Johan Grahn on Buffered ETFs

When the Going Gets Tough, the Tough Get Buffered

Explaining how buffered ETFs work, Grahn outlined that, “In return for a cap on the upside, you get a buffer on the downside. In the case of our ETFs that buffer is either 10% or 20%. It lasts over a twelve-month outcome period.”

Grahn noted that the versatility of the product is what draws attention to it from advisors. With a 20% buffer, if the market was down by 20% or less, investors could end up flat with returns. On the flip side, if the cap is at 13%, then any market rallies over that number won’t be collected.

All Things Seem Possible in May

Allianz just launched its May products – the AllianzIM U.S. Large Cap Buffer10 May ETF (MAYT) and the AllianzIM U.S. Large Cap Buffer20 May ETF (MAYW). The new ETFs have 12-month outcome periods with a 10% and 20% buffer respectively.

MAYT and MAYW give advisors a chance to capture some growth in the events the markets do well while mitigating any downturn. “You can use this to de-risk equity portfolios,” Grahn proffered, sharing use cases for buffered products. He also added that, given the cash sitting on the sideline, “It’s a way to get clients to come back to the markets.” Defined outcome products give investors a safer, more conservative approach that could be useful for clients who have been rattled by 2022’s market or are concerned about a potential recession.

Grahn also noted that Allianz offers its twelve-month products every month, as even has six-month products available as some investors tend to prefer the shorter timelines. “It’s a relatively new space and a lot of advisors are still learning about this,” Grahn said.