Allianz head of ETF strategy Johan Grahn told VettaFi editor-in-chief Lara Crigger at Exchange: An ETF Experience 2022 that inflation is “the number one driver of concern right now.”
With “the purchasing power eroding,” investors “are starting to change their behaviors,” according to Grahn. Making matters more challenging is the Federal Reserve aggressively raising rates, “which makes it very hard to think about where you want to place your money.”
“So, you have a trifecta of issues where you can’t really sit on cash because you will lose purchasing power,” Grahn said. “In the bond market, you see a little bit of trouble because the Fed has really laid out what they’re trying to do. And then on the equity side, you have still rich equity valuations.”
So, where should an investor put their money? Well, according to Grahn, it comes down to how much time the investor has.
“If you’re young, you have all the time in the world to invest,” he said, adding that younger investors can buy meme stocks or really whatever equities they want. But for those investors in or nearing retirement, “it becomes really, really difficult.”
For many years, the playbook to handle this was to “move away from equity when you’re de-risking [and] put the money into fixed income.” However, Grahn noted that “you can’t really do that anymore because the rates are so suppressed.”
Plus, older investors don’t want to be in cash because they don’t want to lose their buying power. So, “that leaves equity.”
“But if you don’t want to invest in equity because you can’t take the risk, then you have to get access to that equity in a different way,” he said.
Fortunately, there are ways to “get some of the upside” in equities while also receiving some risk protection on the downside.
While he said that it’s difficult to choose a favorite ETF, Grahn did point out that Allianz offers a suite of buffered outcome ETFs designed to expand the risk management solutions available to investors.
The lowest cost buffered outcome ETFs on the market seek to match the returns of the S&P 500 Price Return Index up to a stated cap while providing a level of risk mitigation through a buffer against the first 10% and 20% of S&P 500 Price Return Index losses.
The suite includes:
- The AllianzIM U.S. Large Cap Buffer10 Jan ETF (AZAJ)
- The AllianzIM U.S. Large Cap Buffer20 Jan ETF (AZBJ)
- The AllianzIM U.S. Large Cap Buffer10 Apr ETF (AZAA)
- The AllianzIM U.S. Large Cap Buffer20 Apr ETF (AZBA)
- The AllianzIM U.S. Large Cap Buffer10 Jul ETF (AZAL)
- The AllianzIM U.S. Large Cap Buffer20 Jul ETF (AZBL)
- The AllianzIM U.S. Large Cap Buffer10 Oct ETF (AZAO)
- The AllianzIM U.S. Large Cap Buffer20 Oct ETF (AZBO)
The ETFs follow a 12-month outcome period. Each outcome period reflects a new stated cap commensurate with prevailing market conditions, allowing investors to remain invested with a level of risk mitigation.
“It’s a way to combat the whole issue of cash and bonds right now,” Grahn said.
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