Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Morgan Stanley Financials Conference 2018
38 slides from Virtus Investment Partners's conference presentation, Jun 12, 2018
Slide 1: Morgan Stanley Financials Conference
Morgan Stanley Financials Conference June 12, 2018 George R. Aylward President and Chief Executive Officer
Slide 2: Important Disclosures
IMPORTANT DISCLOSURES This presentation contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The Private Secur
Slide 3: Agenda
AGENDA Firm Overview Multi-Boutique Model Product Distribution Financial Review – Interim Q2 Business Update – Assets Under Management – Asset Flows – Non-GAAP Results – Capital Position Growth Opportunities Appendix 3
Slide 4: Firm Overview
_VIRTIUS | INVESTMENT PARTNERS FIRM OVERVIEW
Slide 5: Firm Overview
FIRM OVERVIEW We are a distinctive Independent publicly traded asset manager partnership of – Market capitalization of ~$1.0 billion1 (NASDAQ: VRTS) boutique investment Managing $89.1 billion2 in a multi-boutique structure managers, singularly committed to the – Flexible model with offerings fro
Slide 6: Value Proposition
VALUE PROPOSITION Flexible Multi-Boutique Flexible partnership approach with alignment of interests Asset Manager Preserves affiliate culture, investment process, and brand Shared distribution and support services Diverse, High-Quality Well-diversified across asset classes and investment sty
Slide 7: Multi-Boutique Model
_VIRTIUS | INVESTMENT PARTNERS MULTI-BOUTIQUE MODEL
Slide 8: Flexible Multi-Boutique Model
FLEXIBLE MULTI-BOUTIQUE MODEL We have the All the Benefits of a Multi-Boutique flexibility, agility, Broad array of differentiated investment strategies and responsiveness Attractive structure for high-quality investment teams and firms of a boutique asset management firm with Greater Efficiency
Slide 9: Our Managers
OUR MANAGERS Affiliates* Subadvisers * *Virtus has an ownership interest in the firm 9
Slide 10: Product
_VIRTIUS | INVESTMENT PARTNERS PRODUCT
Slide 11: Broad and Diverse Offerings
BROAD AND DIVERSE OFFERINGS AUM by Manager AUM by Product Type AUM by Asset Class Other1 Liquidity3 Alternative & Other4 Kayne Structured 4% 3% 2% Liquidity3 Anderson Products Vontobel 2% Rudnick 4% Open-End 12% 23% Mutual Domestic Institutional Funds Equity 22% 47% 38% Ceredex 11% Seix (Lev. Fin.)
Slide 12: Compelling Investment Performance
COMPELLING INVESTMENT PERFORMANCE Institutional Assets Under Management Mutual Fund Assets Under Management % AUM Beating Benchmark1 Morningstar Rating By Assets2 Morningstar # of $mm % of 94% 94% Rating Funds AUM AUM 8 $12,295 28% 70% 81% 21 $22,887 53% 98% 24 $7,437 17% 6 $380 1%
Slide 13: Diversity of Performance
DIVERSITY OF PERFORMANCE 29 mutual funds rated 4 or 5 Stars, including the five largest funds 4 and 5 Star Mutual Funds by Asset Class 5 Largest Mutual Funds # of AUM2 M’Star Asset Class Fund Funds1 ($B) Rating1 Vontobel Emerging Markets Fixed Income 13 Funds $8.7 4 Opportunities Newfleet Multi-Sect
Slide 14: Distribution
_VIRTIUS | INVESTMENT PARTNERS DISTRIBUTION
Slide 15: Effective Distribution Capabilities
EFFECTIVE DISTRIBUTION CAPABILITIES Retail AUM by Product Type ($65.7B) Institutional AUM by Product Type ($23.4B) Other1 Liquidity Closed- 6% Structured 1% End Products 9% 16% Retail Separate Accounts 21% Open-End 64% Institutional 83% Broad and diversified product offerings make Virtus a Affil
Slide 16: Multi-Channel Retail Approach
MULTI-CHANNEL RETAIL APPROACH MUTUAL FUNDS CLOSED-END FUNDS RETAIL SEPARATE ACCOUNTS UCITS COLLECTIVE INVESTMENT TRUSTS ETFs Wirehouse Regional Independent/ Private Retirement and Offshore RIA Bank Insurance Merrill Lynch Janney Ameriprise Citi Empower Merrill Lynch Morgan Stanley Raymond Ja
Slide 17: Differentiated Retail Distribution Capabilities
DIFFERENTIATED RETAIL DISTRIBUTION CAPABILITIES Our strategy, team, Strategy and approach One-point access to Broad and differentiated product offering Allows financial advisors to focus on fewer distinguishes us in the boutique managers relationships competitive retail market Team Experienced a
Slide 18: Financial Review
_VIRTIUS | INVESTMENT PARTNERS FINANCIAL REVIEW
Slide 19: Interim Q2 Business Update
INTERIM Q2 BUSINESS UPDATE Business Update as of May 31, 2018 Preliminary ending long-term AUM of $89.7 billion at May 31, an increase of 2.5% from March 31 Positive quarter-to-date net flows of $1.1 billion reflect positive contributions in all product categories, including: – Open-end mutual f
Slide 20: Assets Under Management
ASSETS UNDER MANAGEMENT Long-term Long-Term Liquidity $90.6 $91.0 assets are $88.6 $89.1 $88.8 diversified $85.0 $87.1 $87.4 by asset class and product type $48.0 3/31/17 6/30/17 9/30/17 12/31/17 3/31/18 Metrics Equity as % total 58.3% 49.0% 49.5% 51.5% 52.5% Fixed Income as % total 33.1% 46.0% 45.6
Slide 21: Asset Flows
ASSET FLOWS Generated Inflows/(Outflows) positive net Inflows Outflows flows in Net flows $5.4 $4.6 structured $3.5 $4.1 $3.3 products, open-end funds and Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 ETFs in Q1:18 ($2.8) ($3.7) ($4.4) ($4.9) ($6.1) Metrics Net Flows1 $0.5 ($0.2) $0.2 ($0.8) ($0.7) Inflow Rate2 29.
