| Credit analysts get back to fundamentals | Declarations of independence |
| How many analysts do you need? | Go to full results: High Grade |
| Methodology and voter profiles |
| Best overall high-yield research team | |||||||
| 02 | 01 | Scores | TMT | Gen Ind/Man | Consumer Retail | Credit Strategy | Total |
| 1 | 1 | Merrill Lynch | 268 | 221 | 178 | 190 | 857 |
| 2 | 4 | Deutsche Bank | 261 | 217 | 165 | 168 | 811 |
| 3 | 2 | CSFB | 250 | 180 | 158 | 189 | 777 |
| 4 | 6 | Goldman Sachs | 202 | 175 | 152 | 197 | 726 |
| 5 | 7 | SSMB | 187 | 178 | 145 | 182 | 692 |
| 6 | – | JP Morgan | 130 | 174 | 157 | 149 | 610 |
| 7 | 8 | UBS Warburg | 137 | 153 | 132 | 153 | 575 |
| 8 | 3 | Morgan Stanley | 210 | 117 | 110 | _ | 437 |
| 9 | 10= | DrKW | 127 | 93 | 74 | 102 | 396 |
| 10 | 5 | Lehman Bros | 165 | 98 | 118 | _ | 381 |
| 11 | 15= | ING | 119 | 128 | 99 | _ | 346 |
| 12 | 12 | Barclays Capital | 99 | 79 | 76 | 69 | 323 |
| 13 | 9 | Bear Stearns | 81 | 93 | 60 | 85 | 319 |
| 14 | 10= | BNP Paribas | 119 | 83 | 105 | _ | 307 |
| 15 | 14 | CIBC | 58 | 64 | 66 | _ | 188 |
| 16 | 13 | RBS | 63 | 69 | 42 | _ | 174 |
| 17 | – | ABN Amro | 59 | 51 | 46 | _ | 156 |
| 18 | – | Bank of America | 74 | 65 | _ | _ | 139 |
| 19 | – | Commerzbank | 65 | _ | _ | 46 | 111 |
Deutsche snaps at Merrill’s high-yield heels
| Helen Rodriguez | ||||||
Helen Rodriguez made a reasonable guess at which bank had denied her the top spot in the high-yield poll. Having worked in Frank Knowles’s team at Merrill Lynch for four-and-a-half years, she knows how well established it is in this field.
But Rodriguez is now managing director of high-yield research at Deutsche Bank, where she has been for two years, making her the head of an impressively up-and-coming team. In 1999, Deutsche barely made an impact on the high-yield rankings, although Bankers Trust, which Deutsche later bought, was well established. Since then, Deutsche has climbed, hovering around fourth last year before hitting a close second in almost all the high-yield categories this year.
Sven Olson joined the London team from Bankers Trust (BT) in early 2000. “It takes time to get established,” he says. “In 2000, people had written us off. But once the BT acquisition was done, we were off to the races.” And it seems to be going well. Olson, who is the senior analyst covering industrials and chemicals, fell into second place by the tiniest of margins.
Rodriguez talks in glowing terms about her colleague. She recalls one meeting she and Olson held with one of Europe’s biggest investors, where Olson was talking about one of Deutsche’s transactions. The investor, suspicious as ever, said: “Oh, I suppose this is a ‘buy’ because it is a house deal.” He nearly fell off his chair when Olson said “Well, no.”
Ironically, Deutsche seems to benefit from the fact that it has only recently established itself as a big international underwriting house. “We came late to the high-yield party and missed the telecoms issuance boom,” says Rodriguez. That means that in many cases investors can’t possibly accuse the bank of talking up its own deals, an accusation that is repeatedly levelled at research teams in general.
The team is big. Rodriguez and Olson are complemented by Sonia Van Dorp and Andrew Welty to make up the team of senior analysts. And there are several junior analysts. The average age of a team member is around 27. After some readjustments, Rodriguez is happy that she has the team she wants.
