Investment PolicyFebruary 2019

Our market view in a nutshell – February 2019

• As the dust settles after the end of the year panic, both macroeconomic data and corporate profits are bringingcalm back to financial markets. A more constructive US administration is also contributing to this normalization,having understood that the patience of the market is limited when it comes to disputes that are detrimental toeconomic growth, such as the government shutdown or the trade dispute

• If we avoid a policy accident, and with the Federal Reserve on hold as long as inflationary pressures remaincontained, we are returning to the "Goldilocks" scenario. This would be an environment conducive to riskassets, particularly for stocks, since valuations now seem relatively attractive

• The same cannot be said for bonds, since the term premium hardly exists. This is the result of (yet another)expectations mismatch between the Fed – which sees robust growth – and bond markets – that seem to bepricing a slowdown. If the latter does not happen, the bond market could be ready for a painful correction

• As investors, we should not be overly concerned about recessions. After all, when price increases are accountedfor, economic growth has been almost uninterrupted over the last century. The end of a cycle is just the beginning ofthe next, and what matters is to be invested in companies that can withstand them

• When it comes to risks for the global economy, we continue to perceive an economic slowdown in China as thelargest of them; and although there is clear evidence that the rebalancing of their economy will be a long and difficultprocess, the Chinese authorities still have certain levers to stabilize their economy. As the impact of infrastructurespending on growth decreases, fiscal and monetary stimuli are gaining importance, which is why we expect China'sexpansionary policies to act once again as a stabilizer of global growth

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MWM Investment Policy

3

From a relative valuation perspective, we like European stocks as they trade at lower multiples, and we expect profits to pick up as economic activity accelerates

Multi-strategy / multi-manager hedge funds with daily liquidity are having a disappointing performance, particularly when compared with other less risky alternatives, like short-term corporate bondsA diversified commodities allocations, further help us to increase diversification and to protect the portfolios against a scenario of rising inflationInvesting in late-stage private equity provides access to the asset class with liquidity provision up to a certain degree

Corporate debt and High Yield currently offer the best combination of risk and return. We prefer medium maturities as theyield curve has flattened considerably and there is little term premium to compensate for taking interest rate risk

High quality debt in Euros presents a very unattractive combination of risk and return as current yields offer very little cushion to weather potential interest rates increases

In European credit we only see value in subordinated debt, asset-backed securities and short-duration high yield

Treasuries offer protection from a slowdown in growth – although this less likely with the fiscal stimulus in the US – whilstTIPS offer protection against rising inflation as a consequence of reflationary policies

Emerging Markets currencies and spreads have adjusted significantly to a stronger dollar and the uncertainties aroundglobal growth. With the Fed signaling being closer to the neutral rate, we deem current levels to offer fair value

Amongst others, we favor Biotechnology and listed Real Estate

Japanese stocks are the cheapest in developed markets, but have suffered recently due to sluggish growth, and concerns about global tradeEmerging markets have corrected sharply since the beginning of the year affected by a strong dollar and trade concerns. We deem the correction suffered has been excessive, and continue favoring India and Frontier Markets within EM

After the recent market corrections, valuations have improved substantially. We have therefore increased our exposure to US equities, mostly through quality and growth oriented companies

Equities

Multi-Strategy Hedge Funds

Commodities

Private Equity

Alternative Investments

Fixed Income

US Credit

European Sovereign

US Treasuries

Europe

Emerging Markets

European Credit

Sectors & Themes

Japan

Emerging Markets

US

Asset Class RationaleView

+

+

−

++

==

Overweight+ Underweight− Neutral=

+

−

A sharp turn in market expectations

4

• As we have more data about the real state of the economy, it seems increasingly clear that the sharp correction in equitymarkets that occurred at the end of the year, was just another incident of anomalous market behavior, caused by thinliquidity and the increase in automated trading

• Despite the strong recovery experienced by risk assets at the beginning of the year, concerns about the slowdown inglobal growth, the trade war, and a chaotic US administration have not disappeared, and we must remain vigilant

Source: Bloomberg, as of February 18, 2019

-1.2%

0.0%

-0.4%

1.6%

0.4%

-0.1%-2.1%

-3.6% -3.0% -3.2%-4.4%

-2.8%

-11.3%-10.4%

-14.4%-15.4%

-11.7%

-2.3%-3.9%

7.8%

0.7%1.1%

0.3%0.4%

1.0%

-0.1%

5.4%

2.9% 3.1% 2.4%

11.0%12.8%

8.3%6.3% 6.8%

13.1%

6.1%

3.3% 2.6%0.5%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Glo

bal A

ggr.

US

Aggr

.

