Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Bank of America Merrill Lynch Future of Financials Conference 2016
41 slides from Virtus Investment Partners's conference presentation, Nov 15, 2016
Slide 1: Bank of America Merrill Lynch Future of Financials Conference
Bank of America Merrill Lynch Future of Financials Conference November 15, 2016 Michael A. Angerthal Executive Vice President and Chief Financial 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 Quarterly Financial Trend Growth Opportunities 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 $0.6 billion (NASDAQ: VRTS) boutique investment Managing $47 billion in a multi-boutique structure managers, singularly committed to the – Flexible model with offerings from aff
Slide 6: Historical Financial Summary
HISTORICAL FINANCIAL SUMMARY Ending Long-Term AUM ($B) Net Flows ($B) 8.1 6.7 5.2 0.1 1.5 (1.2) 56 57 47 (6.3) 44 32 22 27 2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015 Revenue, As Adjusted Operating Income, As Adjusted 337 150 291 295 121 108 212 155 73 87 111 36 2 16 2009 2
Slide 7: Core Beliefs
CORE BELIEFS Our multi-boutique Investment professionals that operate in “boutique” environments model is based on allowing for the appropriate focus and culture generate certain fundamental sustainable, superior returns for clients beliefs Investment professionals should concentrate on managing cli
Slide 8: Virtus Value Proposition
VIRTUS VALUE PROPOSITION Flexible Multi-Boutique Flexible partnership approach with alignment of interests Model Preserves affiliate culture, investment process, and brand Shared distribution and support services Diverse, High-Quality Well-diversified across asset classes and investment styl
Slide 9: Multi-Boutique Model
_VIRTUS | INVESTMENT PARTNERS Multi-Boutique Model
Slide 10: Multi-Boutique Model
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 the pr
Slide 11: Multi-Boutique Model: Affiliates
MULTI-BOUTIQUE MODEL Our affiliates offer a broad 30 investment array of professionals $11.7B Multi-sector fixed Hartford, CT differentiated of AUM income Team established in 1993 capabilities 31 investment $10.6B Income-oriented Chicago, IL professionals of AUM equities Founded in 1932 26
Slide 12: Multi-Boutique Model: Recent Partners
MULTI-BOUTIQUE MODEL Our flexible approach to partnering also allows us to leverage high-quality investment managers Recent Partners Subadviser to 10 Virtus DFA Subadviser to the Virtus Provides proprietary Target Date Retirement Multi-Strategy Target Return technical analysis for the Income F
Slide 13: Product
_VIRTIUS | INVESTMENT PARTNERS Product
Slide 14: Diversity of Strategies
DIVERSITY OF STRATEGIES AUM by Product Type AUM by Asset Class AUM by Manager Other Alternative 6% Other Open-End & Other Products Newfleet Mutual 9% Kayne 48% 25% Funds Equity Anderson 52% 57% Rudnick 26% Fixed Income 34% Duff & Phelps 23% Vontobel 20% Mutual Funds Equity Affiliated Managers Open-E
Slide 15: Mutual Fund Performance
MUTUAL FUND PERFORMANCE Majority of fund AUM in top half of Lipper peer group and rated 5 Stars % AUM in Top Half of Peer Group1 Morningstar Rating By Assets2 87% 85% % of # of Morningstar $mm % of Funds Funds Rating AUM Assets 80% 15% 6 $15,874 66% 48% 80% 33% 13 $3,492 14% 90% 80% 31% 1
Slide 16: ETF Capabilities
ETF CAPABILITIES Expanded product Virtus ETF Solutions operates a platform for listing, operating, capabilities with a and distributing exchange-traded funds platform for competing – Founded in 2012 as ETF Issuer Solutions (ETFis) in the growing ETF – Majority owned by Virtus since 2015 business
Slide 17: Distribution
_VIRTIUS | INVESTMENT PARTNERS Distribution
Slide 18: Strong Retail Distribution
STRONG RETAIL DISTRIBUTION Our strategy, team, Strategy and approach One-point access to Broad and differentiated product boutique managers offerings distinguishes us in Allows financial advisors to focus on the competitive retail fewer relationships market Team Experienced and high- Significa
Slide 19: Multi-Channel Approach
MULTI-CHANNEL APPROACH MUTUAL FUNDS CLOSED-END FUNDS SEPARATELY MANAGED ACCOUNTS VARIABLE INSURANCE FUNDS COLLECTIVE INVESTMENT TRUSTS ETFs Wirehouse Regional Independent/ Private DCIO Variable RIA Bank Insurance Merrill Lynch Janney Ameriprise Citi Fidelity AXA Morgan Stanley Raymond James
Slide 20: Diverse Mutual Fund Sales
DIVERSE MUTUAL FUND SALES Mutual Fund Gross Sales by Asset Class 2012 2013 2014 2015 YTD 16 7% 6% 9% Fixed Income 12% 12% 7% 21% 32% 28% 30% 10% 27% International Equity 20% Domestic Equity 24% 29% Alternative 36% 29% 66% 54% 41% Key Metrics Gross Sales $12.3 $19.1 $12.7 $10.0 $5.4 Sales Rate1 73.0%
Slide 21: Quarterly Financial Trend
_VIRTUS | INVESTMENT PARTNERS Quarterly Financial Trend
Slide 22: Assets Under Management
ASSETS UNDER MANAGEMENT AUM profile is diversified by product $47.9 $47.4 $46.5 type as well $45.7 $45.2 as asset class 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 Assets By Asset Class Equity 58.9% 59.8% 59.3% 58.0% 57.3% Fixed 32.5% 31.9% 32.8% 34.2% 33.9% Alternatives1 7.7% 7.3% 6.8% 6.8% 7.9% Other