Rodriguez says her phone rings at least once every five minutes, with enquiries from investors and issuers. Welty, who recently joined from JPMorgan, can spend around 12 hours a day on the phone. But most of those calls will have been from worried investors. Despite the team’s enthusiasm, this has been a depressing year to work in high yield. “I don’t think anyone on the sell side called the magnitude of what has happened,” she says. “No-one was expecting Energis to be as bad as it has been. Unless you stood up early in 2001 and said it was going to the teens, no-one called it.” Energis has now formally been downgraded by Standard&Poor’s to D, having already rapidly slumped to distressed debt trading levels. Rodriguez says: “The only call we think you could have made in telecoms this year was to advise no long-term buy-and-hold decisions in anything but wireless. Anyone who bought for the long term has lost money.”
Opportunities to make money in high yield have been few and far between. Xerox, which now trades in the 20s after a period in the teens, is a rare example. So the Deutsche team, like competitors, has been forced to focus on short-term trades and arbitrage opportunities. Merrill Lynch knows that it cannot afford to be complacent. The investors will decide whether it holds on to its position next year.
Katie Astbury
Best in high-yield telecoms, media and technology
Frank Knowles, Atish Kakodkar
Merrill Lynch
| Best in high-yield TMT | |||||||||
| 2002 | 2001 | %HY votes | Score | Euro-12 | UK Only | ?500m+ | ?500-250m | ?250m- | |
| 1 | 1 | Merrill Lynch – Frank Knowles, Atish Kakodkar | 35.2% | 268 | 2 | 1 | 1= | 6 | 1 |
| 2 | 4 | Deutsche Bank – H. Rodriguez, S. Van Dorp, A. Welty&Team | 44.4% | 261 | 1 | 2 | 1= | 2 | 2 |
| 3 | 2 | CSFB – Martin Hornbuckle | 33.0% | 250 | 5 | 4 | 4= | 1 | 3 |
| 4 | 3 | Morgan Stanley – Steve Franck, David Gladstone | 23.7% | 210 | 4 | 5 | 7 | 3 | 4 |
| 5 | 7 | Goldman Sachs – Colin Marshall, John Fusek, J.Salisbury | 25.2% | 202 | 3 | 7 | 5 | 4 | 5 |
| 6 | 5 | SSMB – Tom Crawley, Kay Turner, Peter Dalena | 24.1% | 187 | 11 | 3 | 4= | 5 | 6 |
| 7 | 6 | Lehman Bros – Adam Philips, Dave Sharret&Team | 22.2% | 165 | 12 | 6 | 3 | 7 | 10 |
| 8 | 8 | UBS Warburg – Bill Gallagher&Team | 14.4% | 137 | 8 | 14 | 10 | 9 | 7= |
| 9 | – | JP Morgan – Galia Velimoukhametova, Paul Levene | 19.6% | 130 | 9 | 11= | 6 | 8 | 12 |
| 10 | 13 | DrKW – Lior Jassur, Kate Kirby | 15.2% | 127 | 7 | 15 | 13= | 11= | 7= |
| 11= | 9 | BNP Paribas – Aizaz Shaikh, Pilar Manzanaro | 13.3% | 119 | 6 | 17 | 12 | 14 | 9 |
| 11= | 14 | ING – Peter Cuckovic | 11.5% | 119 | 10 | 11= | 8 | 16 | 11 |
| 13 | 11 | Barclays Capital – Kurt Klimenko, Alfredo Mattera | 10.4% | 99 | 13 | 9 | 9 | 10 | 13 |
| 14 | 10 | Bear Stearns – L.Landeman, B.Murphy, S.Surtees | 10.7% | 81 | 16 | 18 | 11 | 11= | 15= |
| 15 | – | Bank of America – John Stamler | 5.9% | 74 | 15 | 10 | 13= | 17 | 14 |
| 16 | – | Commerzbank – Alaric Hu | 7.4% | 65 | 14 | 19 | 17 | 13 | 19 |
| 17 | 15 | RBS – Martyn Carlisle | 6.3% | 63 | 17 | 13 | 15= | 15 | 18 |
| 18 | 12 | ABN Amro – Mikkel Hofstee | 5.9% | 59 | 18= | 16 | 18 | 18 | 15= |
| 19 | 16 | CIBC – Amanda Neff, Avnish Mehra, Mark Weinberg | 7.8% | 58 | 18= | 8 | 15= | 19 | 17 |
| Knowles (right) and Atish Kakodkar | ||||||
Few credit analysts can claim to have been doing the job for 10 years. Frank Knowles can. “A bit of grey hair helps,” he says. If he was not the very first dedicated credit analyst in London he was certainly one of the first, having joined Lehman Brothers in 1992 to set up the credit research group. Four years later, he joined Merrill Lynch.
