Allianz Investment Management has launched a new S&P 500 ‘buffered outcome’ ETF with a shorter, six-month outcome period.
Johan Grahn, Vice President and Head of ETF Strategy at AllianzIM.
The AllianzIM US Large Cap 6 Month Buffer10 Apr/Oct ETF (SIXO US) has been listed on NYSE Arca with an expense ratio of 0.74%.
Buffered outcome ETFs, also known as defined outcome ETFs, target a specific return profile with an allowance for a certain level of risk at a particular point in time.
In the context of SIXO, it tracks the S&P 500 Price Return Index while protecting, or buffering, against the first 10% of potential losses over an outcome period of six months.
The fund is actively managed by Allianz in line with a systematic rules-based model which utilizes FLexible EXchange (FLEX) Options – customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation – to implement the strategy.
The downside protection comes at the expense of a cap on the ETF’s potential upside over the outcome period. The cap is set at the beginning of the outcome period and is dependent upon market conditions at that time.
At the end of each outcome period, the fund does not expire but, instead, rebalances and resets, providing investors with a new upside cap dependent on market conditions at that time.
SIXO has an initial cap of 6% (before fund expenses), and its six-month outcome period will reset on 1 April 2022. It joins Allianz’s existing suite of buffered outcome ETFs which are tailored for 10% or 20% buffers over one-year outcome periods.
Johan Grahn, Vice President and Head of ETF Strategy at AllianzIM, said: “The buffered outcome ETF market has grown dramatically, increasing from zero to almost $8 billion of assets in just three years. We’re excited to expand our line-up of buffered outcome ETFs to meet the evolving risk management needs of investors. SIXO is the latest addition to our defined outcome ETF line-up, providing investors with an opportunity to participate in the equity market up to a cap in an ETF that provides a 10% buffer against losses and the potential for gains to be realized every six months.”
Brian Muench, President of AllianzIM, added: “We’re focused on expanding our defined outcome product suite to help investment professionals and their clients navigate today’s historically low interest-rate environment and market uncertainty. The launch of the new AllianzIM buffered outcome ETF with a six-month outcome period is the latest evolution in this process. We look forward to continuing to work closely with investment professionals to remain on the cutting edge of risk mitigation.”