< The 2016 All-Europe Research Team

Spyros Mesomeris & team
Deutsche Bank
First-Place Appearances: 5

Total Appearances: 9

Team Debut: 1987

Top-ranked for two years running, Spyros Mesomeris and his Deutsche Bank colleagues enjoy their fourth No. 1 appearance in the past five years. Working out of London, the seven analysts in this group “produce the best quantitative research for real quants, taking academic insights into an applied setting with a strong econometric understanding,” one investor declares. Interest rates are a major subject of examination for the team, which is monitoring the impact of the U.S. Federal Reserve’s monetary policy shift on style portfolios and, in particular, on income-orientated equity strategies. “Previous interest rate tightening cycles have occurred [against] a backdrop of strengthening economic growth and rising prices,” notes Mesomeris, 40. With that caveat and based on historical analysis, the Deutsche’s squad forecasts that large-cap and low-volatility companies (aside from interest-rate-sensitive sectors like utilities) will outperform their small-cap, higher-volatility counterparts in the wake of interest rate hikes. “High-dividend-yield companies have tended to struggle, and income investors should probably tilt their portfolios toward companies with sufficient dividend cover and potential to grow their dividends in the future,” he counsels. Finally, the researchers also are reminding investors to consider the effect that businesses’ capital structures can have on their share price when interest rates change. Those with elevated leverage and a significantly high proportion of short-term debt tend to underperform after rates rise, especially if their interest coverage ratios are inadequate. In such circumstances, Mesomeris points out, ”their debt servicing costs are likely to increase, and raising additional debt would be more expensive.”