Morgan Stanley is advising new and seasoned investors to consider taking advantage of the diverse collateral available in the CDO market, particularly in the 2000 and 2001 vintages, which have seen better performance than earlier deals, according to the firm's current CDO Perspectives.

The strategy is to avoid concentrated exposure to any one underlying market, such as high-yield bonds, explains Sivan Mahadevan, who took over Morgan Stanley's CDO research effort last month and is supported by two research analysts, David Schwartz and Kenny King.

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