Johan Grahn, Head of ETF Market Strategist at Allianz Investment Management, LLC, joined Julie Cooling, Founder and CEO of RIA Channel, to discuss the use of buffered ETFs in client portfolios.
As investors approach retirement, thoughts turn towards risk management, which has driven demand for buffered ETFs. Since the June 2020 launch of buffered ETF products, interest from advisors and their clients has grown exponentially. Buffered ETFs allow investors to manage equity risk without reallocating equity assets to bonds or cash. While moving from equity to fixed income substantially reduces the long-term return potential of a portfolio, buffered strategies maintain a portion of the upside return of the equity market. Allianz manages the funds using options-based strategies, with an internal desk trading trillions of dollars of options each year.
In April 2024, Allianz started offering buffered ETFs with uncapped returns. For example, an ETF with a 15% downside buffer may offer uncapped returns after the S&P 500 index has risen more than 4%. This allows an investor to earn most of the returns the US equity market earned in years when the index rises over 20%. Typical buffered ETFs offer a downside buffer and capped upside returns on a stock market index, offering returns in the strongest market years that may be limited to 10%.
Advisors have access to Allianz’s team of buffered ETF specialists who can explain the products and how they can be used in client portfolios.
Resources:
AllianzIM U.S. Equity Buffer15 Uncapped Jul ETF (JULU)
Learn How Buffered Outcome ETFs Work
The Fund’s website, https://www.allianzim.com/etfs/, provides important Fund information (including outcome period start and end dates and the spread and buffer), as well as information relating to the potential outcomes of an investment in the Fund on a daily basis. If you are contemplating purchasing shares, please visit the website. Investors considering purchasing shares after the outcome period has begun or selling shares prior to the end of the outcome period should visit the website to fully understand potential investment outcomes.
Allianz Investment Management LLC (AllianzIM) is a registered investment adviser and wholly owned subsidiary of Allianz Life Insurance Company of North America.
AllianzIM and Allianz Life Insurance Company of North America are not affiliated with RIA Channel or Wealth Management Edge.
Distributed by Foreside Fund Services, LLC. Foreside Fund Services, LLC is not affiliated with Allianz Investment Management LLC or Allianz Life Insurance Company of North America.