Q&A Series: Capturing the AI theme through equities, convertibles and bonds with Allianz AI Income

Allianz AI Income is managed by the Allianz Global Artificial Intelligence and Allianz Income & Growth teams at Voya Investment Management. The Allianz Global Artificial Intelligence team brings decades of experience identifying companies positioned to benefit from technological innovation and disruptive secular trends. Complementing this expertise, the Allianz Income & Growth team specializes in convertible and fixed income securities, with a proven track record of investing across the capital structure through multiple market cycles.

Together, the teams combine their complementary expertise to deliver an investment solution designed to provide stable income and long-term capital appreciation, underpinned by innovation and a differentiated multi-asset approach.

1. How does Allianz AI Income differ from a pure-play thematic AI equity fund, and what investor profile is this fund best suited for?

Allianz AI Income (the Fund) differs from a pure-play thematic AI equity fund through its distinctive multi-asset approach. Launched in 2019, the Fund invests across companies’ capital structures—including equities, convertible securities, and fixed income—allowing the Fund to participate in long-term growth opportunities created by artificial intelligence while seeking stable income and capital appreciation. This structure is designed to reduce portfolio volatility relative to a pure equity thematic strategy while retaining meaningful upside potential.

Allianz AI Income is a unique thematic income solution

Source: Allianz Global Investors, 2025. This chart is not intended to represent the Fund’s performance or how the Fund’s portfolio will be invested or allocated at any particular time. For illustrative purposes only (no reference to any real strategy, portfolio or product data). The diagrams and statements above reflect the typical investment process applied to this strategy / fund. At any given time, other criteria may affect the investment process. This is for guidance only and not indicative of future allocation. Past performance does not predict future returns.

2. The fund targets roughly 50% equities, 35% convertible securities and 15% fixed income. What role does each sleeve play in the portfolio, and why is this combination particularly relevant in today’s market?

The Fund is designed for investors seeking both exposure to innovation and a consistent source of income. While many investors recognize the transformative growth potential of AI, some may be reluctant to accept the heightened volatility often associated with thematic equity strategies. Allianz AI Income aims to bridge this gap by combining participation in AI-driven growth with the potential for regular income and a more balanced return profile through its diversified multi-asset approach. The Fund targets roughly 50% equities, 35% convertible securities and 15% fixed income.

• Equities (~50%): Provide exposure to the long-term growth potential of companies enabling or benefiting from AI innovation.
• Convertible Securities (~35%): Combine equity upside participation with bond-like downside protection, offering an attractive asymmetric risk-return profile.
• Fixed income (~15%): Supports a more stable income stream and helps moderate overall portfolio volatility.

By pairing approximately 50% growth-oriented equity exposure with approximately 35% in convertible securities and 15% in fixed income, Allianz AI Income seeks to deliver regular income alongside capital appreciation potential. In a market where most thematic strategies rely exclusively on equities, the Fund offers a differentiated solution that combines thematic growth exposure with an income objective.

3. Walk us through how an idea actually becomes a position. Once a company is identified as an AI beneficiary, how does the team decide whether to express that view through equity, convertible securities, or fixed income?

Our investment process follows two distinct steps: first identifying the right company, and then selecting the most attractive security within its capital structure. We begin with an investable universe of approximately 1,000 innovative companies that may benefit from AI.

The investment team continually refines this universe based on its assessment of which companies are positioned to generate outsized benefits as either enablers or adopters of AI. This research narrows the opportunity set to approximately 200–300 companies. Because many issuers offer securities across multiple asset classes, the potential universe for portfolio construction expands to more than 300 individual securities.

• Equity – The investment team maintains proprietary financial models, establishing upside and downside price targets. We favor stocks with significant upside potential. The team also avoids names with large downside potential, given our income objective.
• Convertible Securities – The goal is to identify and invest in convertible securities with an asymmetric risk/reward profile that can participate in the upside potential of the underlying equity and with the bond portion providing downside protection. Convertibles with these characteristics are referred to as “total return” convertibles.
• Fixed income – The investment team evaluates the relative value of the available fixed income security’s spread advantage over US Treasuries given the level of credit risk.

4. The strategy is co-managed by Voya's Artificial Intelligence team and its Income & Growth team. How does that collaboration work in practice – who originates ideas, and who decides how they're sized and structured in the portfolio?

The investment process leverages the distinct expertise of both teams. The Allianz Global Artificial Intelligence team is primarily responsible for idea generation and company selection, identifying the most attractive AI beneficiaries through bottom-up fundamental research. Once a company is selected, the Allianz Global Artificial Intelligence and Allianz Income & Growth teams jointly evaluate the issuer's capital structure to determine whether the equity, convertible security, or fixed income instrument offers the most attractive risk-adjusted return opportunity. Portfolio construction and position sizing are decided by portfolio managers James Chen and Stephen Jue of the Allianz Global Artificial Intelligence team.

5. Top holdings span obvious AI infrastructure names like NVIDIA and TSMC alongside less obvious ones like Welltower and Eli Lilly. How broadly does the team define an “AI beneficiary,” and what's an example of a holding whose AI connection might surprise investors?

We define an AI beneficiary broadly, looking beyond obvious infrastructure providers to companies that use AI to generate meaningful gains in productivity, profitability, competitive advantage, or business model innovation. Over time, we believe these benefits can support superior earnings growth relative to peers and create opportunities for excess value creation.

