Allianz Income and Growth has Good Returns for Past 3 Years to Sustain a 7% Income Yield but…

Core Insights - The best performing income ETFs of 2025 are convertible bond strategies and emerging market local currency funds, despite convertible bonds typically yielding less compared to other fixed income options [1] - Convertible bonds behave like call options on equities, performing better in favorable equity markets while providing principal and low coupon returns in poor equity conditions [2] - Allianz Income and Growth fund's performance is analyzed, revealing its composition and returns over the years, with a focus on USD returns and income generation strategies [4][5] Fund Performance - Allianz Income and Growth fund has maintained a total return of 17.29% in 2023, 9.94% in 2024, and 10.60% year-to-date in 2025 [9] - The fund's income distribution is currently at 7.75%, which is significantly higher than the underlying portfolio yield of 2.8% [11][12] - The fund's composition remains approximately 33% in US Equity, US High Yield Bonds, and US Convertible Bonds [8] Income Generation - The fund pays out 61% from capital and 39% from income, raising questions about the sustainability of its high distribution yield [16] - Investors are often hesitant to sell units for income, yet they may end up in funds like Allianz Income and Growth that rely heavily on capital for distributions [16][18] - The fund manager's strategy may not align with individual investor income needs, as distributions are based on a systematic approach rather than personalized strategies [18] Market Context - Convertible bonds have performed well over the past two years, contributing to the income generation of funds like Allianz Income and Growth, despite not outperforming a composite portfolio of lower-cost ETFs [19]