The Royal Bank of Scotland today (2/22/11) rolled out the third product in its U.S. lineup with the introduction of the RBS Gold Trendpilot ETN (TBAR). Performance for the new exchange-traded note (ETN) is linked to an index that tracks gold bullion when it is in a long-term uptrend and tracks T-bills when gold is trending down.
To date, all of the RBS Trendpilot ETNs have applied the same long-term market timing approach to different underlying asset classes. RBS US Large Cap Trendpilot ETN (TRND) times the S&P 500 while RBS US Mid Cap Trendpilot ETN (TRNM) applies it to the S&P MidCap 400 Index.
The timing methodology employed by TBAR is to track gold bullion, as defined by the London PM Fixing Price in USD, when it has been above its 200-day moving average for five consecutive days and to track the return of 3-month Treasury Bills when gold has been below its 200-day moving average for five consecutive days. A more complete description of the methodology is located in the TBAR fact Sheet (pdf).
TBAR, like TRND and TRNM, has a variable investor fee (expense ratio) of 1.00% while it is tracking gold and 0.50% while it is tracking T-Bills. When held in a taxable account, TBAR should provide significant after-tax performance improvements compared to a do-it-yourself approach of the same timing mechanism applied to a physical gold ETF such as SPDR Gold Trust (GLD). Both the tax-deferment of the ETN structure plus a tax rate reduction from the “collectables” tax rate of GLD should help.
The downside is that TBAR is an exchange-traded note (ETN), which means it is an unsecured debt obligation of RBS. Additional information is located in the press release (pdf), summary page, and the prospectus (pdf). TBAR had zero volume in its trading debut today, so you still have a chance to be the first buyer.
Disclosure covering writer, editor, and publisher: Long GLD. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.