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Many macro-focused hedge funds are profiting as markets decline in Europe and the U.S. credit rating downgrade sends shocks through equity markets.Here’s how one hedge fund is doing it. Warning: it’s an obvious trade that is essentially just shorting equities in fancier language.
According to Bloomberg, Tan Maruyama, the manager of the Singapore-based R-SQUARED, a Japan-focused hedge fund portfolio run by MAM Pte, said he “bought put options and credit default swap indexes and sold cash bonds in anticipation of a U.S. sovereign-rating downgrade.”
The S&P warned that it would downgrade the U.S. credit rating on Friday afternoon before it did so at around 8:30 PM.
As equity markets declined, Maruyama’s strategy paid off, though he didn’t disclose how much to Bloomberg.
In an interview with Bloomberg, the former UBS head of credit sales and trading and Goldman managing director and prop trader said: “We’re expecting volatility to remain high going forward so we will be looking for investment opportunities in market dislocation.”
The fund, launched April 1 2010, is up 11% through August 5th.