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INVESTMENT OUTLOOK FOR 2023 - 4 - ROBERT GAMBI Global head of investments Letter to investors We have become accustomed to uncertain times. Nonetheless, 2022 was an extremely challenging year in financial markets. The investment rationale for the classic 60% stocks / 40% bonds portfolio is that it will deliver solid if not spectacular returns. As of October, the 60/40 portfolio was on track to match its worst year for performance since the Second World War. Sharply rising bond yields were a key reason. They weighed on ultra-long duration assets like equities, with the Nasdaq down almost 30% year-to-date. Beyond 60/40, we saw major rotations in style with value stocks bucking the trend of recent years and outperforming growth. In currency markets, the US dollar surged and the Japanese yen had a year to forget. Navigating geopolitical tensions has increasingly become an occupational hazard for investors. The conflict in Ukraine has had a profound impact on global commodity prices, amplifying inflation, and forcing Europe to re-think its energy policies. This will have major implications for industry structure and living standards for years to come. Meanwhile, markets are watching Sino-US relations closely, fearful that tensions over Taiwan could escalate. No doubt 2023 will bring fresh sources of volatility. But that volatility should be seen as an opportunity for an active manager. It is our job to make sense of the evolving macroeconomic landscape, position accordingly, and translate the market moves into strong performance for our clients. We remain convinced that a relentless focus on sustainability is an essential ingredient within that investment process and we do not accept that there is a conflict between delivering strong performance for clients and embedding sustainability in everything we do. On the contrary, we view sustainable investing as an opportunity, rather than a constraint. We have just published Committed to climate: Our net zero roadmap which spells out how we will align our portfolios with the goal of reaching net zero emissions. I hope that you will remain partners with us on the journey to net zero investing.

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