The trade-off most investors face during volatile markets is unattractive in both directions.
Moving to cash may reduce short-term anxiety, but it also risks missing the recovery that often follows market declines. Staying fully invested, on the other hand, preserves participation in the market’s upside, but it also means experiencing the full drawdown when markets move lower.
This challenge isn’t just theoretical. It shows up consistently in investor behavior – and often with a measurable cost.
The Cost of Stepping Out of the Market
Morningstar’s 2025 Mind the Gap study, which measures the difference between fund returns and the returns investors actually earn, found that over the 10 years ending December 31, 2024, the average dollar invested in U.S. mutual funds and ETFs earned approximately 1.2 percentage points less per year than the funds themselves returned.¹
The report identified a key reason: investor behavior. As Morningstar noted, “The more volatile a fund’s returns, even when controlling for differences in types of funds, the less of that fund’s total returns investors capture.”
The pattern appears year after year, with 2024 serving as a particularly striking example.
According to DALBAR’s Quantitative Analysis of Investor Behavior, the average equity investor earned about 16.54% in 2024 compared to the S&P 500’s 25.02%, which is a gap of about 848 basis points.²
Why the disconnect?
In each quarter of 2024, investors pulled money from equity funds, with some of the largest withdrawals occurring just before significant market advances. This means, investors who moved to cash to avoid volatility were the same investors who missed the rebound that followed.
What is a Defined Outcome?
Defined outcome ETFs are built to establish clearer boundaries around risk and reward over a specified outcome period. Each fund tracks a reference asset, such as the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500®, or the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100®, and applies two structural features to the exposure over a defined outcome period.
The first is a downside buffer, which is the amount the market can decline before the fund begins to experience losses. The second is an upside cap, which limits how much of the market’s gains the fund can capture during the outcome period.
Within those two boundaries, the fund seeks to deliver 1:1 exposure to the reference asset, before fees or expenses. For example, if the reference asset rises 6% during the outcome period and the cap is set at 12%, the fund participates fully in the 6%. If the reference asset falls 8% and the buffer is 10%, the fund’s investors experience no loss on that drawdown.
When the reference asset’s performance goes beyond the stated boundaries, the outcomes differ. For example, if the reference asset rises 15% during the outcome period, the fund’s return is limited to the 12% cap. If the reference asset falls 14% during the outcome period, the buffer absorbs the first 10% of loss, but the remaining 4% of the decline is passed on to the investor.
Why Investors Are Paying Attention
While the behavioral data highlights the challenge, the growth of the defined outcome ETF category suggests many advisors are looking for ways to address it.
According to research from Cerulli Associates, the U.S. Defined Outcome ETF category is projected to reach approximately $334 billion in assets under management by 2030. This is a roughly 29% to 35% annualized growth rate compared with approximately 15% for the broader ETF industry over the same window.3
BlackRock, in a separate projection, estimates the category could reach $650 billion by 2030.4 What’s driving these projections? According to the Cerulli report, it’s advisor adoption.
“Advisors consistently highlight the behavioral benefits of defined outcome ETFs in helping clients remain invested during periods of market volatility,” according to the report.⁴
This aligns with the challenge Morningstar identified. If volatility is one of the primary reasons investors underperform the funds they own, then a structure built to make market swings easier to navigate may help investors stay invested through periods of uncertainty.
Buffered ETF Choices from AllianzIM
Part of the defined outcome category aimed at helping investors manage volatility, AllianzIM Buffered ETFs offer four choices of protection levels (5%, 10%, 15%, and 20%), with upside exposure to a cap, and multiple outcome period lengths – allowing investors to choose an approach that aligns with their goals and risk tolerance.
Each fund seeks exposure to one of four major equity benchmarks: the S&P 500 via the SPDR S&P 500 ETF Trust (SPY), the Nasdaq-100 via the Invesco QQQ Trust (QQQ), the Russell 2000 via the iShares Russell 2000 ETF (IWM), or the MSCI EAFE via the iShares MSCI EAFE ETF (EFA).
