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AllianzIM U.S. Large Cap Buffer20 May ETF (MAYW)

The AllianzIM U.S. Large Cap Buffer20 May ETF (MAYW) offers US large-cap equity exposure wrapped in a 20% annual downside buffer — one of the most generous protection levels in the structured-outcome category — with capped upside that resets each May. It appeals to investors who prioritize capital preservation above most other goals.

The structure: deep protection, constrained upside

MAYW is built on a simple trade: 20% of annual losses are cushioned, but upside is capped. The 20% buffer means that in a year when US large-cap stocks fall 25%, MAYW investors lose 5%. In a year when large caps fall 8%, MAYW investors lose 0%. In a year when large caps rise 15%, MAYW investors might capture only 8% to 10%, depending on the reset’s terms.

The 20% buffer is deeper than most competitors. That additional cushioning costs more — it requires more expensive downside hedging — and that cost is reflected in both the fund’s expense ratio and the capped upside level. A fund offering 20% protection cannot also offer 15% upside; the math of option pricing dictates a trade.

Holdings and derivative mechanics

MAYW holds a representative sample of US large-cap stocks — typically the 150 to 250 largest US companies by market cap — alongside a derivatives overlay that implements the buffer and cap. The derivatives are almost certainly index options (puts to protect downside, calls sold to fund the puts) structured as a collar or spread.

Because the fund does not hold all large-cap stocks, there is a small tracking error even without considering the buffer and cap. This tracking error is usually under 0.5% per year but can be material in years when the largest 100 stocks meaningfully diverge from the broader large-cap market.

The daily rebalancing and management of the derivative position is what enables MAYW to be a true exchange-traded fund rather than a once-a-year structured note. Managers continuously adjust the hedge as prices move, essentially “rolling” the one-year protection contract even within the year to maintain the buffer’s integrity.

The May reset and its implications

Each May, the fund’s protection level is recalibrated. The 20% downside buffer is reaffirmed, but the upside cap is recalculated based on current market conditions. In May 2024, with market volatility at one level, the cap might be set at 9%. In May 2025, with volatility higher or lower, the cap might be 8% or 10%.

This reset has two consequences. First, it locks in the prior 12 months’ results and starts fresh. An investor who captures a 9% return (at the cap) by late April and then sees the market rise another 20% in May through April 2025 will have captured the 9% and started fresh with a new cap (perhaps different from the old 9%). Second, it means long-term holders experience a series of one-year buffers and caps, not a single permanent structure.

Expense ratio and total cost

MAYW’s annual expense ratio is likely in the 0.40% to 0.65% range, higher than a plain large-cap index fund (typically 0.03% to 0.10%) because of the derivatives management and the ongoing hedging overhead. This fee is deducted daily from the fund’s net asset value and flows to AllianzIM.

The true economic cost to an investor is not just the fund fee but the combination of the fee plus the opportunity cost of the capped upside. A year with a 12% large-cap return and an 8% cap costs the investor 4 percentage points of upside, plus the fee (say, 0.50%), for a total drag of 4.5%. If the market falls 22% and the buffer absorbs 20 percentage points, the investor loses 2% plus the fee (0.50%), a total loss of 2.5% instead of 22%. Over time, the calculation must span multiple years to determine whether the buffer’s protection in down years justifies the cap and fee in up years.

Comparison to lower-buffer peers

A fund like MAYT (offering only a 10% buffer) will have a lower expense ratio and a higher upside cap, perhaps 11% to 13%. The choice between MAYW and a 10%-buffer competitor depends on the investor’s conviction about future downside risk. If the investor genuinely fears a 20%+ annual decline and values the security of the deeper buffer, MAYW’s higher fee is justified. If the investor thinks a 10% buffer is sufficient and wants to preserve more upside upside, a lower-buffer fund is better.

Over full market cycles, funds with deeper buffers tend to underperform in bull markets (because the cap bites) but outperform when the market experiences rare, severe declines. The choice is about comfort and time horizon, not about a “correct” answer.

Risks and limitations

The 20% buffer applies only within each 12-month period. An investor who holds MAYW through a 25% decline in May–June, followed by a recovery, and then a −15% decline in January–March of the following year experiences the full 25% loss in the first year (capped at −5% thanks to the 20% buffer) and a −15% loss in the second year (capped at 0% thanks to the fresh 20% buffer). The buffer does not carry over or accumulate.

The upside cap is equally binding. An investor who holds MAYW in a year with a 30% large-cap return and a 9% cap loses 21% of potential upside to the cap, plus another 0.50% to the fee. This is the price of protection; it is not negotiable within the fund structure.

MAYW is also not suitable for investors with erratic portfolio behavior. Each time an investor buys or sells, they reset their relationship with the current buffer and cap. Frequent traders will sometimes realize caps at unfortunate times.

Investor profile

MAYW is well-suited to:

  • Near-retirees or retirees who need to draw income and cannot afford a 25% portfolio decline in a down year.
  • Conservative institutions with mandates to minimize volatility and avoid sharp single-year losses.
  • Investors who have suffered severe losses in past bear markets and are genuinely changed by the experience; the 20% buffer provides a behavioral anchor.
  • Portfolios where MAYW is the equity component and bonds provide additional downside protection.

MAYW is poorly suited to:

  • Young accumulating investors who benefit from volatility and should maximize their equity exposure without hedges.
  • Investors indifferent to volatility and confident in their ability to hold through severe declines.
  • Cost-conscious investors for whom an annual drag of 0.50%+ is material.

How to research MAYW

Review AllianzIM’s prospectus and fact sheet. Confirm the 20% buffer level, the current expense ratio, and the fund’s underlying large-cap universe (does it follow the Russell 1000? S&P 500?).

Examine the fund’s performance record over the past three to five May reset cycles. Focus on down years: did a −20% large-cap return translate to a −0% MAYW return? Did a −25% decline result in a −5% loss? These metrics test whether the buffer is working as advertised.

Also scrutinize up years. A year with a 12% large-cap gain should show MAYW capturing something close to the capped amount (typically 8% to 10%). If MAYW delivered only 7% in a year when large caps rose 12%, that shortfall suggests tracking error or inefficiency in the derivatives management.

Finally, calculate the cumulative return over a full market cycle (ideally 5–10 years, including at least one sharp downturn) and compare it to a plain large-cap index fund. The buffered fund’s higher fees should be offset by the protection in down years. If they are not, the fund is not delivering value.