Investment PolicyJune 2019

Our market view in a nutshell – June 2019

• In recent months we have witnessed a deterioration in the main leading economic indicators. This can beattributed in part to the deterioration in business and investor confidence as a result of the stall in trade talks, but italso reflects the gradual withdrawal of fiscal and monetary stimuli in the main developed economies, as well aswhat seems a failed effort by the Chinese authorities to revive their economy

• Currently, several indicators show an increasing probability that the economy will enter into recession in thenext 12 months. However, we have already had "false signals" in the past, and it is too early to conclude that arecession is inevitable

• As a result, there has been a significant drop in bond yields as well as a marked change in marketexpectations about future interest rates, the latter partly motivated by the apparent readiness of the FederalReserve to begin to cut interest rates if the economy continues to decelerate

• But as we have seen in two other occasions within the current cycle, trends do not necessarily have to continue, andit is still too early to call a recession, particularly when looking at the hard data. In this respect, the likelymonetary easing will provide a further impulse that can help revert the trend

• In addition, risk assets (equity and credit) are not pricing a recession anytime soon, but rather a return to the“Goldilocks”, with low growth, low inflation and low interest rates. Should this scenario materialize, equities lookmore attractive than bonds from a relative value perspective

• In the current environment, risk management in portfolios gets complicated, since long-dated high quality bonds –the traditional portfolio hedge against a recessions – provide little upside. For this reason, we recommend to seekprotection through derivatives, a tilt towards quality stocks and high-quality bonds with short maturities

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MWM Investment Policy

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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 bonds

In the present late-cycle environment, with inflation pressures remaining subdued, we see limited upside for commodities

Investing 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, but we believe that current long-term yields are unattractive,preferring shorter maturities

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 Healthcare

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, Frontier Markets and Brazil within EM

After the recent market corrections and the increase in corporate earnings, valuations have improved. 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

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Recession fears are back

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• After what seemed to be the first signs of stabilization in macro data at the beginning of the year, the main leadingindicators have resumed their downward trend, which has generated new fears about an incoming recession

• While the economy has recovered from similar levels in the past, the trend is making investors nervous

Source: Bloomberg

0.0%

2.5%

5.0%

7.5%

10.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 201945

50

55

60

65

ISM Manufacturing (lhs) Conference Board US Leading Index Ten Economic Indicators YoY (rhs)

And this time is not only the shape of the yield curve

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• Contrary to previous signs of recession, coming from indicators linked to the shape of the yield curve, this time we see thatbroader recession indicators are also flashing red

• Despite the above, we have had "false signals" in the past, and it is too early to conclude that a recession is inevitable

Source: Bloomberg

0%

25%

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75%

100%

2007 2009 2011 2013 2015 2017 20190%

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NY Fed Prob. of Recession Bloomberg Prob. of Recesion

Normalization is over, monetary easing is back

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• As it happened in previous episodes of uncertainty, the Federal Reserve has come to the rescue, indicating itswillingness to cut interest rates

• This has caused a drastic change in expectations, with the market currently discounting 2-3 interest rates cuts by year-end

Source: Bloomberg

0%

25%

50%

75%

100%

May 18 Aug 18 Nov 18 Mar 19 Jun 190%

25%

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75%

100%

Prob. of 3 Cuts Prob. of 2 Cuts Prob. of 1 Cut Probability of Cut

What are bond markets pricing?

7

• The Fed’s policy u-turn can be observed in the dramatic change in the shape of the yield curve over the last year,from discounting further increases to a marked inversion in the short-term

• The curve has inverted over some periods, and shifted downwards in the long end, but it is at levels consistent with a“Goldilocks” scenario

Source: Bloomberg

0.0%

1.0%

2.0%

3.0%

0.0%

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UST Yield Curve (13/06/19) UST Yield Curve (1 Year ago) UST Yield Curve (01/07/16)

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7Y

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Yields are falling not just in the US

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• The sharp decrease in long-term interest rates is not just a US phenomenon, but it has been mirrored in all majorcurrencies

• Particularly pronounced has been the case of Europe, where we are testing all-time lows. The German 10-year Bundyield hit a low at -0.25%; a move that has been also felt in the periphery, with the Spanish 10-year Government Bondyielding a record low of +0.57%

Source: Bloomberg

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2006 2008 2010 2012 2014 2016 2018-1%

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US Tresury 10-Year Yield German Bund 10-Year Yield

What does the “hard data” says?

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• The economy is running at full capacity and with its own impulse. This does not necessary imply that it shoulddecelerate, but it is more vulnerable to the natural fluctuations in supply and demand

• Large fiscal and monetary impulses are behind us (until the next recession), but monetary easing – or at least theend of the tightening cycle – will provide confidence to consumers and investors

Source: Bloomberg

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2006 2008 2010 2012 2014 2016 2018-7%

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US Nominal Output Gap %GDP (lhs) US Unemployment Rate (rhs)

What does it mean for risk assets?

