Kaiser Partner Privatbank AG - Monthly Market Monitor July 2022

Monthly Market Monitor

July 2022

Table of contents Iv Nutshell Our view on the markets

Macro Radar Tl]vPRo}(}v}u]]˙

04 06

Satellite View

Aoo}}v

G}}o]oRu

TRu]v Focus

N}(}uRIvuv}uu]' C

07

08

Private equity – fallen back to Earth(?!)

10

SG E PS]v]o]˙}v ISG E (]vPv]v˙]]M

The Back Page

12

Asset classes & agenda

14 Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

3

In a Nutshell

O]`}vRul

M}vvP]}v]l Macro data points have disappointed for the most part in recent weeks. Depending on which analysts are asked (or which model is consulted), the probability of a recession ]vRUSA`]R]vRv˘`ou}vR]u between 20% and 50%. The risk of a recession in Europe is even bigger than that due to soaring energy prices and RR}(}uoR}+}(R]vvoP shipments. However, central banks are currently viewing ]vG}v]lRP]oU}(R]vr hikes are in sight.

on economic growth are largely being blamed also on R]u}voo˙XTRu} D }oo}R]ui}]˙ ]v }R Ru}( R US }vP C ]v R u]ru o}v]vN}uXI(]v B }uSoul_ in the middle of his term, this would have consequences.

P]]˙W(oovl}R E ~MJ TR]vuvo]uRP}'v}PRR]˙v ]v}[RvP(}vRu}Uv}i}v public stock markets, but also in the world of private eqr ]˙XTR]]˙o]oo]v}RU R ]]vP ]vroo ] }v } o} o}vvP}v]ulUio]l]R}v public markets. However, this new reality doesn’t necesr sarily augur something bad for investors. On the contrary, it also presents an opportunity.

o} A ]o˙]]v IvR`l}(]}.Ro(r˙(}}R]˙ v.˘r]v}u]v}Uo}}(v`Wvv u]o]}v W ]o˙]]v }v R .vv]o markets now. Meanwhile, though, the bar for upside surprises is low, and the prospects for the second half ISG E (]vPv]v˙]]M }(R]˙'RvR˙RuXTR r S]v]o]˙]vvPRv]v}u`RvP r ]ou]vv}(Ru]uru]i}˙(} o]PRoo˙XGv`R]vPvoUoo(}' stocks will be whether a recession actually materializes Po}vUvPo]vP.v]}v}ou`i}]v and by how much corporate earnings contract. ]vR.Ro(}(R]˙˙}}v(}uvX The investment industry evidently faces challenges with ]v B ]v]vP}`v` regard to ESG, but it is premature to sound the death US P]v J} ]v B [o]}o vP R knell for the sustainability megatrend. vuo]vP}`vR]oo(}˙rvrrRo(v}`XRu r v]vG}vU}]vPvP˙]vll]ul

CR }(R M}vR

TR o ~o] .]oZ R }( oo}` ]v rates over the last decade has come to an abrupt end ]v v u}vRX TR .Ro( }( R] ˙ o}v ` R ˙]o }v r˙US T˙ v} o]u} R]PR XA9 (} uX Ov R } P} l } R o˙ ı } .v }uo ul ]v }oo r ity. But back in those days we were in the midst of a P]u}(Pvoo˙R]PR]vG}vvR]PRv}u]vo }v}u]P}`RXTR]ulRv]vr R}l ]o]vP R}PR R .vv]o ˙u ]v oo uv r ner of ways all the more intense. Taking on debt is ber coming more expensive, assets are being discounted at a higher interest rate, housing prices are falling (or are threatening to), and so on. These developments are acr oo˙ RoR˙ }v v }voo˙ ul R }( v` ]vrP]uU R˙ uv[ v(}o }} quickly or else a hard landing looms.

Ivr v}vn (…and a historical turning point?)

Six-month change in US 2-year yield 4%

2%

0

-2%

-4%

-6% 1982

1986

1990

1994

1998

2002

2006

Sources: Bloomberg, Kaiser Partner Privatbank 4

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

2010

2014

2018

2022

Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

5

M}R

Tl]vPRo}(}v}u]]˙

TRR B C E }P]v P Runaway inflation remains R]}v]l}vv}u}v the macro topic of the hour, Macro data points in the USA have disappointed for the The European Central Bank is facing an equally, if not more, r RoovP]vP]}vRu}uvXS}]vPvP˙] and it prompted the Fed to u} ]vv `lX TR r.GDP }v vRR}(}uoR}+}(R]vvoP implement an (excessively) }v}ov}`v]vP(}oo}`˙Pvv} XIvRo' shipments make the risk of a recession in Europe even bigr large interest-rate hike in u]oo˙vPP}`R(}R}v ger than the likelihood of one occurring in the USA. Howr June. The SNB also sprung ]vvURUv]S`}oo˙.v]o(]v r U]vG}v]v}E o}}l}loRv]vR a surprise last month. SRv]o_]}vXvB ](]v}R r USA, i.e. not before autumn. Monetary policymakers in the And the ECB now likewise ]}v]v[u]o]]vR.Ro(UR]l}(}v} E Ro]l`](}}l}v]v] looks set to join the rate- curring has further increased lately. Depending on which }}v hiking fray in July, but at analysts are asked and which model is consulted, they of the very high macroeconomic uncertainty. But the endr C E r˙]vP}Pu`]o(v}PR} the same time has to keep place the probability of a recession within the next twelve ]vP}(R[B}v cause credit spreads on Italian sovereign bonds to climb an eye on credit spreads on months at between 20% and 50%. to uncomfortably high levels in June and to compel the the Eurozone periphery.

