The Merger Fund® Interactive Chart
See how The Merger Fund® can diversify traditional stock and bond portfolios in an interactive way.
July 2024: Increasing volume and decreasing time to completion
- Merger and Acquisition (M&A) activity increased to $1.9 trillion in July, a 16% increase year-over-year.
- Transaction volume was bolstered this year by a rise in “mega deals,” with 36 transactions between $5 billion and $10 billion—an increase of 33%. Transactions exceeding $10 billion have seen a 25% increase, with 20 such deals announced.
- Private equity purchases reached $358 billion year-to-date, an 11% increase.
- We are beginning to see faster deal completion times in North America, suggesting regulatory flexibility in negotiating agreements rather than the pursuit of lengthy court processes.
- The robust pipeline of pending corporate separation activity in the U.S includes over 20 pending separations scheduled through year-end, highlighting an attractive M&A environment.
Spreads
Spreads remain attractive. As of July 31st, we tracked 139 potential investment transactions offering a median annualized spread of approximately 10.5%, slightly lower than last month. Both The Merger Fund® and the Virtus Westchester Event-Driven Fund continue to hold a number of arbitrage investments with a weighted median annualized spread in the mid-teens. As a reminder, the funds' net performance will typically be lower than the median spreads themselves, as the actual fund performance will be reduced by operating expenses, trading and hedging costs, potential time slippage, and the occasional terminated transaction.
July 2024 Performance Review
The Merger Fund® (MERIX): +1.58%
- Seven deals were completed, and capital was redeployed into seven new situations. There were no broken transactions. As of the end of July, we held 58 positions and were approximately 94% invested.
- Top contributors: United States Steel Corp./Nippon Steel Corp.; Amedisys Inc./UnitedHealth Group Inc.; Hess Corp./Chevron Corp.; Catalent Inc./Novo Holdings A/S; Cerevel Therapeutics/Abbvie Inc.
- Top detractors: Westrock Co./Smurfit Kappa Group PLC; Macro Portfolio Hedge; SilverBow Resources Inc./Crescent Energy Co.; Inhibrx Inc./Sanofi SA; Everi Holdings Inc./Apollo Inc.
Virtus Westchester Event Driven Fund (WCEIX): +1.59%
- Eight deals were completed during the month, with capital redeployed into six new situations. There were no broken transactions. As of the end of July, the Fund held 75 positions and was approximately 119% invested.
- Top contributors: United States Steel Corp./Nippon Steel Corp.; Amedisys Inc./UnitedHealth Group Inc.; Cerevel Therapeutics/Abbvie Inc.; Hess Corp./Chevron Corp.; Catalent Inc./Novo Holdings A/S.
- Top detractors: Silicon Motion; Westrock Co./Smurfit Kappa Group PLC; Thyssenkrupp AG; GSEs; Pan American Silver Corp.
Virtus Westchester Credit Event Fund (WCFIX): +0.88%
- One transaction was completed, with capital redeployed into five new transactions. There were no broken transactions. The Fund held 42 transactions and was 101% invested at the end of the month.
- Top contributors: Closed-End Funds; Cerevel Therapeutics/Abbvie Inc.; Kronos Acquisition Holdings; Clear Channel Outdoor Holdings; Everi Holdings Inc./Global Gaming & PlayDigital.
- Top detractors: Claire’s Stores; Allen Media LLC; U.S. Treasury; Illuminate Buyer LLC; Vista Outdoor Inc./CSG.