As well as being the firm’s senior telecoms media and technology (TMT) analyst, Knowles is also head of the whole credit research team. And the job is clearly going well – this is the third year in a row that Merrill Lynch has won the vote as best team for high-yield credit research.
This may be partly a result of Merrill Lynch’s unusual reporting structure for its credit research division – it doesn’t report to sales or trading but directly to the executive committee, which is different from some firms. “I am happy that independence is not an issue,” says Knowles. “There has never been pressure on us to have a different position.”
The firm has also taken the bold step of merging its high-grade and high-yield research teams. This is partly because there simply hasn’t been enough high-yield issuance to warrant an entire team. It also means, though, that analysts are industry specialists, so they can cover companies as they move through the ranks of credit ratings rather than suddenly being exposed to fallen angels. It also tracks the increasing tendency for investors to look across the credit spectrum.
But no matter how experienced an analyst is, this has been a tough year to make accurate calls. Knowles and his team have been consistently positive on mobile telecoms companies, particularly PGC in Poland and Partner Communications in Israel. They have both outperformed. The cable sector, on the other hand, has not received such kind words from Merrill – the firm has turned more negative on companies such as UPC and NTL since last summer and both of those companies are now in debt restructuring talks with investors. As Knowles puts it: “Cable companies have a good underlying business with inappropriate balance sheets.” He has also been consistently negative on KPN Qwest.
Knowles predicts that 2002 will bring more bankruptcies for telecoms companies. The sector is likely to lag behind others in terms of reaping the rewards of an economic recovery since corporates like to see money in the bank before they invest in new telecoms services.
This will also be the year when cable companies will survive or fall. “This year will be when we discover whether cable companies’ plans to sell new services in Germany will work,” Knowles says. “The market has decided not, and the companies’ debt is trading at low levels. I disagree.”
As with all of the firm’s analysts, releasing key assumptions and allowing clients to apply their own models is important. “We don’t have a monopoly on getting forecasts right,” says Knowles. “I don’t think investors are just looking for the most accurate calls. They want accessibility, openness, and a willingness to discuss ideas as equals.”
Katie Astbury
Best in high-yield industrials research
Beth Fusco, Guillermo Carrascosa
Merrill Lynch
| Best in high-yield general industries | |||||||||
| 2002 | 2001 | %HY votes | Score | Euro-12 | UK Only | ?500m+ | ?500-250m | ?250m- | |
| 1 | 1 | Merrill Lynch – Beth Fusco, Guillermo Carrascosa | 27.4% | 221 | 1 | 1 | 2 | 2 | 2 |
| 2 | 3 | Deutsche Bank – Sven Olson&Team | 32.2% | 217 | 2 | 2 | 4 | 1 | 1 |
| 3 | 2 | CSFB – Ben Booth, Michael Sonenshine, Tom Plante | 23.3% | 180 | 3 | 3 | 6 | 6= | 3= |
| 4 | 6 | SSMB – David Newman, Cathy Braganza | 22.6% | 178 | 8 | 4 | 1 | 4 | 6 |
| 5 | 5 | Goldman Sachs – Peter Morris, Pierluigi Volini | 30.7% | 175 | 6= | 7 | 7 | 8= | 3= |
| 6 | – | JP Morgan – Thomas Mitchell, Katherine Mc Cormick | 22.6% | 174 | 4 | 6 | 3 | 3 | 5 |
| 7 | 11 | UBS Warburg – Richard Phelan, Marcus Strub&Team | 18.5% | 153 | 6= | 5 | 5 | 3 | 8 |
| 8 | – | ING – Ian Harris | 14.1% | 128 | 11= | 8 | 9 | 5 | 9 |
| 9 | 4 | Morgan Stanley – Bala Ramakrishnan | 14.8% | 117 | 9 | 13 | 8 | 13= | 7 |