IRF}vRP}(ul]vP}o]˙u]lM TRUSFoR]o(Rv]vuvo]v}v ]vP}}l]vP]}v]lXI(]]Ro( (v}}]lo˙v(}(oo˙U ]]lG]vP} v}u]]˙ R}PR }o˙ PR.vv]vP}v]}v v(R]}}v}(}vuv]v}v .vX H}`U F}8]ovo˙u}PPo˙ u]v}P]vG}vv}v}ov](]uv }ovPvPS`oR+_~]vRv}(]P }lrulo}U Z ]vv}o˙RF[ ~˘]o˙oP Z ær]r}]vR]l]vJvXTR R]v}]vPo˙R]PR]l}(u}v˙r}o]˙u] ovP lv v}}oo}( l R]˙[ hiking by as early as 2023.

}B C E }vvvuPv˙uvPvvv}vR r o}uv}(v`]vuv]Pv}S(P r uv}v_}vR}E v}vulXTR].}( r this tool look set to be communicated in July. And the next ECB rate hikes (by 25 basis points in July and 50 basis points r ]vSuR Z o}v8]vo˙oPR˙ now and are accordingly priced in on the market.

C}vv u 2021

2022

2023

GDPP}`R~]v9A

r

Switzerland

3. 6

2.5

uE rozone

5.3

2.8

7 1.

UK

.5 7

3. 6

USA

7 .5

2.5

1.9

China

81 .

1 4.

5.2

1.9 1.

Iv(o]}v~]vA9

TRSNBlv}`R}`}]vP]n Policy rates

lB }]vrv}uo˙

Switzerland

0 .6

2.3

uE rozone

2.6

.27

3. 0

UK

2.6

8.3

4. 8

USA

7 4.

.5 7

3. 4

2.2

2.3

3M

12M

China

0.9

1.

2.0%

Kaiser Partner Privatbank interest rates view Last

1.5%

Key interest rates (in %) 1.0%

0.5%

0

-0.25

AR

AR

-0.50

AR

AR

UK

1. 2 5

AR

AR

USA

75 1.

AR

AR

China

2.85

A\

A\

10-year yields (in %)

-0.5%

-1.0% 01/2020

07/2020

01/2021 Fed

EZB

07/2021 SNB

BoE

Sources: Bloomberg, Kaiser Partner Privatbank 6

Switzerland uE rozone

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

01/2022

Switzerland

1 . 07

AP

AP

uE rozone

1. 3 6

AP

AP

UK

2.23

AP

AP

USA

2.79

AP

AP

China

2.82

AP

AP

Sources: Bloomberg, Kaiser Partner Privatbank

Satellite View G}}o]oRu

CR]v ] o}}v]vP Now that this year’s GDP growth target of +5.5% has }u oo˙ v']vo U R P} vuv }( China has recently embarked on an easing course (but with the handbrake applied). The government R R ( R o}l}`v }( v ] to be avoided as much as possible. It has taken steps } u}v ˙ }o]˙U R v . o u r lus measures, and has become more conciliatory in its dealings with the country’s big tech companies, `R]R R o ˙ v G ˙ } ˙ }( R] }l ] X H}` U P ]vv]. }v }( }v } ]o] C R]v [ }v}u˙ ]v [ } ˘ r vo L R R C R]v C }uuv] P˙ Congress this autumn.

N} }o}v ]v R Iv ] Indirect talks between the USA and Iran aimed at rer viving the 2015 nuclear deal ended fruitlessly in June.

Iv]v}8]o o]u R R USA` v`]oo]vP } }oo l v}v v}PR ]v ˘RvP (} ]v on Iran’s nuclear program. Tensions could mount furr R ]v R u}vR R U v} o R ] will seek to undermine any new accord and disrupt the general stability in the Middle East and North Afr rica since it has an interest in keeping energy prices o v } }]vPW v vP˙ o v X

Geopolitical developments do not stop at the gates of the financial markets.

On the contrary, they have become an increasingly important influencing variable in recent years.

Our Satellite View takes a look at the major hotspots at the moment.

B]v ] v]vP }`v` US P]v J} B]v[ o] }o vP R v uo]vP }`vR]oo (} ˙ rv r rRo( v}`X Ruv ]vG}vU }]vP vP˙ ] v l NATO ˘v U R ] o skid marks on economic growth are being blamed also Iv Jv U NATO }o } ]v ] ] r }v on him personally. The Democrats could lose their (} }v ] v Gvl (}u U } U ui}]˙ ]v }R Ru }( R US C}vP ]v R }} XR ] R v} ]} ](NATO]voo u] r u o }v ]v N}uX I( B]v }u a menacing infrastructure in the Nordic countries. Sou l_ ]v R }v Ro( }( R] ]v˙U R] TR R ]v o˙ } R W [ u]o] ˙ ˘v]}v `}o R o }v v Po . o uo v }v}u] v}v R o}vP v } o during the forthcoming economic downturn, less pror in the form of a massive curtailment of natural gas P }v ~D u} Z Po}˙ }}o v U o exports, which is pushing Europe ever closer to the but not least, a renewed showdown over the US debt brink of a recession. ceiling at the end of 2023.

Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

7

oo}}v AA

N}(}uRIvuvC}uu]'

In the wake of a disastrous first half-year for both equity and fixed-income investors, a lot of bad news – and even a mild recession – is already priced in on the financial markets now. Meanwhile, though, the bar for upside surprises is low, and the prospects for the second half of this year are better than they perhaps seem.

A Aoo}}v M}v]} r

+

Cash

r

+

Equities

F]˘Iv}u

06/2022

Global

Sovereign bonds

06/2022

Switzerland

Corporate bonds

06/2022

Europe

Microfinance

UK

Iv(o]}v ro]vl }v

USA

H]PRr˙]o }v

Emerging markets

uP]vP E rul}v

Aov]A

Ivvro]vl}v

Gold

Convertible bonds

Ro

Duration

Hedge funds

C v]

Structured products

US dollar

Private equity

Swiss franc Euro British pound

]E PM]o]}vo˙]]v how much corporate earnings contract. Earnings fell • In the wake of yet another wave of selling, the S&P ˙vP}(9A ]vP}v}u]}`v r æ]v˘ v}`v S}8]oo˙_ .v]o( ]v turns in the past. If such a scenario materializes, the ul~.vo]v}(u}Rv9A (}u ~US]˙Z ul`}oR}vo}o]v( r vl]v Z u]rJvXH}`URooo r R˙v}RæA9}æA9XT}P]}}o]}(}R }+`v}o}vP}v.u˙Ru}o worst case while staying adequately invested in stocks Puv}(Rul~ARKIvv}}vTF E U]}R RuuU`}vv}}uuvov r ]v˘UIPO]v˘U Z `R]R]L]`}u]oo˙ ing in put spreads.

R]PRG}}X Mv`R]oUvuv]vPu}vP US]o]v}v]vuvv`o'R} fell to dismally low levels the likes of which have only Scorecard r + vvui}]vG}v}]v]vR~XPX Macro ]vııUUX Z ]o}v A ˙]v}v ouo˙o}(}uR]}(R]o r M}v ˙l(]o }o]˙ o}}v}RU`R]R(R]v vo r Corporate earnings ly over the course of the latest wave of equity selling. Valuation Trend TRu]uru]ll`}+(}}lR Investor sentiment further improved. A vigorous bear market rally at the least looks set to unfold in the near term and may have F]˘]v}uPT}}R]PR}}]lo˙M already begun.

• TR }o}v lv ˙ vo vl R • TRSPæ]v˘[9A ovPR(uR] caused yields on bond markets to climb higher in rer average drawdown registered during the last twelve v`lXY]o}vr˙UST˙v}~XæA9Z US recessions. A mild recession at the least is priced vS`]}v( C }v}v~X9A Z]vu]'vo˙ ]vR]}]vXN}`RRSPæ[(}`]r hit their highest level since 2011. However, similar to }rv]vPuooR}(}u˘R R]}v}v]˙ulURo]u} r }(R]˙}æ˘vURo}v}}v uv}ov}`ul.vooo}+v}}v r o]lo˙]vo˙}R]ivXTR]o r ]vP˙]o˘~(}v}`]v Z R.˘r]v}u} u]vv}(Ru]uru]i}˙(}}l `ooRu}vR~o}vPruul Z LRuvoo˙]} `]oo interest rates will climb higher has since become the whether the USA actually slips into a recession and by }vv]`Uvul]v[ ]v r 8

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

G}v}vv}o}}vv]v}vu}ou r X IvvP }}v] ]v R] }]v r ing recession worries. Such a scenario, which would uvPuvvvPRuo]PRv}` ˙v}v˙u}`]RSu}v˙r}o]˙u]l_~]XX (}]v}`]Ro}vPuR}]}vX }PRv]vP˙ZvovlU`}oou}]v] r o˙}uv]vo ˙ ˙]ov v] C PRvP C ]vP]uRSNB corresponding bond price gains. On the whole, we do • UR E lUSDPW]ooR}]v]vP}} r v} v]o˙ 'rRvrP ]vuv o}'}uXP]vRUS}ooU }`]ooR }}v] ˙ ]v]}vo .˘r]v}u ]v r UR E lUSD˘RvP}}]˙}}vMWv uvU`.v]o˙o]u]]lUo`]R }}u`RR]PR}]o]˙}(G}}(}u r P}]vuvrP]XWR(}R ing at the current level. All it would take for the euro to PR.˘r]v}uo˙ }vv}R stabilize or for the (overvalued) greenback to undergo vv}`]SvoX_ }}v]]PvoRUS]vG}vRR] lXTR]PP]l}R]}]v]}`}o ov A PL]o]vuv ]}v]v˙(R }E PRv]vP R]ov supply of natural gas.

• TRv`iu]vo}vPruul]v • GBPlUSDP u}vP A R `}o[ui}v]U R lR]}(P}o}oo]vJvXvB v]P r ]R B }v ]R }vR}vv} (R P+}(R]PR]v `} r `}}v}u] P}`R }l]vG}v }o}}l able among listed real estate investment vehicles such ]}vX TRS}u_}o]˙R]l]v Jv˙ as Swiss real estate funds, which temporarily lost up the Bank of England for the purpose of taking a stand to 10% of their value over the course of the month.

