Allianz targets Europe with US-linked, options-based strategy as ETF alternative

Allianz Global Investors has rolled out its Structured Alpha US Equity 250 fund to the UK market. The fund will be available for investors in the UK and continental Europe provides exposure to the US equity market via the S&P 500 Index, but also targets an annual excess return of 2.5%.

The fund combines a passive investment in the S&P 500 index with an actively-managed options overlay. The US benchmark is the most featured underlying in the US structured products market, appearing in over 1.700 products with a sales volume of more than US$10bn, while in Europe the US top equity index was deployed marginally, in just over 50 products worth €253m ($307m), according to SRP data.

The fund offers broad exposure to the US equity market, combined with the opportunity to earn additional returns that are uncorrelated with traditional market returns, according to Adam Gent, head of retail / wholesale for Northern Europe at Allianz. 'Since the strategy was launched in the US, it has outperformed its benchmark in all rolling five-year periods," said Gent. "This makes the fund, which can be traded on every exchange trading day, an attractive alternative to exchange traded funds. This applies particularly to major investors, such as funds-of-funds managers or asset managers who need exposure to the US equity market. The proportion of US equities in a diversified portfolio is too large for investors to miss out on outperformance in this area.'

The fund's options overlay is based on buying and selling both call and put options, enabling the options portfolio to generate additional returns while also hedging against extreme events, according to Gent.

This is the first open-ended structured fund to be offered by Allianz to UK investors, according to SRP data. The life insurance company is, however, an active provider of structured products across a number of countries and has over 90 live structures, including 43 products in Taiwan, 16 in Japan, 12 in Italy, and nine in the US market, among others.

The most featured underlying among the company's products is the Constant Maturity Swap Rate (26 products), followed by Libor (18), managed funds (17 products), the Eurostoxx 50 and S&P 500 (nine products apiece), the Nasdaq 100 (seven), and the Hang Seng Index (six), according to SRP data.

The strategy underlying the fund has been managed in the US for the past 12 years. The team, led by Greg Tournant, chief investment officer, US structured products at Allianz, manages client money totalling around $10 billion.

The US$2.6bn paid out in 2016 gives a good measure of our strength, Allianz

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