Economics & Strategy– Sovereign Debt: Second

Since 1995, when this sector was introduced, J.P. Morgan has captured the top spot every year in which polling produced publishable results — until now. The team, led since 2000 by Joyce Chang (with assistance from Luis Oganes in 2007), slips to second place but retains an enthusiastic following. The New York–based crew leader is “the best strategy person out there, and I have known and been following her for a long while now,” attests one buy-side supporter. In late May and in June, comments from the U.S. Federal Reserve that it was considering scaling back its program of quantitative easing spooked investors around the world. “You’ve had a sharp sell-off in emerging-markets fixed income,” Chang notes. “Are there certain assets in Latin America where we think you can generate a 5 to 10 percent return between now and the end of the year? That’s what we’re trying to focus on right now.” The eight-member squad is urging clients to overweight Mexico’s sovereign debt. The impact of the rout on bonds relative to fundamentals was greater in that country than in any other, she reports. Even if those instruments reclaim only half their lost ground, investors in long-duration dollar-denominated units should still enjoy a 10 percent return. — Carolyn Koo