| 10 | 7 | Lehman Bros – Adam Phillips, Tom Howard&Team | 12.6% | 98 | 15 | 10 | 10 | 8= | 13 |
| 11= | 8 | DrKW – L. Jassur, R. Mareachealee | 10.7% | 93 | 5 | 16 | 12 | 12 | 10 |
| 11= | 12 | Bear Stearns – James Ravine, Matthew Little | 10.4% | 93 | 11= | 11 | 13 | 6= | 12= |
| 13 | 9 | BNP Paribas – Mark Hughes&Team | 9.6% | 83 | 10 | 17 | 18 | 8= | 11 |
| 14 | 10 | Barclays Capital – Robert Jones | 7.4% | 79 | 14 | 9 | 14 | 11 | 15 |
| 15 | 14= | RBS – Peter Jordan, Wendy Racine | 6.7% | 69 | 13 | 14 | 17 | 13= | 12= |
| 16 | 13 | Bank of America – Dan Purser, Julien Raffelsbauer | 5.9% | 65 | 16 | 18 | 15 | 13= | 14 |
| 17 | 14= | CIBC – P. Volpicelli, A. Maclean, S. Thaker, M. Bailey | 5.9% | 64 | 17 | 12 | 11 | 16 | 16= |
| 18 | – | ABN Amro – Ray Stotlemyer | 6.3% | 51 | 18 | 15 | 16 | 17 | 16= |
|
Beth Fusco and Guillermo Carrascosa |
||||||
Beth Fusco and Guillermo Carrascosa are paid to be pessimists. Luckily, high-yield industrials have provided plenty of scope for that recently. Credit ratings have been slipping, chemicals have been suffering in a cyclical bad patch, and there has been virtually no new issuance.
But every cloud has a silver lining. As Carrascosa says: “We are proud of being objective. The benefit of not having new issuance is that you can’t be accused of talking your own book.” So this year’s winning high-yield team has spent the past 12 months focusing on helping investors to lose as little money as possible by explaining what could go wrong.
“Equity research looks six to nine months ahead, whereas we like to see the money now,” says Carrascosa. “We have to take a more conservative view and wait until we see an upturn in demand.”
One recent example of that is Fusco’s call on chemicals company Ineos Group. Fusco, who has worked in credit for 21 years, put together a model to demonstrate how the firm’s cashflow would be affected by the cyclical phenol business. “We were saying: ‘Yes, we like the company, but here are the risks’.” And that is even though Merrill Lynch brought the company’s deal to market. German construction supplier Grohe told a similar story: Merrill Lynch launched the company’s deal in November 2000 but the team’s more pessimistic outlook on growth in Germany led it to downgrade the company to neutral. “The investors were trapped,” says Carrascosa.
“It is a good company, but it was a single-B credit, yielding 9%. Other similar credits were trading wider. It had become too expensive.”
The team broke most noticeably from consensus with Fusco’s call on Azurix, a subsidiary of Enron. Azurix was trying to sell one of its assets, UK utility Wessex Water. Fusco advised investors to sell, as bondholders were not going to get par. She provided a model to show how much the bonds would depreciate with every quarter that passed. Merrill Lynch was the only bear. Fusco says: “It sounds silly but we always try to put ourselves in the place of the investors. Some people said we were crazy, but some did sell.” In the end, the trading range on the bonds fell to 79-72. Merrill Lynch had predicted 78-48. “We weren’t 100% right, but we did highlight the risks,” says Fusco.
The outlook in this area for 2002 is unlikely to change without new issuance. “If we get a decent upturn in supply, the prices on defensive names should approach fairer value,” says Carrascosa. “Investors are starved of new deals.” In particular, Fusco warns investors away from chemicals debt. “The main question for investors at the moment is whether they should put more money into chemicals to play the recovery,” she says. “But it is too early. This is a false rally.” Investors would do well to listen.
