Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — virtus income and growth fund pres 3473
31 slides from Virtus Investment Partners's investor presentation, Dec 31, 2023
Slide 1: Virtus Income & Growth Fund
VIRTUS INCOME & GROWTH FUND December 31, 2023
Slide 2: Important Risk Considerations
IMPORTANT RISK CONSIDERATIONS Market Volatility The value of the securities in the portfolio may go up or down in response to the prospects of individual companies and/or general economic conditions. Local, regional, or global events such as war or military conflict, terrorism, pandemic, or recessio
Slide 3: Virtus Investment Partners: Multi-Asset Manager Key Facts
VIRTUS INVESTMENT PARTNERS MULTI-ASSET MANAGER KEY FACTS $172.3 Billion in AUM 2 2 38 2 Funds Rated 4 or 5 Stars1 Past performance is not indicative of future results. As of 12/31/23. 1Based on institutional-class or I shares. Please see page 28 for additional Morningstar disclosure. Strong ratings
Slide 4: Income and Growth Team: Philosophy
U.S. INCOME AND GROWTH TEAM Philosophy Our forward-looking approach seeks to identify companies that will benefit from positive sustainable change. By combining fundamental analysis with rigorous credit research, we can uncover the most compelling investment opportunities across a company’s capital
Slide 5: Virtus Income & Growth Fund
VIRTUS INCOME & GROWTH FUND The fund aims to provide: Consistent income Long-term capital growth Upside participation, downside management U.S. Convertible Bonds U.S. Equities with Current Income, downside Covered Calls U.S. U.S. Equities protection, principal growth, Convertibles with Covered
Slide 6: Capital Growth from U.S. Equities: S&P Earnings and Performance
U.S. EQUITIES CAPITAL GROWTH FROM U.S. EQUITIES S&P 500 EARNINGS AND PERFORMANCE 275 6000 S&P 500 Operating Earnings S&P 500 Price Value 250 5000 225 200 12-months Earnings per-Share ($) 4000 175 150 3000 125 100 2000 75 50 1000 25 0 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 7: Asymmetric Return from U.S. Convertibles
U.S. CONVERTIBLES ASYMMETRIC RETURN FROM U.S. CONVERTIBLES ICE BofA US Convertible Index S&P 500 Index May provide investors with upside participation 6.5 of equities 5.1 May provide investors income and risk Avg. Quarterly Return (%) mitigation of bonds ICE BofA U.S. Convertible Index S&P 500®
Slide 8: Coupon Is the Primary Driver of High Yield Returns
U.S. HIGH YIELD COUPON IS THE PRIMARY DRIVER OF HIGH YIELD RETURNS AVERAGE COUPON (%) JANUARY 1998 – DECEMBER 2023 U.S. HIGH YIELD MARKET: PRICE RETURN VS. TOTAL RETURN Price Return Income Return Total Return ICE BofA US High Yield 7.49 70 57.5 Historical Averages 60 Price return: -0.06 Income retur
Slide 9: Asymmetric Risk / Reward Profile
ASYMMETRIC RISK / REWARD PROFILE Income and growth asset classes offer compelling risk/return profile 14 12 Russell 1000 Growth Index S&P 500 Index Russell 1000 Value Index 10 Russell 2000 Index ICE BofA US Convertible Index Return (% Annualized) 8 ICE BofA US High Yield Index ICE BofA US Corporate
Slide 10: Income and Growth Platform: Assets Under Management
INCOME AND GROWTH PLATFORM ASSETS UNDER MANAGEMENT INCOME AND GROWTH TEAM STRATEGIES: $64.2 BILLION Convertibles $3.9 High Yield $1.7 Short Duration High Income High-yield $4.2 Other Bonds $0.7 Income and Growth Equities $53.8 Convertible Securities Stated assets under management may include both di
Slide 11: Income & Growth Strategies Team
U.S. INCOME & GROWTH STRATEGIES TEAM The senior members on the investment team have on average over twenty years of firm experience and have on average twenty-five years of industry experience Justin Kass, CFA (26/24) William (Brit) Stickney (35/25) CIO/Portfolio Management Portfolio Management Co-H
Slide 12: Investment Philosophy and Process
U.S. INCOME AND GROWTH TEAM INVESTMENT PHILOSOPHY AND PROCESS Investing in companies poised to benefit from positive fundamental change Risk Idea Company Upgrade Alert Relative Value Management/ Generation Summary Model and Trading Portfolio Monitoring The diagram and statements above reflect the ty
