Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q1 2021 Earnings Presentation
26 slides from Virtus Investment Partners's earnings presentation, May 2021
Slide 1: Small Cap Quality Value Portfolio Managed Accounts First Quarter 2021
Small Cap Quality Value Portfolio Managed Accounts First Quarter 2021 kayne.com 1800 Avenue of the Stars, 2nd Floor Los Angeles, CA 90067 T 800.231.7414
Slide 2: Firm Overview
Firm Overview As of March 31, 2021 Profile At a Glance • Originally established to manage founder capital Year Founded 1984 Headquarters Los Angeles, CA • Over three decades of experience AUM $56.3 billion • A differentiated “business analyst” investment approach Number of Equity Investment Professi
Slide 3: Employee Statistics
Employee Statistics As of March 31, 2021 African American Hispanic or 7% Latino 7% Male Female 63% Gender Ethnicity 37% Caucasian Asian 56% 30% 10+ years 30% Less than 5 years 40% Women Tenure of Leadership 50% Employees Men Roles 50% 5 - 10 years 30% Numbers may not always add up due to rounding. 3
Slide 4: Small Cap Quality Value Team
Small Cap Quality Value Team Portfolio Manager/Analysts Responsibility Research Experience Years with KAR Douglas S. Foreman, CFA Chief Investment Officer 35 Years 10 Years Portfolio Manager and Senior Research Analyst Julie Kutasov 20 Years 20 Years Sector Coverage: Materials and Industrials Portfo
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 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 Swi
Slide 7: Source of Quality
Source of Quality Small Cap Quality Value Portfolio Competitive Advantage Examples of High-Quality Business Models Network Effect Cost Advantage High Customer Brand Franchise Switching Costs The securities presented on this page are chosen based upon objective, non-performance based criteria and are
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 Portfolio Monitoring & Risk Management 8
Slide 9: Investment Process: Development of High-Quality Universe
Investment Process 1 Development of High-Quality Universe We source our investment universe in a number of ways Quantitative Screens • High return on capital over a full economic cycle • Long and resilient earnings history • High return on net operating assets • Minimal debt KAR Universe Other Resou
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 competitive Purpose: Evaluate source, level, and Purpose: Estimate total return over several advantage exists and evaluate its stren
Slide 11: Investment Process: Portfolio Construction
Investment Process 3 Portfolio Construction Investment Guidelines • 20-35 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 & Portfolio Monitoring
Investment Process 4 Risk Management & Portfolio Monitoring Risk Management • Focus on “high-quality” companies Investment Philosophy • Company’s “business risk” is primary risk control factor • Broad sector diversification Portfolio Level Controls • Individual security weights initiated at 2% to 5%
Slide 14: Portfolio Characteristics
Portfolio Characteristics Higher Quality, Stronger, More Consistent Growth, & Better Value Small Cap Quality Value Portfolio — As of March 31, 2021 KAR Small Cap Russell 2000® Quality Value Value Index Quality Return on Equity—Past 5 Years 21.3% 7.2% In a market of average businesses, we seek to own
Slide 15: Summary of Key Differentiators
Summary of Key Differentiators • We believe that purchasing high-quality businesses with competitive Philosophy protections at attractive valuations will achieve excess returns over a complete market cycle • A “business analyst” approach with a long-term perspective Process • Extensive fundamental r
Slide 16: Appendix
Appendix • Portfolio Data • Biographies • Representative Client List • Disclosure 16
Slide 17: Sector Weights
Sector Weights Small Cap Quality Value Portfolio As of March 31, 2021 KAR Small Cap Russell 2000® Quality Value Value Index Underweight/Overweight (%) Sectors (%) (%) Industrials 30.7 17.2 13.5 Consumer Discretionary 22.0 14.2 7.8 Information Technology 11.9 5.6 6.3 Consumer Staples 6.2 3.5 2.8 Mate
Slide 18: Conviction-Driven Investing Provides Opportunities for Excess Return
Conviction-Driven Investing Provides Opportunities for Excess Return Small Cap Quality Value Portfolio As of March 31, 2021 Top 10 Holdings GICS Sector % of Portfolio Scotts Miracle-Gro Materials 7.9 Thor Industries Consumer Discretionary 5.4 Cheesecake Factory Consumer Discretionary 5.0 Brooks Auto
Slide 19: Strong Risk-Adjusted Returns
Strong Risk-Adjusted Returns Small Cap Quality Value Portfolio Inception* to March 31, 2021 Meaningful Excess Return with Lower Volatility Annualized Since Inception* 20% 18% 16% 14% Annualized Return 12% KAR Small Cap Quality Value - Gross 10% KAR Small Cap Quality Value - Net 8% S&P 500® Index Rus
Slide 20: Peer Comparison
Peer Comparison Small Cap Quality Value Portfolio Inception* to March 31, 2021 0 25 Peer Ranking 50 75 100 Annualized Alpha Sharpe Sortino Annualized Beta Downside Return Ratio Ratio Standard Capture % Deviation KAR Small Cap Quality Value Russell 2000® Value Index Small Cap Value Universe *Actual i
Slide 21: Returns
Returns Small Cap Quality Value Portfolio Annualized Performance Calendar Year Performance Periods Excess Periods Excess Ending Gross Net Index Return – Net Ending Gross Net Index Return – Net 3/31/21 (%) (%) (%) (bps) 12/31 (%) (%) (%) (bps) First Quarter 13.53 12.71 21.17 (846) 2020 28.86 25.11 4.
Slide 22: Biographies
Biographies Small Cap Quality Value Team Douglas S. Foreman, CFA Julie Kutasov Chief Investment Officer and Member of the Executive Portfolio Manager and Senior Research Analyst with Management Committee primary research responsibilities for the small and mid- capitalization materials and industrial
Slide 23: Biographies
Biographies Small Cap Quality Value Team Todd Beiley, CFA Jon Christensen, 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 health communication
Slide 24: Biographies
Biographies Small Cap Quality Value Team Sean Dixon Jordan Greenhouse Research Analyst with primary research responsibilities for Managing Director – Senior Client Portfolio Manager the small and mid-capitalization consumer discretionary and industrials sectors Before joining Kayne Anderson Rudnick
Slide 25: Biographies
Biographies Executive Management Stephen A. Rigali, CFA Douglas S. Foreman, CFA Executive Managing Director and Member of the Executive Chief Investment Officer and Member of the Executive Management Committee Management Committee Mr. Rigali has approximately 40 years of experience in the Mr. Forema
Slide 26: Disclosure
Disclosure Small Cap Quality Value Portfolio Russell 2000 ® Percentage of Composite Pure Composite Net Value Index Composite 3-Yr Benchmark 3-Yr Wrap-Fee Number of Composite Firm Gross Return* Return Return Std Dev Std Dev Accounts Accounts Internal Assets Assets Year (%) (%) (%) (%) (%) (%) (%) Dis
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