Performance and Risk/Reward Updates
Risk Metrics:
(as of
)
| 3 Year | MERIX | WCEIX | WCFIX | S&P 500® Index | Bloomberg U.S. Aggregate Bond Index | Morningstar U.S. Fund Event Driven Category |
|---|---|---|---|---|---|---|
| Total Return | 2.91 | 1.85 | 3.01 | 9.60 | -2.63 | 2.08 |
| Standard Deviation | 2.64 | 4.38 | 3.99 | 17.84 | 7.54 | 4.66 |
| Alpha (vs. S&P 500®) | -0.87 | -2.74 | -1.58 | 0.00 | -8.00 | -2.29 |
| Sharpe Ratio | -0.25 | -0.38 | -0.14 | 0.33 | -0.80 | -0.27 |
| Sortino Ratio | -0.32 | -0.49 | -0.19 | 0.49 | -1.01 | -0.29 |
| Beta (vs. S&P 500®) | 0.03 | 0.16 | 0.15 | 1.00 | 0.29 | 0.13 |
| Correlation | 0.23 | 0.65 | 0.72 | 1.00 | 0.69 | 0.43 |
| Beta (vs. Agg) | 0.08 | 0.29 | 0.27 | 1.65 | 1.00 | 0.23 |
| Correlation (vs. Agg) | 0.23 | 0.50 | 0.54 | 0.69 | 1.00 | 0.30 |
(as of
)
| 5 Year | MERIX | WCEIX | WCFIX | S&P 500® Index | Bloomberg U.S. Aggregate Bond Index | Morningstar U.S. Fund Event Driven Category |
|---|---|---|---|---|---|---|
| Total Return | 3.12 | 3.35 | 6.87 | 15.00 | 0.19 | 4.06 |
| Standard Deviation | 3.07 | 7.74 | 10.59 | 18.08 | 6.31 | 6.96 |
| Alpha (vs. S&P 500®) | -0.22 | -2.63 | 0.28 | 0.00 | -4.38 | -1.20 |
| Sharpe Ratio | 0.24 | 0.12 | 0.41 | 0.68 | -0.34 | 0.25 |
| Sortino Ratio | 0.32 | 0.16 | 0.59 | 1.07 | -0.45 | 0.42 |
| Beta (vs. S&P 500®) | 0.08 | 0.29 | 0.35 | 1.00 | 0.18 | 0.24 |
| Correlation | 0.44 | 0.68 | 0.59 | 1.00 | 0.52 | 0.57 |
| Beta (vs. Agg) | 0.10 | 0.33 | 0.39 | 1.51 | 1.00 | 0.30 |
| Correlation (vs. Agg) | 0.21 | 0.26 | 0.23 | 0.52 | 1.00 | 0.26 |
(as of
)
| 10 Year | MERIX | WCEIX | WCFIX | S&P 500® Index | Bloomberg U.S. Aggregate Bond Index | Morningstar U.S. Fund Event Driven Category |
|---|---|---|---|---|---|---|
| Total Return | 3.13 | 3.38 | NA | 13.15 | 1.61 | 3.08 |
| Standard Deviation | 3.02 | 6.18 | NA | 15.29 | 4.92 | 6.34 |
| Alpha (vs. S&P 500®) | 0.44 | -1.39 | NA | 0.00 | -1.34 | -1.21 |
| Sharpe Ratio | 0.48 | 0.27 | NA | 0.74 | -0.01 | 0.22 |
| Sortino Ratio | 0.70 | 0.37 | NA | 1.15 | -0.02 | 0.33 |
| Beta (vs. S&P 500®) | 0.09 | 0.27 | NA | 1.00 | 0.12 | 0.24 |
| Correlation | 0.45 | 0.68 | NA | 1.00 | 0.37 | 0.55 |
| Beta (vs. Agg) | 0.06 | 0.25 | NA | 1.15 | 1.00 | 0.22 |
| Correlation (vs. Agg) | 0.10 | 0.20 | NA | 0.37 | 1.00 | 0.18 |
Performance (%):
(as of )| Product / Market Indices | Ticker | MTD | YTD | 1 Year | 2 Year | 3 Year | 5 Year | 10 Year |
|---|---|---|---|---|---|---|---|---|
| Westchester Event-Driven | WCEIX* | 1.59 | 1.87 | 7.01 | 4.11 | 1.85 | 3.35 | 3.38 |
| Westchester Credit Event | WCFIX* | 0.88 | 4.29 | 7.57 | 7.51 | 3.01 | 6.87 | NA |
| The Merger Fund® | MERIX* | 1.58 | 2.24 | 7.37 | 4.07 | 2.91 | 3.12 | 3.13 |
| S&P 500® Index | 1.22 | 16.70 | 22.15 | 17.49 | 9.60 | 15.00 | 13.15 | |
| Bloomberg U.S. Aggregate Bond Index | 2.34 | 1.61 | 5.10 | 0.78 | -2.63 | 0.19 | 1.61 |
* MERIX inception date is 8/1/13 (The Merger Fund® A Shares inception date is 1/31/89), WCEIX inception date is 1/2/14, WCFIX inception date is 10/29/17.
Performance data quoted represents past results. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so your shares, when redeemed, may be worth more or less than their original cost.
Class I shares have no sales charges and are not available to all investors. Other share classes have sales charges. The Merger Fund® - The fund class gross expense ratio is 1.37%. The net expense ratio is 1.27%, which reflects a contractual expense reimbursement in effect through 04/30/2025. The net expense ratio minus dividend and interest expense on short sales and indirect expenses incurred by the underlying funds in which the Fund invests is 1.17%. Virtus Westchester Credit Event Fund - The fund class gross expense ratio is 1.61%. The gross expense ratio minus dividend and interest expenses on short sales and indirect expenses incurred by the underlying funds in which the Fund invests is 1.45%. Virtus Westchester Event Driven Fund - The fund class gross expense ratio is 1.67%. The net expense ratio is 1.57%, which reflects a contractual expense reimbursement in effect through 04/30/2025. The net expense ratio minus dividend and interest expenses on short sales is 1.53%.
