The strategy is inconclusive

The Royal Bank of Scotland has added the first exchange traded note to its "Trendpilot" ETN family that ventures abroad.
RBS China Trendpilot ETN (TCHI) — like RBS' six other ETNs — tracks its underlying index when it's trading above the 100-day simple moving average. If the index falls below that key line for three days straight, it switches to tracking three-month U.S. Treasury bills. TCHI will switch back to tracking the BNY Mellon China Select ADR Total Return Index when it trades at or above the 100-day for three consecutive days.
The note aims to capture most of the upside when the index is rising and avoid most of the downside when it's falling. RBS touts that its ETNs let you apply an actively managed strategy without
incurring short-term capital gains. TCHI charges an annualized expense ratio of 1.1% when it's tracking the index and 0.5% when it tracks T-bills.
ETNs are designed to offer exposure to an index without any tracking error. But investors are subjected to risk of default by the issuer.
Whether investors benefit from the strategy is inconclusive. RBS U.S. Large Cap Trendpilot ETN (TRND), tracking the S&P 500, returned 10.56% year to date, in line with the S&P 500's 10.82% gain. But TRND lost 0.6% in the past 12 months while the S&P gained 8.45%. In 2011, TRND lost 6.8% while the S&P rose 2.11%. It started trading in December 2010 and has gathered the most assets, $69 million, among its group.
RBS Gold Trendpilot ETN (TBAR), tracking the yellow metal, rose 2.88% year to date and 6.78% in the past 12 months. Meanwhile, SPDR Gold Trust (GLD), the flagship gold ETF, is up 4.82% year to date and 9.17% the past year. TBAR gained 9% in 2011 vs. 10% for GLD.
RBS also offers Trendpilot ETNs tracking large drug companies, the Nasdaq 100, oil and mid cap stocks.
Top 10 Holdings RBS China Trendpilot ETN And Portfolio Weights:
1. China Mobile Ltd (CHL) 11.14%
2. PetroChina Co (PTR) 7.68%
3. CNOOC Ltd (CEO) 7.59%
4. Baidu (BIDU) 6.63%
5. China Life Insurance Company Ltd (LFC) 6.11%
6. China Petroleum & Chemical Corp (CNOOC) 5.89%
7. China Unicom (Hong Kong) Ltd (CHU) 3.90%
8. China Telecom Corp (CHA) 3.75%
9. NetEase (NTES) 3.09%
10. Yanzhou Coal Mining Co (YZC) 2.91%