Slide 23: Asset Flows
ASSET FLOWS Third quarter Inflows/(Outflows) Inflows was the best Outflows Net flows for flows $3.2 $3.1 since the $2.5 $2.8 $2.4 third quarter of 2014 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 ($2.6) ($4.2) ($4.3) ($4.6) ($5.4) Metrics Net Flows ($1.6) ($1.1) ($2.6) ($2.2) $0.5 Net Flow Rate1 (12.5%) (9.4%) (2
Slide 24: Non-GAAP Results
NON-GAAP RESULTS Higher Operating Income, As Adjusted revenues Diluted earnings per share, as adjusted and lower expenses resulted in $25.3 increased $19.4 $20.3 third quarter $16.7 $15.2 earnings $1.74 $1.64 $1.37 $1.24 $1.12 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Metrics Net Income, As Adjusted $15.5 $11.9
Slide 25: Capital Position
CAPITAL POSITION Net Cash and Investments Cash and cash equivalents net of debt Seed investments Investments – other $445 $422 $383 $368 $383 $277 $179 $221 $174 $274 $281 $179 $156 $165 $127 $88 $50 $11 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 Pro Forma Metrics Net Cash and Investments Per Share $5
Slide 26: Growth Opportunities
_VIRTUS | INVESTMENT PARTNERS Growth Opportunities
Slide 27: Multiple Opportunities for Growth
MULTIPLE OPPORTUNITIES FOR GROWTH Area Growth Opportunities Product Leverage capabilities of current managers – Increase sales of existing and recently launched strategies Offer existing strategies in other product structures – Develop additional product vehicles for different markets/channels
Slide 28: Case Study: Vontobel
CASE STUDY: VONTOBEL In 2005, we adopted two Vontobel Asset Management Vontobel-subadvised Recognized leader in global investing funds with $120 million of Morningstar International-Stock Fund Manager of the Year (2012) assets. Over the last 11 Lipper Fund Awards (2013) years, we successfully
Slide 29: Case Study: Newfleet
CASE STUDY: NEWFLEET In 2011, we established Newfleet Asset Management Newfleet Asset Seven 4-and 5-star rated funds at September 30, 2016 Management as a 12- 125% AUM growth since affiliate established (2011) person fixed income team that was part of our Virtus named Best Taxable Bond Fund Fa
Slide 30: Summary
SUMMARY Flexible multi-boutique model Diverse, high-quality product offerings Effective distribution capabilities Attractive financial profile Multiple opportunities for growth 30
Slide 31: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q3 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2016 Reclassifications Adjustments Distribution and Consolidated Amortization $ and share counts in thousands, except per share data U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets
Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q2 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2016 Reclassifications Adjustments Distribution and Consolidated Amortization $ and share counts in thousands, except per share data U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets
Slide 34: U.S. GAAP to Non-GAAP Reconciliation – Q1 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1 2016 Reclassifications Adjustments $ and share counts in thousands, except per share data Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investment
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – Q4 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2015 Reclassifications Adjustments Distribution and Consolidated Amortization $ and share counts in thousands, except per share data U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investment
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – Q3 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2015 Reclassifications Adjustments $ and share counts in thousands, except per share data Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investment
Slide 37: U.S. GAAP to Non-GAAP Reconciliation – TY 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – TY 2015 Reclassifications Adjustments $ and share counts in thousands, except per share data U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and Non-GAAP Basis asset-based expenses products intangible assets CLO investments
Slide 38: U.S. GAAP to Non-GAAP Reconciliation – TY 2014
U.S. GAAP TO NON-GAAP RECONCILIATION – TY 2014 Reclassifications Adjustments $ and share counts in thousands, except per share data Consolidated Distribution and sponsored Amortization U.S. GAAP other asset- investment Closed-end fund of intangible Seed capital Non-GAAP Basis based expenses products
Slide 39: U.S. GAAP to Non-GAAP Reconciliation – TY 2013
U.S. GAAP TO NON-GAAP RECONCILIATION – TY 2013 Reclassifications Adjustments $ and share counts in thousands, except per share data Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets
Slide 40: Footnotes
FOOTNOTES Non-GAAP financial measures differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the adjustment of certain expenses and other items that are not reflective of the earnings generated from pro
Slide 41: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS