Citi Global Wealth overview | | 9 Investments Alternative investments As we look ahead to 2023, it is a time for pragmatism and practicality. There has been no economic period like this one, buffeted by the collective impact In our view, 2023 will potentially be a great vintage for alternative of a pandemic, a war and a highly reactive Fed. That said, we maintain investments. Higher interest rates have caused a repricing of private our realistic view that the world will see businesses improve the lives of assets amid much higher borrowing costs. As such, specialist managers customers across the world. For example, we believe that the climate will be able to deploy capital into areas of distress and illiquidity – see challenges will ultimately be addressed and provide fuel for profits along Alternative investments may enhance cash yields. Across the venture the way – see Energy security is vital. We believe that the post-pandemic capital industry, capital is now being deployed more judiciously and at more period will accelerate the development of new treatments for disease and favorable valuations for investors – see Digitization and the growth in new tools to prevent future calamities – see Seeking to boost portfolio alternative investments. immunity with healthcare. We believe that new global macro realities will present opportunities to reshape supply chains and alliances. And we also For real estate, a higher bar is now in place for new investment across believe that a return to a “new normal” is the likeliest outcome for the global almost all markets and property types. We see this as a favorable backdrop economy – though not the only one. for real estate investors in 2023 – see How unstoppable trends are redefining real estate. Our strategic return estimates in these areas are now It has been a great honor to work with a highly capable team in our Office materially higher than they were just a year ago when interest rates were of the CIO these last years as we provide you, our valued clients, with much lower, indicative of how much value may be earned over time by taking insights designed to make your lives better as we make your portfolios illiquidity risk when others are less willing to do so. more resilient. Wishing us all a better, healthier and peaceful 2023. Toward a new normal with new risks Over the past six months, we have written about the “little fires” burning DAVID BAILIN across the globe.2 No one knows how or when the war in Ukraine will end. Chief Investment Officer and We cannot be sure of China’s trajectory given its election of like-minded Global Head of Investments leadership. And we certainly do not know what political events will unfold Citi Global Wealth in response to the recession itself, as governments will lack the resources needed to support individuals and companies as they did through the pandemic. In short, markets today are assuming that none of these little fires grow bigger or come together in an untimely way – see Expect the unexpected: How we might be wrong. That itself means that investors need to think of “sequencing” as a useful investing discipline. 2 The Squeeze Is On - CIO Strategy Bulletin, Citi Global Wealth Investments, 9 Oct 2022