Tokyo-based R-SQUARED has sold cash bonds and acquired put options and credit default swap (CDS) indices ahead of a U.S. sovereign-rating downgrade, San Francisco Chronicle reports, citing Bloomberg. The move was set to position the $220 million Japan-focused hedge fund for volatility in the post-downgrade markets. The fund, run by Singapore-based MAM, employs an arbitrage and relative-value strategy that bets on price differences between markets. It has returned 11% in 2011 through August 5.

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