Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Kayne Anderson Rudnick — Q1 2024 Earnings Presentation
30 slides from Virtus Investment Partners's earnings presentation, Jun 27, 2024
Slide 1: Small-Mid Cap Core Portfolio Managed Accounts First Quarter 2024
Small-Mid Cap Core Portfolio Managed Accounts First Quarter 2024 kayne.com 2000 Avenue of the Stars, Suite 1110 Los Angeles, CA 90067 T 800.231.7414
Slide 2: Firm Overview
Firm Overview As of March 31, 2024 Profile At a Glance • Originally established to manage founder capital Year Founded 1984 Headquarters Los Angeles, CA • Over three decades of experience AUM $65.3 billion* • A differentiated “business analyst” investment approach Number of Equity Investment Profess
Slide 3: Employee Statistics
Employee Statistics As of March 31, 2024 African American Hispanic or 8% Latino 8% Male Female 65% 35% Gender Ethnicity Caucasian Asian 57% 28% 10+ years 31% Less than 5 years 39% Women Tenure of Men 48% Leadership Employees 52% Roles 5 - 10 years 29% Numbers may not always add up due to rounding. 3
Slide 4: Small-Mid Cap Core Team
Small-Mid Cap Core Team Portfolio Manager/Analysts Responsibility Research Start Date KAR Start Date Portfolio Manager and Senior Research Analyst Jon Christensen, CFA 1995 2001 Sector Coverage: Health Care and Industrials Portfolio Manager and Senior Research Analyst Julie Kutasov 2001 2001 Sector
Slide 5: Disciplined Investment Approach
Disciplined Investment Approach Investment Philosophy & Objectives Investment Philosophy We believe that purchasing high-quality businesses with competitive protections at attractive valuations will achieve excess returns over a complete market cycle Investment Objectives • To achieve a return meani
Slide 6: Tenets of Quality
Tenets of Quality Our Qualitative Business Assessment Competitive Protection Owner-Oriented Management • Brand/Reputation • Cultivates Competitive Advantage • Network Effect • Rational Capital Allocation • Scale/Cost Advantage • Considers Stakeholder Interests • Benchmarking Standard • High Customer
Slide 7: Source of Quality
Source of Quality Small-Mid Cap Core Portfolio Competitive Advantage Examples of High-Quality Business Models Low Cost Advantage Design In High Customer Route Density Switching Costs The securities presented on this page are chosen based upon objective, non-performance based criteria and are current
Slide 8: Investment Process Overview
Investment Process Overview A Business Analyst Approach 1 Development of High-Quality Universe 2 Proprietary Fundamental Research 3 Portfolio Construction & Sell Discipline 4 Risk Management 8
Slide 9: Investment Process: Development of KAR High-Quality Universe
Investment Process 1 Development of KAR High-Quality Universe Quantitative Screens: Other Resources for Names are: • High return on capital over a • Research on existing full economic cycle portfolio holdings • Long and resilient earnings • Meetings with companies Small-Mid Cap Universe history • In
Slide 10: Investment Process: Intensive Fundamental Research
Investment Process 2 Intensive Fundamental Research Research analysts and portfolio managers work together to develop in-depth business knowledge Purpose: Determine if Purpose: Evaluate source, Purpose: Estimate total Purpose: Evaluate competitive advantage exists level, and sustainability of return
Slide 11: Investment Process: Portfolio Construction
Investment Process 3 Portfolio Construction Investment Guidelines • 25-35 holdings Position Weights • Maximum initial position size is 5% (at cost) • Maximum position size is 10% (at market) Sector Tolerances • Seek broad diversification, but no sector constraints Non-U.S. Holdings • Up to 20% • Typ
Slide 12: Investment Process: Sell Discipline
Investment Process 3 Sell Discipline Sell Discipline • Significant premium to intrinsic value Extended Valuation • Expected annual return insufficient • Better business Portfolio Upgrade • Better price • Our holding acquired at an attractive premium Acquisition Activity • Our holding acquires a comp
Slide 13: Investment Process: Risk Management—Investment Oversight
Investment Process 4 Risk Management—Investment Oversight Our risk management begins with our high-quality investment approach Risk Management • Focus on “high-quality” companies Investment Philosophy • Company’s “business risk” is primary risk control factor • Broad sector diversification Portfolio
Slide 14: Investment Process: Risk Management—Independent Oversight
Investment Process 4 Risk Management—Independent Oversight Our risk management process also includes independent oversight to ensure that business and investment risk is thoroughly evaluated from multiple viewpoints Risk and Compliance Committee Oversees all business and regulatory risk Portfolio Ov
Slide 15: Portfolio Characteristics
