RBS’ New ETN Can Switch Tracks

by Kyle Woodley | September 10, 2012 12:32 pm

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[1]) US Large Cap Alternator Index ETN (NYSE:ATLT[2]) 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.

The previous week saw an S&P 500 ETF with volatility hedging[3] come to market. In all, 141 new funds have come out so far in 2012, according to XTF.com[4].

Kyle Woodley[5] is the assistant editor of InvestorPlace.com[6]. As of this writing, he did not hold a position in any of the aforementioned securities. Follow him on Twitter at @KyleWoodley[7].

Endnotes:
  1. RBS: http://studio-5.financialcontent.com/investplace/quote?Symbol=RBS
  2. ATLT: http://studio-5.financialcontent.com/investplace/quote?Symbol=ATLT
  3. S&P 500 ETF with volatility hedging: http://investorplace.com/2012/09/new-etf-adds-insurance-to-sp-500/
  4. XTF.com: http://www.xtf.com/
  5. Kyle Woodley: http://investorplace.com/author/kyle-woodley/
  6. InvestorPlace.com: http://investorplace.com/
  7. @KyleWoodley: https://twitter.com/#!/kylewoodley

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