The 2014 All-Europe Fixed-Income Research Team: Credit Derivatives, No. 2: Phanikiran Naraparaju, Andrew Sheets & team

< The 2014 All-Europe Fixed-Income Research Team

Phanikiran Naraparaju, Andrew Sheets & team
Morgan Stanley

First-place appearances: 0

Total appearances: 2

Team debut: 2013

Leaping from runner-up to second place is Morgan Stanley. This year, Phanikiran Naraparaju shares leadership of the London-based quartet with newcomer Andrew Sheets, who also directs a crew that captures the No. 3 position in High-Yield Strategy and runner-up spots in General Strategy and Investment-Grade Strategy. Generating returns is a key issue in 2014, since “yield opportunities are scarce right now,” says Naraparaju. “Avoiding rates volatility also seems to be a priority for most investors, although we are more concerned about the poor growth backdrop than rising rates.” However, a major revamp of credit default swaps this year should make the contract “more robust” for protection buyers, he adds. European CDS spreads are still four times the overextended levels of 2007, Naraparaju points out, even as those of other asset classes have returned to precrisis valuations. The strategists favor going long on the region’s CDSs this year, citing a positive basis, in contrast to the extreme negative basis in the U.S.; steep curves, which help carry positions; and a lack of rate exposure. Their research on European credit strategy is hailed as a “nonjudgmental and nonopinionated summary that allows you to form your own opinion,” in the words of one backer.

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