Katie Astbury
Best in high-yield consumer products and retail
Sarah Percy-Dove
Merrill Lynch
| Best in high-yield consumer/retail | |||||||||
| 2002 | 2001 | %HY votes | Score | Euro-12 | UK Only | ?500m+ | ?500-250m | ?250m- | |
| 1 | 3 | Merrill Lynch – Sarah Percy-Dove | 25.6% | 178 | 2 | 1 | 2= | 2 | 1= |
| 2 | 1 | Deutsche Bank – Sonia Van Dorp&Team | 29.3% | 165 | 1 | 3 | 6 | 1 | 3 |
| 3 | 2 | CSFB – Ben Booth | 21.9% | 158 | 3 | 6 | 9 | 7 | 1= |
| 4 | – | JP Morgan – Mark Bayley | 19.6% | 157 | 4 | 9 | 1 | 3 | 6 |
| 5 | 5 | Goldman Sachs – Caroline Brown, Rupert Egan | 22.2% | 152 | 6 | 4 | 4= | 4= | 4 |
| 6 | – | SSMB – David Newman, Cathy Braganza | 20.7% | 145 | 7 | 2 | 4= | 8 | 5 |
| 7 | 7 | UBS Warburg – Marcus Strub, Sara Colley&Team | 15.9% | 132 | 10 | 5 | 7= | 4= | 8 |
| 8 | 6 | Lehman Bros – Adam Philips, Tom Howard&Team | 15.9% | 118 | 11 | 10 | 2= | 6 | 12 |
| 9 | 4 | Morgan Stanley – Bala Ramakrishnan | 12.2% | 110 | 5 | 13 | 11 | 13 | 7 |
| 10 | – | BNP Paribas – Oleksiy Soroka and Team | 10.4% | 105 | 8 | 11 | 7= | 10 | 10 |
| 11 | 11 | ING – Angus Rosborough&Team | 10.4% | 99 | 12 | 7 | 12 | 9 | 9 |
| 12 | 8 | Barclays Capital – James-Scott Wong, Robert Jones | 7.4% | 76 | 16 | 8 | 10 | 11= | 16 |
| 13 | 10 | DrKW – L. Jassur, R. Mareachealee | 8.5% | 74 | 9 | 14 | 14 | 14= | 11 |
| 14 | 13 | CIBC – P.Volpicelli, A.Maclean, S. Thaker, M.Bailey | 7.4% | 66 | 13= | 12 | 13 | 15 | 13 |
| 15 | 9 | Bear Stearns – James Ravine, Matthew Little | 7.8% | 60 | 13= | 17 | 15 | 11= | 15 |
| 16 | – | ABN Amro – Ray Stotlemyer | 5.2% | 46 | 17 | 16 | 16 | 14= | 17 |
| 17 | 12 | RBS – Peter Jordan, Wendy Racine | 3.7% | 42 | 15 | 15 | 17 | 16 | 14 |
| Sarah Percy-Dove | ||||||
Sarah Percy-Dove, voted this year’s best high-yield analyst for consumer and retail credits, claims to be from “another world”. This may seem an odd thing to say but Percy-Dove has a point.
Before joining Merrill Lynch 18 months ago she sat on the other side of the fence as a buy-side analyst at Alliance, a division of Axa, in Singapore. During this time she learnt two useful lessons: how to ignore biased research and how to keep your head in a downturn. “I know not to panic,” she says.
The lessons have stayed with Percy-Dove as she has commented on her sector (consumer and media, excluding cable) during a turbulent period. In her list of key calls over the past year she includes her speculative buy call on music retailer HMV in January 2001. She made the call when the company’s debt was languishing in the 40s, and it is now trading over par. Slightly later, in March 2001, she downgraded publisher Polestar to underweight, advising investors to sell when the credit stood at 70. When it eventually fell to trade at around 20 the debt was restructured.
She says it is tricky to pinpoint what impact her research has on the market. “I wouldn’t say the prices on my bonds are rational,” she says. One example is United Biscuits, which trades at around 113 but still remains an attractive, defensive “sleep-at-night” credit for nervy investors.
And like an actress who says she doesn’t read her critics, Percy-Dove laughs and shrugs when asked whether she frequently goes against consensus, saying she rarely knows what other analysts are writing. But she does think she is more negative than other analysts on sports equipment maker Head. “It’s not a terrible credit but it sells tennis rackets and skis,” she says. And they are not exactly products that sell well in a downturn.
She is certainly a plain talker. Merrill Lynch is the bank that brought Yell, the directory business, to the high-yield debt market. But Percy-Dove says she probably offers the lowest forecasts for the company of all her peers. “I think I give both sides,” she says. “Anyone who knows me knows that I say what I think. I have been on the receiving end of people who I thought were biased. I know some people were trying to sell their own book. I just want to give people the tools to make their own decisions.”
Merrill Lynch always shows its models and key assumptions, making them available for investors to challenge. “You can’t get complacent,” says Percy-Dove. “I don’t profess to know everything. I prefer it if people call and say that what I have written is a load of crap. It provides dialogue and insight.”
