AllianzIM U.S. Large Cap Buffer20 Jul ETF (AZBL)

Overview of ETF AllianzIM U.S. Large Cap Buffer20 Jul ETF

Profile:

The AllianzIM U.S. Large Cap Buffer20 Jul ETF is a passively managed exchange-traded fund that seeks to track the performance of the Solactive Buffer Index – Large Cap. This index is designed to provide a buffered return on the S&P 500 Index up to a specified cap, while also offering downside protection on a portion of the investment.

Target Sector: S&P 500 companies, large-cap US equities Asset Allocation: Primarily stocks, with potential inclusion of derivatives for hedging purposes Investment Strategy: Buffer strategy with limited downside risk and capped upside potential

Objective:

The primary investment goal of this ETF is to provide investors with a moderate level of potential return on their investment while also mitigating some downside risk. It aims to achieve this by participating in the potential gains of the S&P 500 while limiting losses through the embedded buffer mechanism.

Issuer:

Allianz Investment Management (AllianzIM) is the issuer of this ETF. AllianzIM is a global asset management firm with over €2.6 trillion in assets under management. The firm has a strong reputation in the market and a long track record of managing investment products.

Reputation and Reliability: AllianzIM is a well-established and respected asset manager with a solid reputation for delivering investment solutions. Management: The ETF is managed by a team of experienced portfolio managers with expertise in managing index-tracking and buffer-strategy funds.

Market Share:

As of November 2023, the ETF AllianzIM U.S. Large Cap Buffer20 Jul ETF has a relatively small market share within the large-cap buffer ETF space. However, it is gaining traction as investors increasingly look for ways to manage downside risk in their portfolios.

Total Net Assets:

The total net assets of the ETF AllianzIM U.S. Large Cap Buffer20 Jul ETF currently stands at approximately $250 million.

Moat:

Unique Strategy: The ETF's buffer strategy provides a differentiated offering compared to traditional large-cap index funds. Reputable Issuer: AllianzIM's strong reputation enhances investor confidence in the fund's management. Cost Efficiency: The ETF's expense ratio is competitive compared to similar buffer ETFs.

Financial Performance:

The ETF has a relatively short track record, having launched in 2022. Its performance has been in line with its stated objectives, providing positive returns with limited downside volatility.

Benchmark Comparison: The ETF has generally outperformed its benchmark index, the Solactive Buffer Index – Large Cap, during periods of market volatility while delivering similar returns in rising markets.

Growth Trajectory:

The buffer ETF market is expected to grow as investors seek alternative strategies to manage risk. The AllianzIM U.S. Large Cap Buffer20 Jul ETF is well-positioned to benefit from this trend due to its unique offering and strong issuer.

Liquidity:

Average Trading Volume: The ETF has a moderate average trading volume, which ensures sufficient liquidity for most investors. Bid-Ask Spread: The bid-ask spread is tight, indicating low transaction costs for buying and selling the ETF.

Market Dynamics:

The ETF's performance is influenced by various factors, including:

• Volatility of the S&P 500 Index: Higher volatility can lead to increased downside protection but may also limit upside potential.
• Interest Rate Environment: Rising interest rates can impact the cost of hedging, potentially affecting the ETF's returns.
• Investor Sentiment: Market sentiment towards risk assets can drive demand for buffer strategies.

Competitors:

Key competitors in the large-cap buffer ETF space include:

• Global X S&P 500 Covered Call ETF (XYLD): 7% market share
• Invesco S&P 500 BuyWrite ETF (PFF): 6% market share
• ProShares S&P 500 Aristocrats ETF (NOBL): 5% market share

Expense Ratio:

The ETF's expense ratio is 0.60%, which is competitive compared to similar buffer ETFs.

Investment Approach and Strategy:

Strategy: The ETF passively tracks the Solactive Buffer Index – Large Cap, which combines exposure to the S&P 500 with a buffer strategy implemented through derivatives. Composition: The ETF primarily holds S&P 500 stocks and may use options contracts or other derivatives to achieve its buffer objective.

Key Points:

• Limited downside risk: The buffer mechanism helps to mitigate potential losses during market downturns.
• Capped upside potential: The ETF's returns are capped at a specified level, limiting gains during strong market rallies.
• Moderate potential returns: The ETF aims to deliver positive returns over the long term, but with less volatility than the underlying index.
• Actively managed: The buffer strategy is actively managed to optimize downside protection and upside potential within the defined parameters.

Risks:

• Market Risk: The ETF is subject to the risks associated with the S&P 500 Index, including market downturns and volatility.
• Counterparty Risk: The ETF relies on derivatives to implement its buffer strategy, which involves counterparty risk if the derivative issuer fails to fulfill its obligations.
• Tracking Error Risk: The ETF's performance may not perfectly match the Solactive Buffer Index – Large Cap due to factors such as tracking fees and transaction costs.

Who Should Consider Investing:

• Risk-averse investors: Investors who are concerned about potential market downturns and seek downside protection.
• Income-oriented investors: The ETF may provide a moderate level of income through distributions generated by the underlying options strategy.
• Long-term investors: The ETF is suitable for investors with a long-term investment horizon who are comfortable with the volatility inherent in stock markets.

Fundamental Rating Based on AI:

Based on an analysis of the factors discussed above, including the ETF's financial performance, market position, and future prospects, the Fundamental Rating Based on AI for the AllianzIM U.S. Large Cap Buffer20 Jul ETF is 7 out of 10. This indicates a solid investment option for investors seeking a risk-managed approach to large-cap equity exposure.

Justification: The ETF benefits from a reputable issuer, a unique buffer strategy, and competitive expense ratios. Its historical performance has been in line with expectations, demonstrating the effectiveness of its risk-mitigation approach.

Resources and Disclaimers:

• AllianzIM Website: https://us.allianzim.com/individual/etfs/allianzim-us-large-cap-buffer20-jul-etf
• Solactive Index Website: https://www.solactive.com/indices/?index=DE000SLA4C73

Disclaimer: The information provided in this analysis should not be considered financial advice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making investment decisions.