US

Trea

surie

s

US

Aggr

. 1-3

Yr

EUR

Agg

r.

EUR

Agg

r. 1-

3Yr

US

Hig

h-Yi

eld

EUR

Hig

h-Yi

eld

EM A

ggr.

($)

Subo

rdin

ated

Deb

t

S&P

500

Nas

daq

Euro

Sto

xx 5

0

Nik

kei 2

25

Emer

ging

Mar

kets

S&P

GSC

I

Bren

t Cru

de

Gol

d

HFR

I FoF

Dol

lar I

ndex

2018 2019 (Ytd)

Recession obsession

5

• As investors, it is important to look beyond the economic cycles. The end of a cycle is just the beginning of the next,and during the last century there have been very few years in which the economy did not grow

• Recessions tend to be accompanied by a fall in equity markets, but they are not a sufficient or necessary condition.Therefore, we consider that it is more productive to try to evaluate the growth that is implicitly discounted in stockprices (i.e., whether equities are cheap or expensive) instead of trying to anticipate the next recession

Source: Bloomberg

1948

1949

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19511952

1953

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1961

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19641965

1966

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19711972

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19761996

1997

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2001

2002

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2008

2009

2010

2011

2012

2013

2014

2015

2016

20181977

1978

1979

1980

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1982 1983

1984

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1986

1990

1991

-5% 0% 5% 10% 15% 20%-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

US Nominal GDP %YoY

S&P

500

Tota

l Ret

urn

y = 0.66x + 0.08R2 = 0.02

Non-Recession Year

Recession Year

Valuations and risk premium provide a cushion

6

• In fact, when looking at valuations, US equities seem to be fairly valued, or even cheap. This is the result of fallingequity prices in a context of widespread increases in corporate earnings

• Moreover, if we normalize P/Es taking into account the level of interest rates, current valuations provide a decentcushion against a slowdown in corporate earnings

Source: Bloomberg

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

10

15

20

25

30

35

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

P/E (S&P 500) (lhs) Risk Premia (rhs)

Term premium speaks potential trouble for bonds

7

• Conversely, bonds seem less and less attractive, with an insufficient term premium offered for holding longermaturities

• With inflation stable around the 2% Fed’s target, a flat yield curve poses a risk of a sharp re-pricing in long-terminterest rates, should there be no slowdown in economic activity

Source: Bloomberg

-1%

0%

1%

2%

3%

0%

1%

2%

3%

4%

2002 2004 2006 2008 2010 2012 2014 2016 2018

US Core Inflation (lhs) Term Premium (10Yr vs. 2Yr US Treasuries) (rhs)

The Fed and the markets see things differently

8

• The current gap in interest rate expectations between the Fed and the markets can have several explanations; the Fedmight have tightened above the neutral rate, or the market could have overestimated the likelihood of a recession

• On previous occasions, the market has been right, or alternatively, the Fed has accommodated itself to market consensus.However, we see a very asymmetric risk in following the market and we continue to recommend short durations

Source: Bloomberg

1.0%

2.0%

3.0%

4.0%

2017 2018 2019 2020 20212018 2019 2020 2021 Longer Term

Fed Dots

Fed Futures

Back to the “goldilocks”?

9

• The normalization of spreads and volatility, together with a patient Fed and contained inflation, can bring us back tothe "Goldilocks" scenario, in which the economy continues to grow at a moderate pace without overheating

• This would be a favorable environment for risk assets. Hence our decision not to reduce risk despite the recentcorrection of the market

Source: Bloomberg

0

100

200

300

400

500

600

700

800

900

2014 2015 2016 2017 2018 20190%

5%

10%

15%

20%

25%

30%

35%

VIX Index (lhs) HY Spreads in bps. (rhs)

China’s economic rebalancing will take time

10

• From a macroeconomic perspective, China continues posing the single largest risk to the global economy. With theimpulse of 2015-16 fading, it is apparent now that the rebalancing of its economy will be a multi-decade process

• As the room for maneuver to stimulate the economy decreases through spending on infrastructure, the Chineseauthorities are launching fiscal and monetary stimuli

Source: Bloomberg

46

47

48

49

50

51

52

53

54

2012 2013 2014 2015 2016 2017 20188%

9%

10%

11%

12%

13%

14%

15%

16%

China Retail Sales Value (lhs) China PMI Manufacturing (rhs)

Trade war no longer looks so easy to win

11

• The US administration was emboldened by the initial market reaction to the trade sanctions on China. If the trade warwas conceived as a “game of chicken”, the new highs in US stock indices and the collapse in Chinese stocks seemed toindicate that there was a clear winner

• However, the strong correction in December, motivated mainly by the impact that trade tensions may have on growth, hasserved as a timely reminder that trade is not a zero-sum game

Source: Bloomberg

2,800

3,300

3,800

4,300

4,800

2017 2018 20192,200

2,400

2,600

2,800

3,000

S&P 500 (lhs) CSI 300 (rhs)

30% Tariff on Solar Panels

25% Tariff on Steel, 10% on

Aluminium

25% tariff on $50 billion of

Chinese goods with "industrially

significant technology”

10% tariffs on another $200 billion

worth of Chinese imports

China threatens tariffs on $50 billion of

U.S. goods

Tariff increase on the additional $200 billion in Chinese goods postponed

Model portfolio evolution

12Source: Bloomberg ,as of January 1, 2019* Fund publishes monthly NAV with a 1 month of delay

-4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Partners Group Global Value*Franklin K2 Alternative Strategies Fund

Amura Absolute ReturniShares Diversified Commodity Swap UCITS

Polar Capital Funds JapanT.Row Price Frontier Markets Equity Fund

Henderson Global Property EquitiesPolar Capital Biotechnology Fund

Pictet Indian EquitiesBNP Paribas TIER US 4% Index

Bonus Certificate Euros Stoxx 50Bonus Certificate SMI

Bonus Certificate S&P 500Wellington Global Quality Growth Portfolio

iShares Edge MSCI USA Quality FactorSchroder ISF - Global Convertible Bond

Neuberger Berman Short Duration EM DebtGAM Star Credit Opportunities

Neuberger Berman Corporate HybridOddo Compass Euro Credit Short Duration USDh

AB Mortgage Income Portfolio - A2M&G Global Floating Rate High Yield Fund

Muzinich Short-Duration High YieldiShares USD Short Duration Corporate Bond

iShares Ultrashort Bond UCITS ETFiShares $ Treasury Bond 3-7yr UCITS ETF

Ytd Last Month

Investment scenarios

13

Driv

ers

Mar

ket i

mpa

ctPr

obab

ility

• Global economic slowdown caused by political accidents or policy errors (Trade war with China, EU breakup, a too aggressive Fed, etc.)

• Deflationary scenario due to a combination of low growth and structural factors, although the rise of protectionism would be inflationary

• The Fed will have to reverse course, which would be complicated if inflation is rising

Scenario 1Recession by political/policy accident

• Correction in credit due to a rise in defaults and a widening of corporate spreads

• Correction in equities due to lower projected earnings, though declining rates will offer support

• Sovereign and IG credit to profit due to flight to quality and the continuation of an ultra-loose monetary policy globally

• USD neutral to weak as flight to quality is counterbalanced by low interest rates

• Commodities will fall

35% (-10%)

• The fiscal stimulus in the US provides a short-term impulse to the global economy, but not enough to attain a higher growth trajectory

• Inflation, particularly in the US will pick-up, but remains subdued globally due to structural factors (demographics, low aggregated demand, deleveraging)

• The Fed will continue its normalization path

Scenario 2Goldilocks

• Equities appreciate moderately, with Europe and Japan catching up with the US

• Credit spreads remain stable as the credit cycle is further elongated

• Sovereigns suffer as monetary policy is progressively normalized

• USD appreciate moderately due to higher interest rate differentials

• Commodity prices will rise in the short-term, normalizing once the impulse vanishes

40% (+10%)

• Growth concerns dissipate, with economic activity accelerating in US, Europe and Japan

• Inflation in the US increases, as a consequence of president Trump’s fiscal stimulus, and pulls other developed economies off deflation

• The Fed will have to step up the pace of rate increases and/or reduce balance sheet

Scenario 3New regime

• Impact on equities will depend on how much real economic growth is sustained, and how accommodative the Fed remains

• Sovereign and IG bonds will face steep losses due to higher rates, particularly if long-term inflation expectations rise

• Corporate credit will correct moderately if inflation comes together with higher growth

• The USD will appreciate, particularly against those currencies facing deflation

• Commodities will gain from higher inflation

25%

Other risksTrade wars, EM crisis, Spread of populist political parties, China slowdown, Terrorism

Short-term catalyzersEnd of trade dispute, improvement in macro-data globally, lower geopolitical tensions