- 12-month series: ETFs seeking a 10% or 20% downside buffer with annual resets
- 6-month series: ETFs seeking a 10% buffer with semi-annual resets
- Quarterly series: ETFs seeking a 5% or 15% buffer across four equity index exposures (the S&P 500, Nasdaq-100, Russell 2000, and MSCI EAFE) with 3-month resets
For investors who prefer more frequent resets, funds that track different indexes within the quarterly series include: the AllianzIM U.S. Equity Buffer15 ETF (QBSF), which seeks a 15% buffer against SPY; the AllianzIM Growth-100 Buffer5 ETF (QBQV), which seeks a 5% buffer against QQQ; and the AllianzIM U.S. Small Cap Buffer5 ETF (QBKV), which seeks a 5% buffer against IWM. Together, these funds provide quarterly resetting exposure tied to U.S. large-cap, growth, and small-cap market segments.
For more information on AllianzIM Buffered ETFs, visit AllianzIMetfs.com.
¹ Source: Morningstar Inc., “The More Investors Traded, the Less Their Average Dollar Made,” August 13, 2025.
² Source: DALBAR, Quantitative Analysis of Investor Behavior 2025, as of March 31, 2025.
3 Source: Cerulli Associates, “Defined Outcome ETF Industry Could Quadruple in Assets by 2030,” November 2025.
4 Source: BlackRock, “Outcome ETFs: A Powerful Tool for a Changing World,” March 27, 2025.
Disclosures
This article is sponsored content created in partnership with AllianzIM. It is intended for informational and educational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any securities. Investors should consider their own financial situation, risk tolerance, and investment objectives before making any investment decisions.
The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than their original cost, and current performance may be lower or higher than the performance quoted. Performance current to the most recent month-end can be obtained by calling 877.429.3837 or visiting allianzIMetfs.com. Short-term performance, in particular, is not a good indication of the fund’s future performance, and an investment should not be made based solely on returns.
Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or a summary prospectus with this and other information about the fund, please call 877.429.3837 or visit www.allianzIMetfs.com. Read the prospectus or summary prospectus carefully before investing.
There is no guarantee the funds will achieve their investment objectives. You may lose your entire investment, regardless of when you purchase shares, and even if you hold shares for an entire outcome period. The fund may not be suitable for all investors. Full extent of buffers and caps only apply if held for the stated outcome period and are not guaranteed. The caps may increase or decrease and may vary significantly after the end of the outcome period.
The S&P 500 Index is a broad measure of U.S. large-cap stocks. The Nasdaq-100 Index is a broad measure of the largest domestic and international non-financial companies. The Russell 2000 Index measures the performance of approximately 2000 small-capitalization U.S. equities. The MSCI EAFE Index is a broad measure of large- and mid-cap developed market equities from Europe, Australasia, and the Far East. An investor cannot invest directly in an index.
FLEX Options Risk: The fund will utilize FLEX options issued and guaranteed for settlement by the Options Clearing Corporation (“OCC”). The fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX options contracts.
Buffered Loss Risk: While the fund seeks to provide a buffer against losses up to the stated buffer amount, there is no guarantee the buffer will be effective, and shareholders may experience losses beyond the buffer.
Capped Upside Return Risk: The fund’s participation in the reference asset’s upside is limited to the stated cap. If the reference asset’s gains exceed the cap, the fund will not participate in those additional gains.
Outcome Period Risk: The fund’s stated buffer and cap apply only to shareholders who hold shares for the entire outcome period. Investors who purchase shares after the outcome period has begun or sell shares before it ends may experience results materially different from the fund’s stated objective.
Non-Diversification Risk: The funds are classified as non-diversified and may invest a relatively high percentage of their assets in a limited number of issuers.
Allianz Investment Management LLC (AllianzIM), a wholly owned subsidiary of Allianz Life Insurance Company of North America, is a registered investment adviser and adviser to AllianzIM ETFs. AllianzIM and Allianz Life Insurance Company of North America are affiliated companies. Distributed by Foreside Fund Services, LLC. Allianz Investment Management LLC and Allianz Life Insurance Company of North America are not affiliated with Foreside Fund Services, LLC.
Effective December 22, 2025, AllianzIM U.S. Large Cap ETFs are now known as AllianzIM U.S. Equity ETFs.