Portfolio Characteristics Small-Mid Cap Core Portfolio As of March 31, 2024 KAR Small-Mid Cap Russell 2500 Core Index Quality In a market of average businesses, we seek to Return on Equity—Past 5 Years 24.3% 13.6% own protected proprietary businesses that Debt/EBITDA* 1.6 x 2.1 x generate exceptiona
Slide 16: Top Ten Holdings
Top Ten Holdings Small-Mid Cap Core Portfolio As of March 31, 2024 Top 10 Holdings GICS Sector % of Portfolio Bentley Systems Information Technology 4.9 POOLCORP Consumer Discretionary 4.5 Lennox International Industrials 4.4 Cooper Companies Health Care 4.4 Charles River Laboratories International
Slide 17: Sector Weights
Sector Weights Small-Mid Cap Core Portfolio As of March 31, 2024 KAR Small-Mid Cap Russell 2500 Core Index Underweight/Overweight (%) Sectors (%) (%) Industrials 29.7 20.6 9.2 Information Technology 21.6 13.1 8.5 Consumer Discretionary 19.1 13.2 5.9 Health Care 11.1 11.8 (0.7) Consumer Staples 2.1 3
Slide 18: Returns
Returns Small-Mid Cap Core Portfolio Annualized Performance Calendar Year Performance Periods Excess Periods Excess Ending Gross Net Index Return Ending Gross Net Index Return 3/31/24 (%) (%) (%) - Net (bps) 12/31 (%) (%) (%) - Net (bps) First Quarter 7.60 6.81 6.92 (11) 2023 23.87 20.26 17.42 284 2
Slide 19: Risk-Return Analysis
Risk-Return Analysis Small-Mid Cap Core Portfolio Ten Years Ending March 31, 2024 Meaningful Excess Return with Lower Volatility Annualized for the Past 10 Years 18% 16% 14% KAR Small-Mid Cap Core - Gross S&P 500® Index 12% Annualized Return KAR Small-Mid Cap Core - Net 10% 8% Russell 2500 Index 6%
Slide 20: Peer Comparison
Peer Comparison Small-Mid Cap Core Portfolio Ten Years Ending March 31, 2024 0 25 Peer Ranking 50 75 100 Annualized Alpha Sharpe Information Tracking Annualized Beta Downside Return Ratio Ratio Error Standard Capture % Deviation KAR Small-Mid Cap Core Russell 2500 Index Small-Mid Cap Core Universe T
Slide 21: Summary of Key Differentiators
Summary of Key Differentiators We Seek to Manage Risk and Generate Returns Differently CLASSIC APPROACH* KAR APPROACH† Minimal business risk stock portfolio stock portfolio 75 25-35 Minimal balance sheet risk RISK Minimal profit risk 1% to 2% 3% to 10% positions in positions high-quality companies T
Slide 22: Appendix
Appendix • ESG Principles & Process • Biographies • Disclosure 22
Slide 23: ESG Principles
Investment Process ESG Principles Policy We believe that responsible investment practices which incorporate the consideration of environmental, social, and governance (ESG) topics add sustainable value for our investors and are consistent with our fiduciary duty. Philosophy Our investment strategy i
Slide 24: ESG Process
Investment Process ESG Process We use a proprietary ESG ratings framework to generate ESG scores for businesses in our portfolios as well as portfolio scores. • ESG research is conducted by each member of the investment team • Five key issues identified that we believe are the most material and fina
Slide 25: Biographies
Biographies Small-Mid Cap Core Team Jon Christensen, CFA Craig Stone Portfolio Manager and Senior Research Analyst with primary Portfolio Manager and Senior Research Analyst with primary research responsibilities for the small and mid-capitalization research responsibilities for the small and mid-ca
Slide 26: Biographies
Biographies Small-Mid Cap Core Team Julie Biel, CFA Adam Xiao, CFA Senior Research Analyst with primary research Senior Research Analyst with primary research responsibilities for the small and mid-capitalization responsibilities for the small and mid-capitalization financials, information technolog
Slide 27: Biographies
Biographies Small-Mid Cap Core Team Sean Dixon Arthur Su, CFA Research Analyst with primary research responsibilities for Research Analyst with primary research responsibilities for the small and mid-capitalization consumer discretionary and the small and mid-capitalization information technology an
Slide 28: Biographies: Client Services Team
Biographies Client Services Team Jason Pomatto James May, CFA Managing Director – Senior Client Portfolio Manager Managing Director – Client Portfolio Manager Mr. Pomatto began his career in the investment management Mr. May began his career in investment management in industry in 1994. Before joini
Slide 29: Biographies: Executive Management
Biographies Executive Management Stephen A. Rigali, CFA Douglas S. Foreman, CFA Executive Managing Director and Member of the Executive Co-Chief Investment Officer and Member of the Executive Management Committee Management Committee Mr. Rigali has worked in the investment management Mr. Foreman has
Slide 30: Disclosure
Disclosure Small-Mid Cap Core (Wrap) Composite Composite Pure Composite Net Russell 2500TM Composite 3-Yr Benchmark Internal Composite Firm Gross Return* Return Index Return Std Dev 3-Yr Std Dev Number of Dispersion Assets Assets Year (%) (%) (%) (%) (%) Accounts (%) ($ Millions) ($ Millions) 2014 9
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