Slide 13: Idea Generation
U.S. INCOME AND GROWTH TEAM IDEA GENERATION Voya IM’s resources are focused on identifying qualitative investment opportunities RESOURCES: PEOPLE Investment Specializing in company research across sectors management team Leverage all fundamental research of the various components of the capital
Slide 14: Company Summary
U.S. INCOME AND GROWTH TEAM COMPANY SUMMARY Team discussion Fundamental analysis Company description Competitive landscape Positive catalysts Management assessment Key risks Capital structure Basic operating statistics Revenue growth Cash/debt/capital Operating income/margin expend
Slide 15: Upgrade Alert Model: Operating Statistics
UPGRADE ALERT MODEL: OPERATING STATISTICS Operating statistics reviewed Published rating: B3/B+ Years ended December 31 Projections: Base case Financial statements 2021 2022 2023 2024 2025 2026 Objective internal credit rating Liquidity Current ratio 1.7 1.6 2.5 2.6 2.7 2.8 Eight Rating Factor
Slide 16: Portfolio Construction
PORTFOLIO CONSTRUCTION Security allocation process provides the investment team the discretion to select the most attractive opportunity across the company’s capital structure Single Investment Voya IM Income and Growth Investment Team Platform U.S. U.S. Equities Capital Structure U.S. High Converti
Slide 17: Portfolio Construction: Capital Structure Approach
PORTFOLIO CONSTRUCTION CAPITAL STRUCTURE APPROACH High Level of Income Generated Asymmetric Return from Capital Growth from U.S. from U.S. High Yield U.S. Convertibles Equities with Covered Calls Consistent income and attractive Provide current income and Opportunity to participate in the yiel
Slide 18: Risk Management and Portfolio Monitoring
VOYA INCOME AND GROWTH TEAM RISK MANAGEMENT AND PORTFOLIO MONITORING Daily News/information flow, issuer level performance, convertible structure and technical analysis, option strike price vs. market price analysis Weekly Portfolio review including credit and relative valuation analysis Monthly
Slide 19: U.S. Equities: Earnings Growth and Performance
U.S. EQUITIES EARNINGS GROWTH AND PERFORMANCE Earnings growth is estimated to accelerate in 2024 Valuations reside near long-term averages S&P 500 CALENDAR YEAR BOTTOM-UP EPS ACTUALS AND PRICE TO EARNINGS (NTM) ESTIMATES 30 25 20 274.8 15 10 243.5 5 219.2 217.6 0 09/30/95… 08/31/96… 07/31/97… 06/30/
Slide 20: Covered Calls Selling, Tactically Using Options
U.S. EQUITIES COVERED CALLS SELLING, TACTICALLY USING OPTIONS Allianz Income and Growth Characteristics Other Common Approaches (typical approach) Management style Volatility/Catalyst driven Long, Fundamental Enhancement of income production Instruments Puts, Calls, Combinations Calls Opportunit
Slide 21: Understanding Convertible Securities
U.S. CONVERTIBLES UNDERSTANDING CONVERTIBLE SECURITIES Convertibles offer investors the advantages of both stocks and bonds WHAT IS A CONVERTIBLE BOND BEHAVIOR OF A CONVERTIBLE BOND Total Equity Yield/Busted Equity Like Straight Bond + Warrant = Convertible Bond Return Convertible Bond Value Advanta
Slide 22: US Convertible Bonds: Market Size, Issuance and Characteristics
US CONVERTIBLE BONDS MARKET SIZE, ISSUANCE AND CHARACTERISTICS ICE BofA US Convertible Index FOR 2024, MARKETS STRATEGISTS ARE PROJECTING NEW U.S. CONVERTIBLE MARKET CHARACTERISTICS ISSUANCE OF $60-80 BILLION 140 400 Characteristics Issuance 351 Delta 0.42 341 Universe 350 120 Conversion Premium 48%
Slide 23: US High-Yield Bonds: Returns, Spread, Price, and Outlook
US HIGH-YIELD BONDS RETURNS, SPREAD, PRICE, AND OUTLOOK 80 High Yield Performance 2000 Returns (%) U.S. High Yield Debt Spreads 1600 6- 12- 18- 24- 60 Yield (%) month month month month High Yield Spreads (basis Points) 1200 <6 1.3 2.0 1.4 2.0 40 800 Performance (%) 6-6.99 4.2 4.2 5.3 5.4 400 20 7-7.