Eli Lilly is one example that may surprise investors. Although it is not traditionally viewed as an AI company, AI may help accelerate drug discovery, improve clinical trial design, and enhance research productivity. In the pharmaceutical industry, a company’s value is largely determined by the strength and productivity of its drug pipeline. By potentially increasing the probability of successful drug development and shortening development timelines, AI can enhance the long-term value of that pipeline. This illustrates our view that some of the most compelling AI opportunities may be found among non-technology companies using AI to transform their businesses.

6. AI-related stocks staged a sharp rally through mid-2026 before a correction in July and August. How do you manage drawdown risk?

Risk management is integrated throughout our investment process, beginning with disciplined company and security selection. We emphasize companies where we have high conviction that AI can improve the durability and visibility of future earnings growth. An important element of drawdown mitigation is avoiding businesses with unproven models or uncertain paths to sustained profitability. Our flexibility to invest in the most attractive part of a company’s capital structure potentially provides an additional layer of downside protection.

At the portfolio level, Allianz AI Income’s multi-asset structure can help the fund navigate periods of heightened volatility. Beyond equities, we may express an investment view through convertible securities or fixed income when those instruments offer a more compelling risk-reward profile. Convertibles can provide equity upside participation with downside support from their bond floor, while fixed income can enhance income generation and reduce overall volatility. Together, these asset classes are designed to create a more balanced and resilient portfolio than a pure AI equity strategy.

7. The strategy combines exposure to a high-growth AI theme with an income objective. How do you balance the pursuit of AI upside with the need to generate sustainable income for investors?

Balancing AI-driven growth with sustainable income begins with disciplined company selection. Rather than investing in early-stage businesses with unproven products or uncertain paths to profitability, we focus on established companies with attractive earnings growth prospects supported by their role as enablers or adopters of AI. We then seek to invest in the most compelling part of each company’s capital structure—whether equity, convertible securities, or fixed income. This combination of rigorous company selection and capital structure flexibility allows us to pursue regular income while retaining meaningful participation in AI’s long-term capital appreciation potential.

8. Looking ahead, what catalysts, developments or risks over the next 12 months could have the biggest impact on the strategy?

Looking ahead, we believe the Fund’s most important catalysts will be the continued expansion of AI infrastructure and further advances in agentic AI applications. The AI ecosystem has broadened significantly in recent years, creating opportunities not only among a wider range of AI enablers but also among a growing number of adopters across non-technology sectors. As adoption accelerates and use cases become increasingly commercialized, we expect earnings growth to strengthen across a broader set of companies, extending the opportunity well beyond today’s market leaders.

From a risk perspective, the trajectory of inflation and interest rates remains the primary concern. Although inflation does not appear to pose an immediate threat, it remains above the Federal Reserve’s long-term target. A higher-than-expected inflation environment could lead to tighter monetary conditions, slower economic activity, and softer earnings growth for some AI beneficiaries. Nevertheless, we believe the secular AI adoption trend remains intact, and periods of market volatility may provide opportunities to invest in high-quality AI beneficiaries at more attractive valuations.

Disclaimers:

Allianz Global Investors and Voya Investment Management have entered into a long-term strategic partnership, and as such, as of 25 July 2022, the investment team has transferred to Voya Investment Management. This will not change the composition of the team, the investment philosophy nor the investment process.

The information presented here is intended for general circulation and does not constitute a recommendation to anyone; it also has not taken into account the specific investment objectives, financial situation or particular needs of any particular person. Information herein is based on sources we believe to be accurate and reliable as at the date it was made. We reserve the right to revise any information herein at any time without notice. No offer or solicitation to buy or sell securities and no investment advice or recommendation is made herein. In making investment decisions, investors should not rely solely on this publication but should seek independent professional advice. However, if you choose not to seek professional advice, you should consider the suitability of the product for yourself. Past performance of the fund manager(s) and the fund is not indicative of future performance. Prices of units in the Fund and the income from them, if any, may fall as well as rise and cannot be guaranteed. Distribution payments of the Fund, where applicable, may at the sole discretion of the Manager, be made out of either income and/or net capital gains or capital of the Fund. As a result of the payment, the Fund’s net asset value is expected to be immediately reduced. The dividend yields and payouts are not guaranteed and might change depending on the market conditions or at the Manager’s discretion; past payout yields and payments do not represent future payout yields and payments. Investment involves risks including the possible loss of principal amount invested and risks associated with investment in emerging and less developed markets. The Fund may invest in financial derivative instruments and/or structured products and be subject to various risks (including counterparty, liquidity, credit and market risks etc.). Investing in fixed income instruments (if applicable) may expose investors to various risks, including but not limited to creditworthiness, interest rate, liquidity and restricted flexibility risks. Changes to the economic environment and market conditions may affect these risks, resulting in an adverse effect to the value of the investment. During periods of rising nominal interest rates, the values of fixed income instruments (including short positions with respect to fixed income instruments) are generally expected to decline. Conversely, during periods of declining interest rates, the values are generally expected to rise. Liquidity risk may possibly delay or prevent account withdrawals or redemptions. Past performance, or any prediction, projection or forecast, is not indicative of future performance. Investors should read the Prospectus obtainable from Allianz Global Investors Singapore Limited or any of its appointed distributors for further details including the risk factors, before investing. The duplication, publication, extraction, or transmission of the contents, irrespective of the form is not permitted, except for the case of explicit permission by Allianz Global Investors. This publication has not been reviewed by the Monetary Authority of Singapore (MAS). MAS authorization/recognition is not a recommendation or endorsement. The issuer of this publication is Allianz Global Investors Singapore Limited (79 Robinson Road, #09-03, Singapore 068897, Company Registration No. 199907169Z).