Thirty-eight-year-old Marko Kolanovic and his four-member J.P. Morgan crew repeat in first place. The strategists’ “coverage is more frequent and consistent than any of the other shop’s,” says one admirer. “They’re one of the few teams that have expertise on dividend swaps, providing bottom-up estimates on where [those instruments] should trade.” The group foresees an increase in volatility and the Chicago Board Options Exchange Volatility Index through year-end. Seasonality, potential tapering of the Federal Reserve’s bond-buying scheme, debt-ceiling battles in Washington and conditions in Europe will leave the waters choppy and the market weak. As a result, the analysts advise investors to hedge their equity exposure by, for example, replacing stocks with upside calls, which “eliminates downside and takes advantage of relatively low levels of implied volatility,” Kolanovic explains. In addition, given rising interest rates, they expect utilities and other high-yielding sectors to underperform those less affected by rates, such as technology. To clients looking for “upside exposure,” as he says, they recommend derivatives trades that exploit the underperformance of U.S. equities compared with those of China, Europe and emerging markets. — Paul Sweeney |
The 2013 All-America Research Team: Equity-Linked Strategies, No. 1: Marko Kolanovic & Team
