For Kyo Yamamoto, leaving investment choices to a computer rather than making his own calls has been the best strategy as unorthodox global monetary policies only worsen market volatility. Right now, the machine says sell Japan government bonds.
GCI Systematic Macro Fund, a Japanese hedge fund that earned 19 percent in the first two months of the year after buying the nation's sovereign notes, has been switching toward selling, said Yamamoto, the head of the quantitative research and strategy group at Tokyo-based GCI Asset Management. The fund's return since inception in February 2014 is 173 percent, he said. That compares with a 16 percent gain by the Hedge Fund Research's Systematic Diversified Index of similar funds in the same period.
The fund, which employs a computerized model to invest in global exchange-traded securities, boosted Japanese government bond holdings into the start of 2016, while selling the Canadian dollar as a hedge, Yamamoto said. Asset managers are having to innovate to steer through choppy markets after the Bank of Japan's adoption of negative rates sent a measure of JGB volatility to the highest since 1999, while global central banks ramp up monetary easing to avoid a collapse in growth.