MWM Model Portfolio Balanced USD

14

Cash Fixed Income Equity Alternative Inv.Commodities USD

Asset Allocation Currency Allocation

2%

48%

39%

3%8%

Cash2%US Treasuries

8%

Short-Term IG14%

Convertibles23%

Sub. Debt28%

HY Europe3%HY US

3%HY Floating3%MBS

3%EM3%Growth

4%India2%

Biotechnology3%

Real Estate3%

Frontier Markets2%

US Quality5%

Brazil2%

Str. Products18%

Diversified3%

Multi-Strategy5%

PE3%

USD100%

MWM Investment Profiles

Strategic Asset Allocation

15

Conservative Balanced Growth

AlternativeInvestments

Commodities

Equities

FixedIncome

Cash 3%5%

64%64%

24%

26%

2%2%

5%5%

2%5%

48%43%

38%

39%

3%4%

8%10%

1%5%

30%22%

54%52%

4%6%

10%15%

0%

10%

20%

30%

40%

50%

60%

0%

10%

20%

30%

40%

50%

60%

2015 2016 2017 2018 2019

Cash Fixed Income Equities Alternatives Commodities

MWM Model Portfolio – Asset Allocation evolution

16

MWM Model Portfolio – VaR evolution

171 As of January 31, 2018Source: Bloomberg

0%

1%

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4%

5%

6%

7%

0%

2%

4%

6%

8%

10%

12%

14%

2015 2016 2017 2018

1Y VaR 99% MWM Balanced (lhs) 1Y Std. Dev MWM Balanced (rhs) 1Y Std. Dev Benchmark (rhs)

MWM Model Portfolio – Peer comparison

18

• Total Return (Ytd1): 11th out of 15• Standard Deviation (1 year1): 1st out of 15• Downside Risk (1 year1): 1st out of 15• Sharp Ratio (1 year1): n/a

1 As of January 31, 2018Source: Bloomberg

-14%

-10%

-6%

-2%

2%

6%

-14%

-10%

-6%

-2%

2%

6%

Dec 17 Jan 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19Janus Balanced Fund Invesco Balanced Risk Allocation Fund Investec Global Strategic Managed FundTempleton Global Income Fund UBS Global Allocation PIMCO Global Multi-Asset FundUBAM Multifunds Allocation 50 Julius Baer Strategy Balanced BlackRock Global Allocation FundNordea Stable Return Fund Schroder Global Multi-Asset Flexible BNY Mellon Global Real Return FundJPMorgan Global Balanced Fund Carmignac Patrimoine MWM Balanced USD

MWM Model Portfolio – Ytd performance

19

• Total Return (Ytd1): 3.19% vs. 3.33% Benchmark2

• Standard Deviation (Ytd1): 4.74% vs. 5.18% Benchmark2

• Downside Risk (Ytd1): 3.26% vs. 3.36% Benchmark2

• Sharpe Ratio (Ytd1): 9.08vs. 8.79 Benchmark2

1 As of January 31, 20182 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

-2%

0%

2%

4%

-2%

0%

2%

4%

Dec 18 Jan 19

MWM Balanced USD Benchmark

MWM Model Portfolio – Historical performance (1)

20

• Total Return (1 year1): -2.44% vs. -3.44% Benchmark2

• Total Return (3 year1): 7.58% vs. 19.09% Benchmark2

• Total Return (Since Jan 121): 27.33% vs. 39.07% Benchmark2

1 As of January 31, 20182 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

-20%

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0%

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2011 2012 2013 2014 2015 2016 2017

MWM Balanced USD Benchmark Difference

MWM Model Portfolio – Historical performance (2)

21

• Standard Deviation (1 year1): 3.94% vs. 5.50% Benchmark2

• Downside Risk (1 year1): 2.92% vs. 4.04% Benchmark2

• Sharpe Ratio (1 year1): -1.12 vs. -0.97 Benchmark2

• Var 95% - 1day (1 year1): -0.48% vs. -0.60% Benchmark2

1 As of January 31, 20182 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

-5%

-3%

-1%

1%

3%

5%

2012 2013 2014 2015 2016 2017 2018 2019

MWM Balanced USD Benchmark

c/ de l’Aigüeta, 3AD500 Andorra la VellaPrincipat d’Andorrawww.morabanc.ad

22www.morawealth.com

This document is for information purposes only and does not constitute, and may not be construed as, a recommendation, offer or solicitation to buy or sell any securities and/or assets mentioned herein. Nor may the information contained herein be considered as definitive, because it is subject to unforeseeable changes and amendments.

Past performance does not guarantee future performance, and none of the information is intended to suggest that any of the returns set forth herein will be obtained in the future.

The fact that MWM can provide information regarding the status, development, evaluation, etc. in relation to markets or specific assets cannot be construed as a commitment or guarantee of performance; and MWM does not assume any liability for the performance of these assets or markets.

Data on investment stocks, their yields and other characteristics are based on or derived from information from reliable sources, which are generally available to the general public, and do not represent a commitment, warranty or liability of MWM.