Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Kayne Anderson Rudnick — Q3 2023 Earnings Presentation
30 slides from Virtus Investment Partners's earnings presentation, November 2023
Slide 1: Small-Mid Cap Quality Value Portfolio Managed Accounts Third Quarter 2023
Small-Mid Cap Quality Value Portfolio Managed Accounts Third Quarter 2023 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 September 30, 2023 Profile At a Glance • Originally established to manage founder capital Year Founded 1984 Headquarters Los Angeles, CA • Over three decades of experience AUM $52.8 billion* • A differentiated “business analyst” investment approach Number of Equity Investment Pro
Slide 3: Employee Statistics
Employee Statistics As of September 30, 2023 African American Hispanic or 6% Latino 8% Male Female 64% 36% Gender Ethnicity Caucasian Asian 56% 30% 10+ years 29% Less than 5 years Women 44% 45% Tenure of Men Leadership Employees 55% Roles 5 - 10 years 27% Numbers may not always add up due to roundin
Slide 4: Small-Mid Cap Quality Value Team
Small-Mid Cap Quality Value Team Portfolio Manager/Analysts Responsibility Research Experience Years with KAR Portfolio Manager and Senior Research Analyst Julie Kutasov 22 Years 22 Years Sector Coverage: Materials, Industrials and Utilities Portfolio Manager and Senior Research Analyst Craig Stone
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 Quality Value Portfolio Competitive Advantage Examples of High-Quality Business Models Network Effect Designed In High Customer Brand Franchise Switching Costs The securities presented on this page are chosen based upon objective, non-performance based criteria and ar
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: Development of KAR High-Quality Universe
1 Investment Process 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: Intensive Fundamental Research
2 Investment Process 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: Portfolio Construction
3 Investment Process 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: Sell Discipline
3 Investment Sell Discipline Process 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: Risk Management—Investment Oversight
4 Investment Process 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: Risk Management—Independent Oversight
4 Investment Process 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 Quality Value Portfolio As of September 30, 2023 KAR Small-Mid Cap Russell 2500™ Quality Value Value Index Quality In a market of average businesses, we seek to Return on Equity—Past 5 Years 25.1% 12.3% own protected proprietary businesses that Debt/EBITDA* 1.
Slide 16: Top Ten Holdings
Top Ten Holdings Small-Mid Cap Quality Value Portfolio As of September 30, 2023 Top 10 Holdings GICS Sector % of Portfolio TransUnion Industrials 5.0 W. R. Berkley Financials 4.9 Broadridge Financial Solutions Financials 4.7 Gentex Consumer Discretionary 4.5 Lennox International Industrials 4.4 Rese
Slide 17: Sector Weights
Sector Weights Small-Mid Cap Quality Value Portfolio As of September 30, 2023 KAR Small-Mid Russell 2500™ Cap Quality Value Value Index Underweight/Overweight (%) Sectors (%) (%) Industrials 37.6 19.6 18.0 Consumer Staples 9.8 3.1 6.7 Financials 22.6 19.8 2.8 Information Technology 10.7 8.2 2.4 Mate
Slide 18: Returns
Returns Small-Mid Cap Quality Value Portfolio Annualized Performance Calendar Year Performance Periods Excess Periods Excess Ending Gross Net Index Return Ending Gross Net Index Return 9/30/23 (%) (%) (%) - Net (bps) 12/31 (%) (%) (%) - Net (bps) Third Quarter (2.90) (3.63) (3.66) 3 2022 (20.01) (22
Slide 19: Risk-Return Analysis
Risk-Return Analysis Small-Mid Cap Quality Value Portfolio Inception* to September 30, 2023 Meaningful Excess Return with Lower Volatility Annualized Since Inception* 15% KAR Small-Mid Cap Quality Value - Gross 10% Annualized Return S&P 500® Index Russell 2500™ Value Index KAR Small-Mid Cap Quality
Slide 20: Peer Comparison
Peer Comparison Small-Mid Cap Quality Value Portfolio Inception* to September 30, 2023 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 Quality Value Russell 2500™ Value Index Sma
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% positions 3% to 10% positions in 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 Quality Value Team Julie Kutasov Todd Beiley, CFA Portfolio Manager and Senior Research Analyst with primary Senior Research Analyst with primary research research responsibilities for the small and mid-capitalization responsibilities for the small and mid-capitalization in
Slide 26: Biographies
Biographies Small-Mid Cap Quality Value Team Jon Christensen, CFA Adam Xiao, CFA Senior Research Analyst with primary research Senior Research Analyst with primary research responsibilities for the small and mid-capitalization health responsibilities for the small and mid-capitalization financials,
Slide 27: Biographies
Biographies Small-Mid Cap Quality Value Team Luke Longinotti Clarissa Ali ESG Research Analyst with primary research Associate Research Analyst responsibilities for providing specialist ESG support across Ms. Ali works with the investment team, conducting industry all strategies and market research
Slide 28: Biographies: Client Services Team
Biographies Client Services Team Jason Pomatto James B. May, CFA Managing Director – Senior Client Portfolio Manager Managing Director – Client Portfolio Manager Mr. Pomatto has approximately 29 years of experience in Prior to joining Kayne Anderson Rudnick in 2019, Mr. May investment management. Be
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 approximately 44 years of experience in the Mr. For
Slide 30: Disclosure
Disclosure Small-Mid Cap Quality Value Portfolio Russell 2500TM Composite Pure Composite Net Value Index Composite 3-Yr Benchmark 3-Yr Internal Composite Firm Gross Return* Return Return Std Dev Std Dev Number of Dispersion Assets Assets Year (%) (%) (%) (%) (%) Accounts (%) ($ Millions) ($ Millions
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