect on earnings.

Furthermore, there are already signs that M&A activity is gaining momentum after the appointment of a business-friendly director for the US antitrust authority and large-cap companies are clearly ready to use their strong balance sheets to drive external growth. Today's attractive valuation levels are enticing too. The anticipated large-scale shift of investor assets out of stocks that had made strong gains during the previous year is another factor that favors the Bellevue Medtech & Services (Lux) Fund.