Mitigating Market Volatility: The Ingenuity of Allianz Investment Management’s ETFs

Allianz Investment Management’s exchange-traded funds (ETFs) are designed to provide investors with access to sophisticated strategies that have historically been the purview of high-frequency traders. In a candid discussion with Scott Martin, Managing Editor at the Wealth Advisor, Allianz Head ETF Strategist Johan Grahn sheds light on the firm’s strategic use of ETFs as a means to democratize his firm’s risk management expertise.

The Allianz ETFs are more than just investment vehicles; they are a culmination of Allianz’s vast experience in managing risk through options, boasting a formidable daily trading volume in the billions and annual figures in the trillions. The firm’s approach expands the reach of its sophisticated risk management strategies, making them accessible to a wider investor audience through the ETF format.

The innovative ETFs Allianz has introduced offer a unique proposition: the integration of built-in buffers that guard against market downturns, allowing investors to retain a higher base for potential growth. Grahn’s insights into the products’ structures reveal a meticulous approach to creating investment vehicles that address the challenges of market volatility.

Allianz’s ETFs are designed with a dual focus: to provide investors with opportunities for higher probable outcomes and to offer a safeguard during market downturns. Grahn underscores the inevitability of market volatility and emphasizes that the strategic use of ETFs can help minimize losses during market dips, thereby positioning investors for more substantial gains during market rebounds.

The data Grahn shares paints a clear picture: looking at market trends from 1950 onward, in nearly all of the down markets, losses were less than 20%. By shielding investors from the majority of these losses, Allianz’s ETFs ensure that one can start from a stronger position during the recovery phase, potentially leading to quicker and higher returns compared to an investment solely in the S&P 500.

Allianz’s ETFs specifically tailored to the S&P 500 offer two levels of downside protection: a 10% buffer and a 20% buffer. These protections are in place for a 12-month term, ensuring that investors have a clear understanding of the level of risk mitigation over a defined period. The NVBW, with a 20% buffer, notably has an upside cap set at approximately 13% after fees, as of the latest reset on November 1. This cap is a trade-off for downside protection, and investors need to consider their market outlook when choosing between the two products.

Grahn highlights that the choice between these products depends largely on an investor’s risk tolerance and market outlook. For those with a bullish outlook, the capped upside of these ETFs might be restrictive. However, for investors who prioritize capital preservation, especially after the recent volatile market conditions, these products can be particularly attractive.

Investors are advised to keep an eye on the upcoming ticker symbol DECT, which denotes the new funds with the 10% and 20% buffers. This offering is part of Allianz’s ongoing effort to provide a spectrum of risk-managed investment options catering to diverse investor profiles and goals.

With the financial market’s recent unpredictability, strategies that offer both security and growth potential are increasingly in demand. Allianz’s innovative ETFs address this need by blending the firm’s risk management prowess with the versatile and accessible structure of ETFs, equipping investors with novel means to combat market volatility and pursue their investment ambitions with heightened confidence.

Allianz’s ETFs reflect a broader industry trend toward product innovation in response to investor demand for more risk-sensitive investment options. As market conditions shift and investor needs change, the firm’s dedication to offering tailored solutions is clear. Allianz is poised to maintain its position as a key player in the ETF space, offering products that resonate with investors seeking both stability and growth.


More Articles