P]v ]vG}v `]R} G]vP }v}u] ]˙ TR] }}(}uv ]']o} ool }} uR .(o˙ `]RR]]X Wu]v in premiums to net asset value, which have a high bearish on sterling as long as nothing in this toxic mix ]v}o}v`]Rr˙S`]}v( C }v changes. }v ˙]oXvo A }( R S]vr • UR E lCHFP TR S`] N}vo vl B ]}u R}l_]}o˙o˙]]v}˘RvPro] ul]v˙]]vP ]}o]˙ ]v real estate products by now. They have become more by 50 basis points in June. Meanwhile, our longstandr ]v ' R`l}(R]}}vUv}o ing opinion that the SNB will not only allow the Swiss ]v]`}(RovPu]o]v]v˙}˙]oX franc to appreciate, but will even explicitly use it as a • Discrepancies between market price and book value }}o}ov]vG}vR]vv}v.uXSNB are a regularly recurring phenomenon in another alr P]vTR}uJ}vv]R}}v}( r ov`ooPo]]˙ ] XSR o˙oo]vPv˙}]}v]vRv(} (v}((vv]vPoruvP(v]v] r vPRvR(vXvA UR E lCHF˘RvP r o˙]v]˙ ] (vvo]R]o}vPru o}`]˙]}vo˙u'}(uU]v}]`X performance (less fees). In the short term, however, R]]vvoo˙ ] (}uRv r o˙]vP]˙ ] }}o]}v]vP}vvuv }vR.vv]oulXRA u}uvU]}v} book value are running at above 30% in some instancr

IvR]v}}]R(}o}v}(u r roeconomic and market variables, analysts constantly atr u}.v}o}v~vR}(oo˙o}o]Z `v]+v]oX TR]}(}U v S]v]}}(`}o}v}u]]˙U_Rv' ˙ uv˙} R˙oooro]l(v}vX I[v}(} nothing that this industrial metal is also frequently rer ferred to as Doctor Copper. But scratching beneath the (}(R]}]]uPU}vR}}voR copper arguably doesn’t even hold a bachelor’s degree ]}v[Rv˙(o]}`(} ]R]vG}vv}v}u]P}`R}(}l r formance. This means that the recent dip in the price of copper, which some are reading as a harbinger of a recesr sion or as an argument for weak equity markets, should not be overinterpreted.

CR]vRS}o]PR WR}X D C}lv}`Yn Copper Future in US dollar

…that we don’t?

500

400

300

200 01/2020

07/2020

01/2021

07/2021

01/2022

Sources: Bloomberg, Kaiser Partner Privatbank Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

9

Theme in Focus

P]]˙W(oovl}R E ~MJ

The investment climate has gotten rougher this year and investors’ hunger for returns has moderated, not just on public stock markets, but also in the world of private equity. The private equity asset class is still in robust shape, but the rising interest-rate level is bound to lead to a valuation rerating on private markets, just like it has on public markets. However, this new reality doesn’t necessarily augur something bad for investors. On the contrary, it also presents an opportunity.

WRP}Uu}u}`vn Comparison of growth indices

Iv]o v } v}uo P] ]˙ uvP ` oo o]]vP ]v R of all worlds last year – cheap capital was available in vv U }v}u] ]˙` Ruu]vPU R o carousel was spinning at high speed, and (book) gains v v R] }]o } rl]vP R]PR X B ]v u] r U ]v} ]v ] ul .v Ru r selves faced with the same new reality that public eqr uity markets are confronted with – a reality marked ˙ R]PRv P}}o]o v ]v˙U v uPv }v } `Rv R v˘ ]}v `]oo R] U u r v ]vG}v v U o v} o U ]o˙ PRv r ing monetary policy. Although private equity appears v } R}o ' Rv o] }l ul P]v R] u ]v R ( }( R] RoovP]vP v]}v r uv v }vv } ˘R]] (v] o] }v the whole as it has in the past, investors nonetheless R}o ]o }`v R] v ˘ }v (} R] r set class as well for the quarters ahead.

P]o˙Ro}uv]o}]vv}(o}viuv

350

300

250

200

150

100

50 2020

2021 ARK Innovation ETF

Renaissance IPO ETF

Sources: Bloomberg, Kaiser Partner Privatbank

10

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

2022 Nasdaq 100 Index

How well has private equity performed so far this ˙ M Iv }v } o] ul U (} `R]R r}r R r}v ] ]v(}u}v ] ]oo oo˙ ]v o u U R ]}v }v ] ul ] harder to keep track of (and is less up to date). Howr U o˙ } (}u ˘RvP ro] ] ]˙ .u o]l Bol}v U KKRU A }oo} v C o˙o }] o } R}` R˙ ] ]v R . X Those companies reported a gross performance rangr ]vP `v WæA9 ~KKRZ v A=A9 ~A }oo}Z (} R] ] r ]˙ P] (} Q X I u ] o] } u G A9 PPP (}uv (} R v ] ]˙ } (} R . R u}vR of this year. This would mean, though, that this asset o Ro uR ' Rv R MSCIW}o ~WæA9ZU S&P 500 (–5%) and Nasdaq (–9%) indices did over the same period. Private equity returns have a general tendency to follow the performance trend on public ul U `]R u oP }( ]˘ } v]v u}vR X TR }v }o R v}` ]vP (}R ]Pv]. r vo˙ vP v o} (} o] ] ]˙ (buyout) funds, but especially in the private equity P}] SP}`R ]˙ _ v Sv ]o_X .

