Timing Oil Futures With TWTI

September 21, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs), ETNs

The Royal Bank of Scotland (“RBS”) introduced the fourth member of its Trendpilot line of exchange-traded notes last week (9/15/11).  The RBS Oil Trendpilot ETN (TWTI) is linked to the performance of an index utilizing a systematic trend-following strategy to track oil futures when they are above their 100-day moving average and to provide Treasury Bill returns when oil futures are below their 100-day moving average.

The “Benchmark Index” hypothetically constructs an investment in a series of twelve monthly light sweet crude oil (WTI) futures contracts.  A “positive trend” is established when the closing level of the Benchmark Index is at or above its historical 100-day simple moving average for five consecutive days.  A “negative trend” is when it is below its 100-day average for five days.

When oil futures contracts are in a positive trend, TWTI will track their performance minus a 1.10% investor fee.  When oil futures contracts are in a negative trend, TWTI will track the performance of 3-month U.S. Treasury bills minus an investor fee of 0.50%.

While following the same concept as the existing RBS Trendpilot ETNs, TWTI is different in that it uses a 100-day moving average and charges a 1.10% investor fee while in a positive trend.  The three prior products all use 200-day averages and have a 1.00% investor fee.

The three previously released RBS exchange-traded notes (“ETNs”) are:

Additional information on the new TWTI is located in the summary, fact sheet (pdf), and prospectus (pdf).

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  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.

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