Katie Astbury
Best in high-yield credit strategy
Varkki Chacko, Thomas Mercier
Goldman Sachs
| Best in high-yield credit strategy | |||||||||
| 2002 | 2001 | %HY votes | Score | Euro-12 | UK Only | ?500m+ | ?500-250m | ?250m- | |
| 1 | – | Goldman Sachs – Varkki Chacko, Willem Sels, Thomas Mercier | 30.7% | 197 | 1 | 4 | 4 | 1 | 2 |
| 2 | – | Merrill Lynch – M. Christopher Garman | 33.0% | 190 | 2 | 3 | 7 | 2 | 1 |
| 3 | – | CSFB – Sam de Rosa-Farag | 33.7% | 189 | 7 | 1 | 1 | 4= | 3 |
| 4 | – | SSMB – David Newman, Tom Crawley | 26.3% | 182 | 4 | 2 | 3 | 4= | 4 |
| 5 | – | Deutsche Bank – Walter McGuire&Team | 24.1% | 168 | 3 | 5 | 2 | 6= | 5= |
| 6 | – | UBS Warburg – Richard Phelan&Team | 21.9% | 153 | 6 | 6 | 6 | 3 | 8 |
| 7 | – | JP Morgan – Peter Acciavatti | 19.6% | 149 | 5 | 8 | 5 | 6= | 7 |
| 8 | – | DrKW – Lior Jassur&Team | 12.2% | 102 | 8 | 7 | 10 | 11 | 5= |
| 9 | – | Bear Stearns – Simon Ballard, Graham Neilson | 10.4% | 85 | 10 | 9 | 9 | 8 | 9 |
| 10 | – | Barclays Capital – Fred Taylor, Jane Wride | 8.5% | 69 | 9 | 10 | 8 | 9 | 10 |
| 11 | – | Commerzbank – Alaric Hu | 4.8% | 46 | 11 | 11 | 11 | 10 | 11 |
The Goldman Sachs European high-yield credit strategy analysts lean back in their chairs and nod. “Yes, it was a tough call,” says Varkki Chacko, managing director of the global credit strategy team, and the elder and more experienced of the two-man team. “A tough call,” agrees his colleague, a young Frenchman called Thomas Mercier. They look as if they enjoyed making it.
The call in question was when they put out a recommendation on the telecoms high-yield sector in the midst of the telecoms chaos last year. They downgraded the whole lot to “speculative”.
“That’s a speculative rating for a market comprising high-yield – that is speculative-grade – bonds,” explains Chacko, an Indian-born analyst who sizes you up with the same kind of focused scrutiny as you imagine he turns on the bond market. “That’s pretty speculative!”
The analytical work behind this decision shows some of this team’s thinking in action. First of all, they looked at bandwidth capacity utilization. Chacko says: “We saw US data which showed the broadband capacity utilization in the sector was horrific.” The ensuing note observed: “Capacity utilization figures would have to improve to over 90% or so to re-establish pricing power and obtain decent margins.” Secondly, a client rang them up to ask about a capacity provider’s debt. He asked what the chances were of a bond that had gone below 40 cents coming back up to above 80 cents levels (an apt question amid the barrage of this year’s fallen angels).
Mercier went away developed a database and did what may have been the first study of its kind in European high yield. He discovered it was less than 10% likely. The combination of these two facts pushed the team to make the sector speculative. “We were one of the earliest teams to do that,” says Chacko. “I believe we saved our clients some money with that call.”
The team admits that 2001 was a tough year for high-yield bonds. Chacko says: “You needed a very big hard hat. It seemed like every week there was a new default.” While some rival teams were predicting a default rate of 3% to 6%, the actual default rate was 16%. This year doesn’t look any easier to call. Chacko says: “We still have our hard hats on. But some sectors which we favoured in 2001 – particularly consumer/industrial bonds – continue to look positive.”