H]PR ]v AA o}` o}v As is the case on public markets, the most important ] }( R] v ] R ]o˙ RvP]vP ]v r P]u X R]]vP R}ru ul ]v ul R ~ oZ .vv]vP }uu}vo˙ } fund typical buyouts more expensive. Private equity managers therefore won’t be able to employ as much leverage in the future, which is bound to lower rer turns a bit. However, since the good managers boost R o }( R] }}o]} }uv] R ˙ R}PR }}vo ]u}uv uR u} Rv ˙ uv }( .vv]o vP]v]vP }u } } ˙ P}U R ovP ]u }( ]]vP interest rates is likely to stay within reasonable limits }vR`R}o XB ]vo]PR}(Rv`]v r o r ]˙U uvP }vuovP v` o `]oo ˙ o} 'v}v } }uv˙ [ ] v `]oo o}}l (} R cheapest possible entry point. This will tend to comr R o}v oo ] X

Meanwhile, privately held growth companies are in Co-investments: GP[ (} ]vuv ]o v P v }( o}v iuv X TR] v v }vv } ]v X D ]v ˙ revenue and earnings lie far ahead in the future and P}} (}uv v ˙ u}vvP ]v} ]v R}oo˙ v}` `}o R } ]}v `]R ]v Sov U_ GP v} }vo˙ ovR]vP oP r a higher interest rate in view of the sharp increase ] ]˙(v U o} vPu} v ]v ~o}vPruZ ˙]o }v R .˘ r]v}u ul more specialized vehicles (such as funds with a focus } R ˙X O R o u}vR R] r }v P}`RU ]u } ]. } ZX TR }]} iuv R o˙ v o] }v u] o v oo ]v ]vP uv (} ]o }v `]R to publicly traded growth companies. This period has i o]u]o˙ P}`]vP o˙ }( ]o (}u ]v r v o ~] Z R˙P}`R }u r }vo ]v} X TR˙ R o˙ }vvoo˙ ] v] ~R R} v ˙ R ARK Ivv} r R] oo}}v } ] ]˙ ]v R v v}` }v ETFZ v }uv] vo˙ P}v o] l˙r v } }v(}v `]R v }oo}}vU r R]PR o}v P] R r] v}] }( A9 ] } X I( GP } v} R v}PR S˙ }` r } A9 v v uR u} ]v }u X W]R _ }( R] }`v } vPP ]v v` v}v U R˙ u oPU ` v}` ]vP } }v]vP o}v `]oo ]v ]vPo˙ P} }v R o}}l} (} }r]v} X vP o} ]vP o] } ]o˙ Ro P}`R S}U R `]oo }o˙ }vv } ov˙ }( P}} and venture companies. One example of this pher }}v] ]v R ( o} ]v R }( ] nomenon is Klarna, Europe’s biggest unicorn. Back in ]˙}r]vuv ~v } }v]vP ]o] Jv U R S`vr .vR }uv˙ ` funds), which generally entail lower performance fees. o EUR ]oo]}vU ]v ] v .vv]vP }v v`˙U Kov ` ]v]oo˙ l]vP (v]vP Evergreen funds: GPs already have an answer to the o}v }( Si _ P}} EUR ]oo]}vU liquidity problem cited above: in the future they want and lately there have even been rumors about a much to raise new capital also from wealthy private clients. ] ]}v } i EUR æ ]oo]}v v}`X Av Ovrv ]vuv R]o oo Pv(v ] ]v[ i R }}l P]v ]v R P}`R Puv oo˙ ]o `˙ } } R X Bol}v U uovP `˙XTR} P]v R u]v o}R Apollo and other private equity managers have alr to cash in on in the current climate – they at least ready successfully brought such instruments onto R }u R } u}v R}PR v ˘] ] the market, and many more are in the pipeline. Evr v ]v]o o] }+]vP R IPO ul R Pv }+ vP (} }R ] X Iv} ]v (}v vXWR]oR ` IPO}vUS evergreen funds are fully invested right from the outr stock exchanges in Q1 2021, there were only 31 in the set and do not have to service unpredictable capital three months through May of this year. oo U vo]l `]R ]}vo ] ]˙ X P] ]˙ uvP U (} R] U vi}˙ o Av v]}vuv (oo }( }}v] capital base on which they can earn reliable manager But private equity managers (general partners (GPs)) uv ( X F} ]v]]o ]v} U R] }u}v and their investors (limited partners (LPs)) are not (} R] ]o uv v v `] o}v }( r ( }oo˙ `]R R }( o}` o}v X Ao}vP r Pv ]v R ( v ~}voo˙Z v R side that, there are other trends and challenges in fees in the medium term.

R ] ]˙ } R .v]o˙ v } r }v] (} ]v} U `R]R R uv o} (} TR ] ]˙ o R u]v R}lr(oo individual investors. }( }}v] ] R u} ov v]}v r uv R ˙X B ]v } } }. (}u ] v r Secondary market transactions: Many LPs are likely . U 8]v ]].}v } ]vP ˙ U faced with a problem at the moment. Big private equir geographies, investment styles and managers is necr ty gains have accrued in the wake of the very good run essary. The complexity involved in achieving adequate ]v v U R u u U R v r ]].}v ] v} ]v]Pv].v v v ] P }( o]] R R Rvl ]Pv].vo˙ ]v R } }v]vP ˘ X K] Pv P]vl }( R] ˙X A o U R ] rul o r has developed a dedicated private markets mandate o}}v ]v }}o]} R ]v Ro˙U v uv˙ ].oo˙ ]o} } R v }( ]v]]o ]v r LPs are thus now likely overallocated in this asset class. } X W o}}l (}` } ˙} ]v ]v R] ] r Some of them probably will solve this problem simply }v˙ uv X ˙ ]]vP R] P] oo}}v } ] ]˙X Mv˙ LPU R}PRU }o˙ `v } oo ˘]vP } r ]}v } }P ˘ o}v o]v v } create room for new investments. This means that uv˙ ]vvP }}v] o}}l } uP }v the secondary market in the second half of this year.