Slide 24: High-Yield Bonds: Default Rates and Fundamentals
U.S. HIGH-YIELD BONDS DEFAULT RATES AND FUNDAMENTALS The Default Rate Should Normalize In 2024 Balance Sheets Are In A Good Position NET LEVERAGE BB 6.0x 80 16 B 5.0x 4.0x 70 CCC 14 3.0x All Speculative Grade Issuers, trailing 12- 2.0x 60 months (excludes destressed exchanges) 12 BB, B, CCC (Percent
Slide 25: Top Issues/Option Positions
TOP ISSUES/OPTION POSITIONS VIRTUS INCOME & GROWTH FUND Issuer % of Fund Microsoft Corp. 2.0 Amazon.com Inc. 1.6 Alphabet, Inc.- Cl A 1.6 Tesla Inc. 1.4 Apple Inc. 1.2 Mastercard Inc. 1.1 NVIDIA Corp. 1.0 UnitedHealth Group Inc. 1.0 Wells Fargo & Company 7.5 % Non Cum 1.0 Perp Conv Pfd Registered Sh
Slide 26: Rolling 3-Year Returns
ROLLING 3-YEAR RETURNS INSTITUTIONAL SHARE CLASS Since inception, the Fund has delivered positive returns over all rolling 36-month periods 30 25 36-month Performance (Annualized, %) 20 15 10 5 0 Dec-23 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21 Jun-22 Jun-23
Slide 27: Fund Distribution History
FUND DISTRIBUTION HISTORY DISTRIBUTION PAYOUT POLICY IS REVIEWED SEMI-ANNUALLY Virtus Income and Growth Fund A Share (AZNAX) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 January $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0875 $0.0825 $0.0775
Slide 28: Performance Review
PERFORMANCE REVIEW AS OF DECEMBER 31, 2023 AZNAX NAV AZNAX POP AZNIX S&P 500 Index Bloomberg U.S. Aggregate Bond Index MORNINGSTAR RATINGSTM INST Share Moderate 26.29% 26.29% Allocation Category 19.03% 19.03% 18.71% 18.71% Time Period # of Stars # of Funds 15.69% 12.03% 11.69% 12.18% 12.18% Overall
Slide 29: Virtus Income & Growth Fund: Seven Sources of Income
VIRTUS INCOME & GROWTH FUND Seven Sources of Income: 1. High yield bond coupons 2. Convertible bond coupons 3. Equity dividends 4. Gains from the equity sleeve U.S. Convertibles U.S. Equities with Covered Calls 5. Gains from the convertible sleeve 6. Gains from the high yield sleeve 7. Covered call
Slide 30: Disclosures and Important Information
DISCLOSURES AND IMPORTANT INFORMATION The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. Russell 1000 Index is an unmanaged index that consists of the 1,000 largest companies in the Russell 3000 Index and represents approximately 90% of the
Slide 31: Virtus (NYSE: VRTS) Boutique Investment Managers
Virtus (NYSE: VRTS) is a distinctive partnership of boutique investment managers, singularly committed to the long-term success of individual and institutional investors. We are not constrained by a single investment approach; rather, we provide access to independent, specialized investment philos