Jules Evans
Best in emerging-market sovereigns
Kasper Bartholdy, Kay C Hope
CSFB
| Best in emerging market sovereigns | ||||||||||
| 2002 | 2001 | % other credit votes | Score | Euro-12 | UK-only | ?10bn+ | ?5-10bn | ?1-5bn | ?1bn- | |
| 1 | – | CSFB – Kasper Bartholdy, Kay C. Hope | 19.2% | 122 | 7 | 2 | 4= | 1= | 2 | |
| 2 | – | Deutsche Bank – Jose Luis Daza&Team | 19.6% | 120 | 1 | 3 | 2 | 7= | 3= | 4= |
| 3= | – | SSMB – Chris Kelly, Rashique Rahman, Darrell Tonge | 12.9% | 116 | 2 | 5 | 12 | 3= | 8= | 1 |
| 3= | – | Morgan Stanley – Eric Fine&Team | 16.9% | 116 | 8 | 8 | 3 | 3= | 3= | 6 |
| 5 | – | UBS Warburg – Alex Garrard, Michael Gavin&Team | 16.5% | 115 | 10 | 1 | 4= | 7= | 8= | 3 |
| 6 | – | Merrill Lynch – Matt Vogel&Team | 14.9% | 113 | 4 | 6 | 8 | 11 | 1= | 4= |
| 7 | – | JP Morgan – Jonathan Bayliss&Team | 16.5% | 102 | 3 | 7 | 9 | 7= | 6 | 7 |
| 8 | – | Goldman Sachs – Alberto Ades | 11.4% | 93 | 5= | 4 | 7 | 1= | 7 | 8 |
| 9 | – | Lehman Bros – Kaushik Rudra, Robert Adie&Team | 9.8% | 81 | 9 | 9 | 1 | 10 | 5 | 9 |
| 10 | – | DrKW – Arnab Das&Team | 9.4% | 64 | 5= | 12 | 6 | 1= | 10 | 10= |
| 11 | – | Bear Stearns – Tim Ash, John Stuermer | 6.7% | 50 | 12 | 10 | 11 | 3= | 12 | 10= |
| 12 | – | Commerzbank – Juergen Odenius | 7.5% | 42 | 11 | 11 | 10 | 3= | 11 | 12 |
| Kasper Bartholdy | ||||||
Kasper Bartholdy, global head of CSFB’s emerging-market research team, sits in the lofty canteen of CSFB’s office in Canary Wharf. He drinks his coffee as if he needs the caffeine badly and mutters that the food here is so-so.
Bartholdy became global head of emerging-market research at CSFB in February 2002, promoted from head of EMEA research. He is the kind of man you trust to understand emerging markets. He gives the impression of having been through the fads and excesses the sector has thrown up and come out of it much wiser.
He describes how he joined the IMF fresh out of university, and was packed off to Hungary to oversee the country’s liberalization. He recalls the old days when youthful economists like himself would be expected to oversee advanced structural adjustment conditions. “I didn’t know anything about privatizations,” he confesses. “But I had to say things like ‘Right, I want to see 10 bankruptcies this year’, as if that was a good thing.” He specialized in Hungary, then, after five years at the IMF, he moved to the European Bank for Reconstruction&Development, where he oversaw its economic publications, especially those covering eastern Europe, which became well known and respected. Five years later, he moved again, to CSFB.
We make an effort to report what is behind statistics,” he says, “so that our clients can make up their own minds. For example, what helped drive the rally in Russian Eurobonds in the second half of last year. The macro situation was not so favourable, with the oil price going down but the rally continued. The reason was the market perception that president Putin was investing a lot in Russia’s international credibility, tolerating certain US behaviour, making sure the ministry of finance paid back its Paris Club debt in full, which it didn’t want to do, and instructing the central bank to pay back the IMF early. But the US is now making it very difficult for Russia, with its steel tariff and the possible attack on Iraq. If you think the warming-up of relations was part of the rally, then a cooling down of relations will probably have the opposite effect.”
Some of the biggest emerging-market issues last year – such as Argentina’s mega-swap – were lead managed by CSFB but Bartholdy says he has never felt any pressure to promote the firm’s deals. He says: “Before Russia, CSFB was more of a proprietary business, so the incentives for traders and researchers was the same. There could obviously be a conflict of incentives but we said very early on that there’s no point in doing this if we can’t be independent or we won’t be taken seriously.”
Competition in this category was tough in this poll. At just two points behind, Deutsche Bank came a very close second, and there was a gap of just nine points between Merrill Lynch, ranked sixth, and CSFB.
Jules Evans