Private equity funds specialized in secondaries can oo˙ }. ]v R] v]}vuvX Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

11

ESG: Sustainability corner ISG E (]vPv]v˙]]M

Sustainability investing has long been enjoying growing popularity, but has been cast in a somewhat negative light lately. Greenwashing scandals, calls for stricter regulation, and definition problems were joined in the first half of this year by a poor return performance.

The investment industry evidently faces challenges with regard to ESG, but it is premature to sound the death knell for the sustainability megatrend.

H`]v (} R ]oo'Y TR . Ro( }( R] ˙ ` }u˙ uU v v} i }v R .vv]o ulX TR u}vR ` ov o} ]v R `}o }( ]v]o]˙ ]vvPU a universe that more and more investors have discovr ]v v ˙X TR }o] ] }( R }8 }( uo(v}uv˙DWSvR]Pv}v}(DWS CO E A}lWRuvv ]v u]rJv }voo˙ ul i o]u]v˙ v}]v+} ˙Po}} l}`v}vRPv`R]vP}(.vv]o} X Eo]U ]v M˙U R US S] v E˘RvP C}u r u]]}v ~SECZ o USD Xæ u]oo]}v .v }v management company BNY Mellon as a punishment (} Pv`R]vP }+v X TR Ru` o}}l } PRv v (R }}vX TR SECU (} ˘u r ple, has proposed two new rules that would require greater transparency from US mutual funds and would ] .v]}v }( `R o]. (} R SG E ooX Mv`R]oU Po}˙ R}] ]v E} ]v r v}o} lo Ro}vPrlv}`v}ou }v r ]vP SG E vP R SG E }] ˙R ]} vP }] ]+ Po˙ (}u R }R ]v }u X TR] ` ]. }v u} ˙ r cently updated research paper1, which found only a `l } u} }o}v ~vP]vP `v X vXZ`vSG E vP] ˙]˘}u]vv SG E vP Pv]X TR] ] ( o}` Rv R }o r }v `v}vv}vo ]vP~XıZX B R ooP ~]v˙Z ]] O]vP ]v]o r ]˙ ]vvP o} u (}u u}r v P}}o]o o}uv R v(}o ]v R . Ro( }( R] ˙U oo˙ R u }vG] ]v Ul]v v ] consequences. They have forced companies, investors and governments to deal more intensively with the o' E ~v]}vuvoZU S ~}]oZ v G ~}} P}vvZU `R]R }uu u o]l R˙ r ]vPo˙}+P]v R}RXSoP}vuv in Europe, for example, are backing away from their v]}vuvo }i v v]vP } (}]o ( r o} R] vv }vR]vvoP v R u R]o ]uX Av R ]v.PRvP `]R]v the European Union over the EU taxonomy’s seal of sustainability for atomic energy and natural gas has lv }v oo˙ ˘o}] v ]v R ( }(

12

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

soaring energy prices. In light of the military escalar }v ]v v E}U }u } ouo˙ asking whether even the arms industry should also be u]vo~]vvZ `RRv}v r ] ~]XX R] ]v R] Z R}o }v] v r investable from an ESG standpoint.

Yv }}~ (}uv } }} TR ]}]vvP ˙r}r (}uv }( r ]vo ]vuv }R ]v }o v .P v o u ~}u } v}vr]vo ]v r vestments) is not exactly helpful to their image. But it is explicable and actually shouldn’t surprise anyone because it’s no secret that ESG investments tend to have a bias toward the growth investment style and the technology sector, which explains their prior outr performance in recent years. The underperformance RMSCIW}oIv˘}˙RMSCIW}o ESG L Iv˘ ~WX vP }]vZ v R MSCI W}o SRI Iv˘ ~WXæ vP }]vZ (} R .Ro(}( ` ']o ]u]o˙} `}( r tors. First of all, shares of companies rated as being (more) sustainable are more expensively valued on avr P ]v u }( o] o}v u] ~XPX ] r }rv]vP v ] r}r}}lro }ZX TR} v r terprises generally tend to be growth companies that have been hit harder than others in recent months by ]]vP }v ˙]oXS}vo˙U R ]v(}u}v Rv}o r }P˙ v }uuv]}v ] } R }u r o˙ R]PR `]PR ]v ESG ]v] `R]o R energy industry, which tops the sector performance o} ˙ `] uP]v R] ˙U ] ]Pv].vo˙ underweighted in them. Since the ESG indices cited above and corresponding ETFs on those indices try to u]v]u] l]vP } P]v R MSCI W}o Iv˘ ~vouo˙o}˙}l}`]PRvP] r }v uoo }]oZU R] v(}uv } ( R] ˙ R v v}o v} oo˙ voXTRv(}uvu˙o}}l]+vU R}PRU (} S] _ P] ~uv˙ }( `R]R o˙uvPZRoo}`]PP ]}vvv r o˙ ˘o }uv] v } `]R }} ESG }.oX

I `v } }(}uv TR v o}`rP v (}uv }( r ]v]o]˙ru]v ]v}[ R}o]vP ] v} v r essarily heartening for the right hemisphere of their ]v~`R]R]}u]vv]v}]vPu}}vZU ]ulP}}}]}v}P]RoLoRu] r R ~`R vo˙o R]vl]vP l o Z (}} for thought and to review the sense and purpose of sustainable investment, as well as to revisit one’s own understanding of what it means to invest sustainably.

