September began just how August ended, with just a single exchange-traded product coming to market — and again, this one’s a doozy.
Royal Bank of Scotland’s (NYSE:RBS) US Large Cap Alternator Index ETN (NYSE:ATLT) is an exchange-traded note that seeks exposure to the RBS US Large Cap Alternator Index — an index that, depending on its proprietary blend of herbs ‘n’ spices, will give investors exposure to one of three benchmarks: the S&P 500 Total Return Index, the S&P 500 Low Volatility Total Return Index or the S&P 500 Equal Weight Total Return Index.
Which index ATLT guns for is decided by a “relative strength score.” Every month the indices are each ranked by their average historical returns, then the Alternator Index issues a relative strength score for those indices for their prior one-month, three-month, six-month, nine-month and 12-month periods. The index with the highest score is the one the ATLT tracks.
RBS touts ATLT as a way to get constant large-cap equity exposure that’s re-tuned monthly to the current market cycle. For example, having exposure to the Low Volatility Total Return Index would be ideal during shakier times, but a switch to the more small-cap-exposed Equal Weight would be beneficial in the start of a bull charge.
The RBS US Large Cap Alternator Index ETN charges a hefty 1% in fees and is starting with about $4 million in assets.