Slide 22: Non-GAAP Results
NON-GAAP RESULTS Excluding Operating Income, As Adjusted seasonal Diluted earnings per share, as adjusted expenses, $39.1 $35.2 Q1:18 $32.8 adjusted margin was $22.7 $2.60 $2.59 37% $2.30 $13.5 $1.61 $1.16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Metrics Net Income, As Adjusted $8.6 $13.4 $19.5 $21.9 $21.8 GAA
Slide 23: Capital Position
CAPITAL POSITION Solid capital Cash and Cash Equivalents Seed Capital position Investments - Other provides Debt1 $442 operating $367 $362 flexibility $334 $324 $248 $249 $248 $245 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 Metrics Working Capital2 $225 $49 $68 $76 $83 Net Debt3 N/A $184 $14
Slide 24: Growth Opportunities
_VIRTIUS | INVESTMENT PARTNERS GROWTH OPPORTUNITIES
Slide 25: Multiple Opportunities for Growth
MULTIPLE OPPORTUNITIES FOR GROWTH Area Growth Opportunities Product Leverage capabilities of current managers Offer existing strategies in other product structures Broaden capabilities with new teams/managers Distribution Leverage areas of strength in existing retail channels while increasin
Slide 26: Summary
SUMMARY Flexible Multi-Boutique Asset Manager Diverse, High-Quality Product Offerings Effective Distribution Capabilities Attractive Financial Profile Multiple Opportunities for Growth 26
Slide 27: Appendix
_VIRTIUS | INVESTMENT PARTNERS APPENDIX
Slide 28: Virtus History
VIRTUS HISTORY Established in the 1990s and Fully Independent Since January 2009 1993 Phoenix Securities Group (subsidiary of former parent, Phoenix Life) acquires National Funds 1995 Merges with Duff & Phelps to create Phoenix Duff & Phelps (later renamed Phoenix Investment Partners (“PXP”)); 40% o
Slide 29: U.S. GAAP to Non-GAAP Reconciliation
U.S. GAAP TO NON-GAAP RECONCILIATION Q1 2018 (Unaudited) Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 30: U.S. GAAP to Non-GAAP Reconciliation
U.S. GAAP TO NON-GAAP RECONCILIATION Reconciliation of Total Revenues, GAAP to Total Revenues, as Adjusted: Three Months Ended 3/31/2017 6/30/2017 9/30/2017 12/31/2017 3/31/2018 Total revenues, GAAP $ 79,776 $ 94,132 $ 123,675 $ 128,024 $ 129,028 Distribution and other asset-based expenses (15,323)
Slide 31: U.S. GAAP to Non-GAAP Reconciliation
U.S. GAAP TO NON-GAAP RECONCILIATION Q4 2017 (Unaudited) Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 32: U.S. GAAP to Non-GAAP Reconciliation
U.S. GAAP TO NON-GAAP RECONCILIATION Q3 2017 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Restructuring Seed capital and integration Non-GAAP Basis based expenses products assets and severance CLO
Slide 33: U.S. GAAP to Non-GAAP Reconciliation
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments Q2 2017 Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Restructuring Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets and severance CLO
Slide 34: U.S. GAAP to Non-GAAP Reconciliation
U.S. GAAP TO NON-GAAP RECONCILIATION Q1 2017 Reclassifications Distribution and Consolidated Amortization Adjustments Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 35: Footnotes
FOOTNOTES Non-GAAP financial information differ from financial information determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the exclusion of certain expenses and other items that are not reflective of the earnings generated fro
Slide 36: Footnotes
FOOTNOTES Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Acquisition and Integration Expenses Employment expenses $- 2,059 $2,275 $2,009 $1,903 $- $1,903 Restructuring and s
Slide 37: Morningstar, Lipper Data
MORNINGSTAR, LIPPER DATA Additional Information on Virtus Funds rated by Morningstar as of 3/31/18: Description Overall 3 yr. 5 yr. 10 yr. Number of 3/4/5 Star Funds 53 48 46 39 Percentage of Assets 98% 92% 90% 97% Number of 4/ 5 Star Funds 29 27 21 28 Percentage of Assets 81% 52% 47% 90% Total Fund
Slide 38: _VIRTUS |
_VIRTUS | INVESTMENT PARTNERS
Virtus Investment Partners — Morgan Stanley Financials Conference 2018 on 6ix