ESG ]vvPU ]v } ]`U ] v} v ]vuv r P˙ `]R ˙u }(}uv }voU ] rather an investor preference.

2 A ur˙ }v ˙ R Uv]]˙ }( Buv }}} R . }( } }]v]}v } v }u } R }vo]}v R o r }]oo˙ }v]o ]vuv ~SRIZ (}u v]R } average nor below average over the longer term.

W R]vl R vo˙]vP ESG ]] ] . v (} r u}}}o(}]v(˙]vP]lRv}~˙]Z ]v}vR.vv]oulXP(}u]vPvSG E vo˙] helps an investor to avoid such risks. Although this does not lead to an excess return in the long run, it does der liver the same return for less risk. But what not all ESG investments do is make the world fundamentally more sustainable or turn the Earth into a greener planet. And herein lies part of the greenwashing problem when something that is actually a risk management instrur ment is sold to (or interpreted by) the general public as being a tool for improving the world.

G}`]vP]v} oR}} I( ~i.Z Pv`R]vP }vv }v ] }( R uoo]}vU ~v]+vZ ESG R]vP ] R } ] XRv`lU]v(UR vu] `oo o} }( o R R lv v vvv look at the highly complex set of issues and have fundar uvoo˙ oo R v ESG }v ]v} }vX But it is premature to sound the death knell for the sustainability megatrend. A fairer appraisal would go }uR]vP o]l R]P ESG ]vvP P] v r edented growth over the last four years and became part of the mainstream. Oodles of new investment } ` ovRU v i uv˙ o]u ~} promises?) about them were made. But the unprecr edented growth was not accompanied by an equivar ovo˙ uo˙ o} ESG }}o}˘X ESG }vP v U`R]R Ro˙ o vU i }v ˘uo }( R]X TR ] ]v Pv`R]vP r }v v R(} v}ovo˙ ]v as a natural consequence of the success of sustainr ]o]˙ ]vvPX WR v ]v R ( clearer regulatory framework, more coherent guider o]vUvu} ] vv](}u.v]}vXA r u}v `v R R o' EU S v G ~]l uvPuvZ v R }v}v }( ]vo investment (environmental impact) is necessary, for example. The how and what of impact investments (dir

U uo +Z R}o o} u} Ro˙ .vX RPo} }v R `}o ( uu r moth task, but they’re already on their way to tackling ] R˙R }Pv] R }]}o˙˘]vP }ouX I( R] +} (]U (` ˙ (}u now we will look back on the awkward adolescence of ESG and will be living in an ESG 2.0 investment world `]RPRPo}vv`]R} RR}vo˙ disclose what they do and what they don’t do.

B]vP]vPR(}RvPn ESG indices are lagging behind this year Performance comparison: MSCI World vs. ESG indices 40%

30%

20%

10%

0

-10%

-20%

-30% 2015

2016

2017 MSCI World

2018

2019

MSCI World ESG Leaders

2020

2021

2022

MSCI World SRI

Sources: Bloomberg, Kaiser Partner Privatbank

M}Rv}o}P˙Yn …and less energy Comparison of valuation ratios and weightings: MSCI World vs. ESG indice MSCI World

MSCI World ESG Leaders

MSCI World SRI

Price-to-earnings ra o

18.5

19.6

21.8

Price-to-bookvalue ra o

2.9

3.3

3.8

Top 5 posi ons

Apple (4.5%) Microso� (3.6%) Alphabet (2.5%) Amazon (2.0%) Tesla (1.2%)

Microso� (7.2%) Alphabet (5.0%) Tesla (2.4%) Johnson & Johnson (1.8%) Nvidia (1.7%)

Microso� (14.1%) Tesla (4.7%) Nvidia (3.4%) Home Depot (2.3%) Coca Cola (1.9%)

Technology (21.4%) Financials (13.9%) Healthcare (13.4%) Discre onary consumer goods (10.7%) Industrials (9.9%) Communica on services (7.5%) Consumer staples (7.4%) Energy (5.2%) Basic materials (4.7%) U li es (3.2%) Real estate (2.8%)

Technology (21.4%) Financials (14.3%) Healthcare (14.1%) Discre onary consumer goods (11.3%) Industrials (9.7%) Communica on services (8.9%) Consumer staples (7.4%) Basic materials (5.1%) Energy (3.0%) Real estate (2.8%) U li es (1.9%)

Technology (25.3%) Financials (13.9%) Healthcare (13.7%) Discre onary consumer goods (13.0%) Industrials (9.4%) Consumer staples (8.7%) Basic materials (4.8%) Communica on services (3.8%) Real estate (3.1%) U li es (2.6%) Energy (1.8%)