Investment Partner
All investments carry a certain degree of risk, including possible loss of principal.
IMPORTANT RISK CONSIDERATIONS
The Merger® Fund: 3, 8, 12, 13, 4, 9, 1, 2, 5, 14, 11, 7, 10; Virtus Westchester Event-Driven Fund: 3, 8, 4, 12, 9, 1, 2, 5, 13, 7, 10; Virtus Westchester Credit Event Fund: 3, 8, 1, 12, 9, 2, 5, 6, 4, 13, 7, 10.
- Credit & Interest: Debt instruments are subject to various risks, including credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt instruments may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.
- Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.
- Fundamental Risk of Investing: There can be no assurance that the portfolio will achieve its investment objectives. An investment in the portfolio is subject to the risk of loss of principal; shares may decrease in value.
- Foreign Investing: Investing in foreign securities subjects the portfolio to additional risks such as increased volatility, currency fluctuations, less liquidity, and political, regulatory, economic, and market risk.
- Hedging: The portfolio’s hedging strategy will be subject to the portfolio’s investment adviser’s ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being hedged.
- Lower-rated Securities: Instruments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities.
- 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 recession could impact the portfolio, including hampering the ability of the portfolio's manager(s) to invest its assets as intended.
- Merger-arbitrage & Event-driven: Merger-arbitrage and event-driven investing involve the risk that the adviser’s evaluation of the outcome of a proposed event, whether it be a merger, reorganization, regulatory issue, or other event, will prove incorrect and that the fund’s return on the investment may be negative.
- Portfolio Turnover: The portfolio’s principal investment strategies may result in a consistently high portfolio turnover rate. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the portfolio is held in a taxable account.
- Prospectus: For additional information on risks, please see the fund’s prospectus.
- Sector Focused Investing: Events negatively affecting a particular industry or market sector in which the portfolio focuses its investments may cause the value of the portfolio to decrease.
- Short Sales: The portfolio may engage in short sales and may incur a loss if the price of a borrowed security increases before the date on which the portfolio replaces the security.
- Special Purpose Acquisition Company (SPAC): The value of a SPAC's securities is particularly dependent on the ability of its management to identify and complete a profitable acquisition. There is no guarantee that the SPACs in which the Fund invests will complete an acquisition or that any acquisitions completed by the SPACs in which the fund invests will be profitable. The values of investments in SPACs may be highly volatile and these investments may also have little or no liquidity.
- Technology Concentration: Because the portfolio is presently heavily weighted in the technology sector, it will be impacted by that sector’s performance more than a portfolio with broader sector diversification.
GLOSSARY
Alpha: A risk-adjusted measure of an investment’s excess return relative to a benchmark. Beta: A quantitative measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Correlation: A measure that determines the degree to which two variables’ movements are associated. The correlation coefficient will vary from -1 to +1. A -1 indicates perfect negative correlation and +1 indicates perfect positive correlation. Long Position: Refers to the purchase of a security with the expectation that it will rise in value. Deal Spreads: The difference between what the buyer (acquirer) is offering in terms of price for the seller’s (target) stock, typically at a premium to the market price, the result of some risk of the transaction being delayed or terminated. Long Position: Refers to the purchase of a security with the expectation that it will rise in value. Maximum Drawdown: The peak-to-trough decline during a specific record period of an investment, fund, or commodity. A drawdown is usually quoted as the percentage between the peak and the trough. Sharpe Ratio: A risk-adjusted measure calculated using standard deviation and excess return to determine reward per unit of risk. Short Position: Refers to the sale of a borrowed security with the intention of buying it back later at a lower price. Standard Deviation: Measures variability of returns around the average return for an investment portfolio. Higher standard deviation suggests greater risk.
INDEX DEFINITIONS
The Bloomberg U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The Morningstar U.S. Fund Event Driven Category Average contains strategies that attempt to profit when security prices change in response to certain corporate actions, such as bankruptcies, mergers and acquisitions, emergence from bankruptcy, shifts in corporate strategy, and other atypical events. Activist shareholder and distressed investment strategies also fall into this category. These portfolios typically focus on equity securities but can invest across the capital structure. The category average is calculated on a total return basis with dividends reinvested. The category average is unmanaged and is not available for direct investment. The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. Indexes are calculated on a total return basis. Indexes are unmanaged, their returns do not reflect any fees, expenses, or sales charges, and are not available for direct investment.
Please consider a Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other information about any Virtus Fund, contact your financial representative, call 800-243-4361, or visit virtus.com for a prospectus or summary prospectus. Read it carefully before investing.
Not insured by FDIC/NCUSIF or any federal government agency. No bank guarantee. Not a deposit. May lose value.
Distributed by VP Distributors, LLC member FINRA and subsidiary of Virtus Investment Partners, Inc.