RBS rolls out dynamic Nasdaq trend-following ETN

Dec 16th, 2011 | By | Category: Alternatives / Multi-Asset

RBS has announced the launch of the Nasdaq-100 Trendpilot ETN, the sixth exchange-traded product in its growing suite of Trendpilot Exchange Traded Notes (ETNs).

RBS rolls out dynamic Nasdaq trend-following ETN

RBS rolls out dynamic Nasdaq trend-following ETN

Listed on NYSE Arca and trading under the ticker code “TNDQ”, the RBS Nasdaq-100 Trendpilot ETN offers a low-maintenance way to follow a dynamic, trend-based trading strategy on the Nasdaq-100 Index.

The ETN is structured to provide exposure to either the technology-heavy Nasdaq-100 Index or the yield on a hypothetical notional investment in 3-month US Treasury bills, depending on the relative performance of the Nasdaq-100 Index.

When the Nasdaq-100 is at or above its 100-day simple moving average (positive trend), the ETN goes long the Index. Conversely, if the Nasdaq-100 closes below its 100-day simple moving average (negative trend) for a fifth consecutive session, the ETN automatically shifts exposure into short-term US Treasuries. When the Nasdaq-100 returns to a positive trend, the ETN switches back.

Building these rules into an ETN enables investors to synthetically shift into cash when the target asset class, in this case Nasdaq-100 equities, is deemed to be in a downward trend and move back into a long position when prices are trending upwards again – but without the accompanying upkeep or costs of implementing such a strategy independently.

Commenting on the launch, Michael Nelskyla, Head of Structured Retail Distribution, Americas, said: “The RBS Nasdaq-100 Trendpilot Exchange Traded Notes, like the other ETNs in our Trendpilot suite, are designed for investors who seek an objective and transparent trend-following strategy that aims to mitigate, to some extent, the volatility of investing in the Nasdaq-100 Total Return Index.”

The underlying index, the Nasdaq-100, is composed of 100 of the largest non-financial securities listed on the Nasdaq stock market by market capitalisation and has a significant technology bias. Indeed, technology companies make up two-thirds of the index and the top five largest weightings currently are all tech stocks – namely Apple, Microsoft, Oracle, Google and Intel.

“The Nasdaq-100 Total Return Index is an objective, transparent, rules-based index.  A majority of the companies in the index are large-cap companies and many of the companies have been growth companies with a legacy of leadership and innovation,” said John Jacobs, Executive Vice President, Nasdaq.

While this ETN provides investors with an innovative way to gain exposure to technology stocks with less volatility, potential investors should be conscious that the notes are senior unsecured debt obligations issued by RBS.

Investors also incur a fee, deducted at source, at an annualised rate of 1.00% if the ETN is tracking the Nasdaq-100 or at an annualised rate of 0.50% if the index is tracking the T-Bill Rate.

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