Sectors

Sources: MSCI, Kaiser Partner Privatbank X FX BPU JXFX KooU RX R]P}}v ~MITU Uv]] Z”]RZP UAPPP C}v(]}vPTRD]Pv }(ESGRvPiX X LX H}v(U GX Y”loP UTR P(}uv }( S}]oo˙ R}v]o Iv

r

Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

13

The Back Page oA Pv

P(}uv

as of Jv

Asset class

YTD

Cash

-0.3% -0.3% -0.3% -0.3% -0.3% -0.2% -0.2% -0.2% -0.2% -0.2%

CHF UR E USD F]˘Iv}u Sovereign bonds Corporate bonds Microfinance H]PRr˙]o }v Ivvro]vl}v Convertible bonds Equities Global Switzerland Europa UK USA Emerging markets A o v]

-20.8% -20.8% -20.8% -20.8% -20.8%

0.5% 0.5% 0.5% 0.5% 0.5%

-0.3% -0.3% -0.3% -0.3% -0.3%

-19.9% -19.9% -19.9% -19.9% -19.9% -18.3% -18.3% -18.3% -18.3% -18.3% -15.9% -15.9% -15.9% -15.9% -15.9% -18.7% -18.7% -18.7% -18.7% -18.7%

EUR lUSD

-21.3% -21.3% -21.3% -21.3% -21.3% -18.8% -18.8% -18.8% -18.8% -18.8% 18.0% 18.0% 18.0% 18.0% 18.0% -1.2% -1.2% -1.2% -1.2% -1.2%

-14.9% -14.9% -14.9% -14.9% -14.9%

-4.8% -4.8% -4.8% -4.8% -4.8% -7.8% -7.8% -7.8% -7.8% -7.8%

GBPlUSD

r X A9

rX9A

0.0%

r XæA9

rX9A

0.2%

X A9

XA9

r XıA9

r X A9

rX9A

-10.0% -10.0% -10.0% -10.0% -10.0%

0 0 0 00

7.8%

rX9A

rX9A

2.9%

rX9A

rX9A

r X A9

rX9A rX9A

rX9A

rX9A

ræXA9

rXıA9 rXıA9

XA9

ræXıA9

X9A 19.9% 25.7%

rıX9A

12.9%

rX9A

X A9

9.2%

8.7%

r X A9

rX9A

32.8%

rX9A

rX9A

ræX9A

rXıA9

23.8%

rX9A

2.1%

rXæA9

-3.5% -3.5% -3.5% -3.5% -3.5%

rX9A

2.1%

r X A9 0 0 0 00

rXæA9

0.3%

rıX9A 1.7% 1.7% 1.7% 1.7% 1.7%

C v] UR E lCHF

0.0%

rX9A

Gold Hedge funds

3 Years

r X A9 0 0 0 00

Commodities Ro S`]ov

0.5% 0.5% 0.5% 0.5% 0.5% 0 0 0 00

1 Year

rXA9

-12.3% -12.3% -12.3% -12.3% -12.3% -13.8% -13.8% -13.8% -13.8% -13.8%

Iv(o]}vro]vl}v uP]vP E rul}v

-8.7% -8.7% -8.7% -8.7% -8.7%

-15.4% -15.4% -15.4% -15.4% -15.4%

M}vR

rX9A rX9A rX9A

XıA9 28.2%

rXA9

8.1%

r X A9

9.9%

rX9A

rX9A

rX9A

r ıX A 9

rX9A

rX9A

Ov}APv Jo˙}PUEFAW}uv[}v E F}}ooRu]}vR] C F}}oo]}u]vPR}uWRW}uv[}v E F}}ooRu]}vR] C `]ooRoR]uu]v Ru}Rov}((}}oo(}R}vuLæXIu]v}v`RRu}P}o`]oo }RRvRMv[W}o]v C QXSoo˙l]vPUR]o}v} more rainfall in England in any case.

July 7: World Chocolate Day WR}]vv]MTRS`]}RoP]v B W}`]R(}}]v˙MR}}o C ooPo˙]]v }E (}R.u}vJo˙UææWRvR}(R}v}(W}oR}}o C ˙D XP} oR}ovi}˙R]oo`]R}P]o˙}v]vo}vR]}v˙}(R˙X Jo˙P}o]˙ B C E uvP M}v˙r}o]˙v} ] o}vP}(R}]}(~ui}vo Z vlXS}URP]vv]vP }(R˘](}uR[B C E}o]˙}(vP]v ]vR}}v E Ro˙v`ooX uoo A ær]r}]v]vrR]lR[B C E Jo˙uvP]}o]o˙]]v}vRulX

14

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

r

Notes

Y}]vPv}

Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

15

16

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

Kaiser Partner Privatbank AG | Monthly Market Monitor - July 2022

17

This document constitutes neither a financial analysis nor an advertisement. It is intended solely for informational purposes. None of the information contained herein constitutes a solicitation or recommendation by Kaiser Partner Privatbank AG to purchase or sell a financial instrument or to take any other actions regarding any financial instruments. Furthermore, the information contained herein does not constitute investment advice. Any references in this document to past performance are no guarantee of a positive future performance. Kaiser Partner Privatbank AG assumes no liability for the completeness, correctness or currentness of the information contained herein or for any losses or damages arising from any actions taken on the basis of the information in this document. All contents of this document are protected by intellectual property law, particularly by copyright law.

The reprinting or reproduction of all or any parts of this document in any way or form for public or commercial purposes is expressly prohibited unless prior written consent has been explicitly granted by Kaiser Partner Privatbank AG.

18

Monthly Market Monitor - July 2022 | Kaiser Partner Privatbank AG

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