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• The decrease in interest rates, and the relatively good evolution of corporate earnings have caused the equity riskpremium to increase to close to 4%, way beyond its historical average over the last 20 years (~2%)

• This provides a good cushion against a deceleration of earnings, and encourages us to maintain our allocation toequities, since they are cheap from a relative value perspective

Source: Bloomberg

1.0%

2.5%

4.0%

5.5%

10

14

18

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2006 2008 2010 2012 2014 2016 2018

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

Credit markets not distressed

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• High Yield spreads – our preferred recession indicator – continue flashing green despite the worsening leadingindicators

• In fact, financial conditions remain relatively accommodative (helped by the Fed), which is consistent with a“Goldilocks” scenario

Source: Bloomberg

200

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2015 2016 2017 2018 201998

99

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GS US Financial Conditions Index (lhs) HY Spread vs US Treasuries in bps (rhs)

What is more risky?

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• From a portfolio perspective, the decrease in bond yields, although it provides profitability in the short term, is not goodnews. Low yields reduce portfolio carry going forward, and limit the benefits of diversification

• Conversely, with lower bond yields the opportunity cost of equities decreases, incentivizing us to continue taking risks.At this juncture, we continue to recommend quality stocks, which in a recession scenario are less likely to suffer asudden deterioration in corporate earnings

Source: Bloomberg

2.0%

2.4%

2.8%

3.2%

Jun 18 Aug 18 Oct 18 Dec 18 Feb 19 Apr 19 Jun 192,300

2,500

2,700

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S&P 500 (lhs) 10-Year US Treasury Yield (rhs)

Model portfolio evolution

13Source: Bloomberg ,as of June 6, 2019* Fund publishes monthly NAV with a 1 month of delay

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

Partners Group Global Value*Franklin K2 Alternative Strategies Fund

Amura Absolute ReturniShares MSCI Brazil

T.Row Price Frontier Markets Equity FundiShares S&P 500 Health Care Sector ETF

Polar Capital Biotechnology FundPictet Indian Equities

BNP Paribas TIER US x2 IndexBonus Certificate Euros Stoxx 50

Bonus Certificate SMIBonus Certificate S&P 500

Wellington Global Quality Growth PortfolioiShares Edge MSCI USA Quality Factor

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

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• 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%

• 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 hold rates, or increase them only marginally

Scenario 2Goldilocks

• Equities appreciate moderately, with growth outperforming value

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

• Short-term sovereign and IG offer interesting yields with little risk

• USD remains strong due to positive interest rate differentials, but upside is limited

• Commodity prices will rise moderately, as prices remain still relatively depressed

40%

• 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

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Cash Fixed Income Equity Alternative Inv.Commodities USD

Asset Allocation Currency Allocation

2%

49%41%

8%

Cash2% Sub. Debt

8%HY Europe

3%HY US

3%

HY Floating3%

MBS4%EM3%

S-T IG16%

UST9%

India2%

Brazil2%

Str. Products20%

Healthcare3%

Quality9%

Frontier2%

Biotech3%

PE3%

Multi-Strat.5%

USD100%

MWM Investment Profiles

Strategic Asset Allocation

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Conservative Balanced Growth

AlternativeInvestments

Commodities

Equities

FixedIncome

Cash 3%5%

64%64%

24%

29%

0%2%

4%5%

2%5%

49%43%

38%

41%

0%4%

8%10%

1%5%

33%22%

56%52%

0%6%

10%15%

MWM Model Portfolio – Asset Allocation evolution

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Cash Fixed Income Equities Alternatives Commodities

MWM Model Portfolio – VaR evolution

181 As of June 6, 2019Source: Bloomberg

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

MWM Model Portfolio – Peer comparison

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• Total Return (Ytd1): 8th out of 15• Standard Deviation (1 year1): 1st out of 15• Downside Risk (1 year1): 2nd out of 15• Sharp Ratio (1 year1): n/a

1 As of June 4, 2019Source: Bloomberg

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Dec 17 Mar 18 May 18 Jul 18 Sep 18 Nov 18 Jan 19 Mar 19 May 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

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• Total Return (Ytd1): 7.26% vs. 7.75% Benchmark2

• Standard Deviation (Ytd1): 3.74% vs. 4.24% Benchmark2

• Downside Risk (Ytd1): 2.70% vs. 2.87% Benchmark2

• Sharpe Ratio (Ytd1): 4.08 vs. 3.90 Benchmark2

1 As of June 6, 20192 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

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Dec 18 Jan 19 Mar 19 Apr 19 May 19 Jun 19

MWM Balanced USD Benchmark

MWM Model Portfolio – Historical performance (1)

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• Total Return (1 year1): 1.78% vs. 2.28% Benchmark2

• Total Return (3 year1): 10.20% vs. 16.40% Benchmark2

• Total Return (Since Jan 131): 21.51% vs. 33.05% Benchmark2

1 As of June 6, 20192 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

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MWM Balanced USD Benchmark Difference

MWM Model Portfolio – Historical performance (2)

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• Standard Deviation (1 year1): 4.05% vs. 4.96% Benchmark2

• Downside Risk (1 year1): 2.98% vs. 3.54% Benchmark2

• Sharpe Ratio (1 year1): -0.10 vs. 0.03 Benchmark2

• Var 95% - 1day (1 year1): -0.44% vs. -0.50% Benchmark2

1 As of June 6, 20192 Benchmark = 5% Fed Funds + 43% JPM Global Aggregate Bond Index + 38% MSCI World + 4% S&P GSCI + 10% HFRI FoHF

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2013 2014 2015 2016 2017 2018 2019

MWM Balanced USD Benchmark

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

23www.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.