When interest rates rise rapidly, future cashflows will be discounted at a faster rate than the current cashflows can grow. As a result, most financial assets, which represent a stream of future cashflows, will do badly. Last year, the financial markets performed poorly even though there was no economic or financial crisis. Global equities and bonds fell by between 16% and 20%. A traditional 60/40 investor would have lost 18% in portfolio value in 2022 alone. This is in stark contrast to the preceding 30 years, where such a portfolio would have earned a respectable 8.7% per annum. In fact, last year, it did not matter if you were 60/40 or any other combination. So long as your portfolio was exposed to global stocks and bonds, the portfolio would likely have performed negatively in 2022. Against this backdrop, investors will need to consider building greater resilience in their portfolios. What should be the appropriate composition of the portfolios? How will each asset class perform under different growth and inflation environments? What is the appropriate allocation to inflation-protection assets, such as real assets, inflation-linked bonds, and commodities? What should be the exposure to energy given the opposing pulls of short-term inflation dynamics and longer-term climate risks? Is there a role for tail-risk hedges such as gold and how large should that role be? MEDIUM TERM: GEOECONOMIC FRAGMENTATION All said and done, inflation will eventually come down and interest rates normalise, though both are likely to be slightly higher than what we have been used to.

Many green and transition projects in emerging markets pose risks that are not commensurate with their expected returns. We need catalytic or concessional capital from multilateral banks, public and philanthropic sources to improve project bankability and crowd in private sector capital. We need to strengthen the financial ecosystem to deploy blended finance at scale. This involves looking beyond the financing of individual projects and moving to a portfolio approach whereby concentration risks can be reduced through a diversified pool of assets. For instance, via multi-asset funds which invest in small scale renewable energy projects in specific markets. Securitisation can also mobilise private institutional capital, by allowing capital to be recycled from holding typically illiquid green and transition assets. CONCLUSION In sum, the operating environment for asset managers has become profoundly different from the last two decades, with inflation, geo-economic fragmentation, and climate change emerging as key drivers of financial markets. I hope today’s conference will give you insights on how to manage the risks and seize the opportunities ahead. Thank you. *** [1] The global inflation figures cited in this sub-para are based on the PPP-based weighted average of  Singapore’s top 14 trading partners. [2] Forsythe, E, Kahn, L B, Lange, F and Wiczer, D (2022), “Where have all the workers gone? Recalls,  retirements and reallocation in the COVID recovery”, Labour Economics, vol. 78, pp. 1 – 15. [3] Peri G and Ziour R (2022), “Changes in International and Internal Native Mobility after Covid-19 in the  US”, NBER Working Paper, 30811.