“To answer the request of many of our European clients, we decided to bring to the market a currency hedged version of our existing CTA ETF”

Andrea Sozzi Sabatini, Head of Equities and Structured Retail Sales, EMEA & LatAm, and David Moroney, Global Head of Retail Structuring and Structured Funds.

RBS Global Banking & Markets (“GBM”) has launched a euro hedged share class of the world’s first Exchange Traded Fund (“ETF”) that solely tracks the performance of CTA managers.1 Called the “RBS Market Access CTA Index ETF – EUR Hedged”, this new share class is set to trade on the Deutsche Börse in Frankfurt, Germany. It has a denomination of EUR1,000 per share.

This follows the launch on 12 September 2011 of the RBS Market Access CTA Index ETF – the first share class of which was denominated in US dollars.

“To answer the request of many of our European clients, we decided to bring to the market a currency hedged version of our existing CTA ETF,” says Andrea Sozzi Sabatini, Head of Equities and Structured Retail Sales, EMEA & LatAm, and David Moroney, Global Head of Retail Structuring and Structured Funds.

The new RBS Market Access CTA Index ETF – EUR Hedged does the following:

-  tracks the performance of the RBS CTA Index, which provides exposure to a well-diversified pool of CTA managers, including several of the world’s biggest CTA managers, together with market specialists and smaller managers; and

-  delivers the index performance in euros, with the USD/EUR currency exposure hedged through rolling one-month foreign-exchange forward contracts. The currency hedge is adjusted at the end of each month and any time creations/redemptions are performed.

The RBS CTA Index allocates an equal weighting to the RBS Discretionary CTA Index (consisting of CTAs who specifically select their investments by using a “discretionary” trading strategy) and the RBS Systematic CTA Index (consisting of CTAs using mathematical models to execute a “systematic” trading strategy).

The RBS Discretionary CTA Index and the RBS Systematic CTA Index (the “Constituent Indices”) allocate a weighting to their constituent CTAs based solely on their relative performance, volatility and correlations.  In this way, the Constituent Indices’ methodologies are fully rules-based, and so-called “blue chip” bias is avoided.

Each month, the RBS CTA Index is rebalanced to a 50:50 weighting between the Constituent Indices.  The Constituent Indices themselves are also reweighted monthly, taking into account the most recent performance of the underlying CTAs, and are rebalanced semi-annually, which may also include the addition or removal of one or more underlying CTAs.

The RBS CTA Index includes managers who invest across markets, models, time frames and traded instruments, with the aim of providing diversified index returns. As a result, the RBS Market Access CTA Index ETF provides investors with the potential to diversify their investment risk through a single UCITS-compliant investment when choosing CTAs as an asset class.

The potential portfolio benefits of investing in CTAs may be significant: Since 2001, the one-year rolling correlation of CTAs to global equities (MSCI World Index) showed a consistent tendency to rise in rising equity markets and drop in falling markets.2

The low historical correlation between global equities and CTA returns2, combined with good historical CTA returns, has been one of the reasons for substantial capital inflows into CTAs in recent years.

On an ongoing basis, RBS GBM carries out due diligence on the underlying CTA managers as a means of monitoring risk on behalf of the investor.  The fact that the RBS Market Access CTA Index ETF – EUR Hedged is UCITS IV-compliant and is set to trade on the Deutsche Börse also means this latest product from RBS GBM is transparent and regulated.

 

 

For further information contact:

Adam Durchslag
Media Relations Manager
Telephone: +44 20 3361 9613
Email: adam.durchslag@rbs.com

Notes to Editors:

1 The term “CTA” or “Commodity Trading Adviser” is widely used to describe asset managers who can go long and short the full range of futures and options in commodity, currency, fixed income and equity markets.  The RBS Market Access CTA Index ETF – EUR Hedged has a total expense ratio of 0.75% per annum, making it very competitively priced compared to other products offered by multi-manager UCITS funds and by funds of hedge funds.

2 Source: RBS, Bloomberg, 30 November 2011 

RBS Global Banking & Markets (GBM)

RBS Global Banking & Markets (GBM) division is a leading banking partner to major corporations, financial institutions and public sector clients around the world. GBM provides an extensive range of debt, equity and commodity markets, treasury and investor products, and financial advisory services. The division focuses on long-term customer relationships and excellence in global product execution. GBM is active in the Americas, EMEA and Asia Pacific.

The Royal Bank of Scotland Group (RBS)

The RBS group is a large international banking and financial services company. Headquartered in Edinburgh, the Group operates in the United Kingdom, Europe, the Americas and Asia, serving more than 40 million customers. The Group provides a wide range of products and services to personal, commercial and large corporate and institutional customers through its two principal subsidiaries, The Royal Bank of Scotland and NatWest, as well as through a number of other well known brands including Citizens, Ulster Bank, Coutts, Direct Line and Churchill.

Disclaimer

The RBS Market Access CTA Index ETF – EUR Hedged ("the ETF") is a sub-fund of RBS Market Access, an investment company with variable capital (SICAV) regulated by the Commission de Surveillance du Secteur Financier in Luxembourg.  The ETF is directed at institutional investors only. The value of investments can go down as well as up and investors may not get back the full amount invested.  Past or simulated performance is not a guide to future performance. The ETF is in no way sponsored, endorsed, sold or promoted by any of the commodity trading advisers referenced herein. This article has been prepared for information purposes only. Views expressed herein are not intended to be and should not be viewed as advice or as a recommendation. Prospective investors should read the Prospectus of RBS Market Access and the simplified prospectus of the ETF carefully before investing and inform themselves about the features of the ETF, the risks involved, potential legal and tax consequences, offering restrictions or exchange control requirements that may be encountered under their local country’s laws and regulations.  Potential investors must determine the suitability of an investment in the ETF in light of their own circumstances.   The Royal Bank of Scotland plc. Registered in Scotland No. 90312. Registered Office: 36 St Andrew Square, Edinburgh EH2 2YB. The Royal Bank of Scotland plc is authorised and regulated by the Financial Services Authority.