Japan Hedge Fund Buys Options, CDS Indices In Advanced Of U.S. Rating Cut

Aug 8 2011 | 12:32pm ET

R-SQUARED Asset Management may focus on Japan, but the US$220 million hedge fund still girded itself for Standard & Poor's downgrade of U.S. sovereign debt.

Tokyo-based R-SQUARED sold cash bonds and bought up put options and credit default swap indices prior to the announcement of the downgrade on Friday night, Bloomberg News reports. The moves were designed to position the fund for volatility in the post-downgrade markets.

"We're expecting volatility to remain high going forward, so we will be looking for investment opportunities in market dislocation," fund manager Tan Maruyama said.

R-SQUARED has returned 11% this year.

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