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Investment Opportunity

The fund brings the power of liquid alternatives to the individual investor through a broad-based array of uncorrelated alternative strategies, seeking to improve the risk/ return profile of a diversified portfolio. Cliffwater Investments, a subadviser to the fund, leverages the alternatives research expertise of Cliffwater LLC to build portfolio allocations and recommend managers for the fund's underlying investments.

Go to VirtusAlts.com for more information on this fund and the alternative asset class.

Fund Risks

Alternative investments are not suitable for all investors.

The fund may engage in short sales, and may experience a loss if the price of a borrowed security increases before the date on which the fund replaces the security.

When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded.

The market price of equity securities may be affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.

Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk.

Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a security may fail to make payments in a timely manner. Values of debt securities may rise and fall in response to changes in interest rates. This risk may be enhanced with longer-term maturities.

There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

There may be no ready market for loan participation interests. The fund may have to sell the interests at a substantial discount. Such interests are subject to the credit risk of the underlying corporate borrower.

A convertible security may be called for redemption at a time and price unfavorable to the fund.

Investments in Master Limited Partnerships may be impacted by tax law changes, regulation, or factors affecting underlying assets.

The fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management.

A fund that focuses its investments in infrastructure-related companies will be more sensitive to conditions affecting their business or operations.

Commodity-linked instruments may experience a return different than the commodity they attempt to track and may also be exposed to counterparty risk.

The fund's principal investments strategies will 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 fund shares are held in a taxable account.

For additional information on these and other risk considerations, please see the fund's prospectus.

Key Stats (as of 3/26/2015)

Inception: 4/23/2014
Ticker: VATAX
CUSIP: 92835M703
Fund No: 2429
Net Assets by Fund: $82,426,464
Net Assets by Class: $10,033,162

Management Team

Stephen Nesbitt
Stephen Nesbitt Cliffwater Investments

Industry start date: 1978

Start date with Fund: 2014

Daniel Stern
Daniel Stern Cliffwater Investments

Industry start date: 1992

Start date with Fund: 2014

Kathleen Barchick
Kathleen Barchick Cliffwater Investments

Industry start date: 1994

Start date with Fund: 2014

Warun Kumar
Warun Kumar Cliffwater Investments

Industry start date: 1993

Start date with Fund: 2014

Amy Robinson
Amy Robinson Cliffwater Investments

Industry start date: 1979

Start date with Fund: 2014

Cliffwater Investments

Cliffwater Investments is a partnership between Virtus and Cliffwater LLC, a firm specialized in tailoring custom solutions to meet the needs of the world's most sophisticated institutional investors. Cliffwater LLC is among the leading alternatives research and investment firms, identifying and researching managers of alternative strategies, including hedge funds, private equity, and real assets; designing specific portfolio allocations; and monitoring portfolio risk and performance in order to build outcome-oriented portfolios. Cliffwater Investments leverages the alternatives research expertise of Cliffwater LLC to build portfolio allocation and recommend managers for the Virtus Alternative Solution Funds.

Average Annual Total Returns

Monthly Performance (%) (as of 2/27/2015)
  3 Mon. YTD 1YR 3YR 5YR 10YR Since Inception
NAV 0.83 1.92 NA NA NA NA 2.34
POP -4.97 -3.94 NA NA NA NA -3.55
Quarterly Performance (%) (as of 12/31/2014)
  3 Mon. YTD 1YR 3YR 5YR 10YR Since Inception
NAV -1.37 NA NA NA NA NA 0.41
POP -7.04 NA NA NA NA NA -5.37
Index -1.74 -0.58 -0.58 3.17 1.04 0.70 NA

Index: HFRX Global Hedge Fund Index
The HFRX Global Hedge Fund Index is designed to be representative of the overall composition of the hedge fund universe. It is comprised of all eligible hedge fund strategies, including but not limited to, convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset weighted based on the distribution of assets in the hedge fund industry. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

Sales Charge and Expense

POP (Public Offering Price) performance reflects the deduction of the maximum sales charge of 5.75%. A contingent deferred sales charge of 1% may be imposed on certain redemptions within 18 months on purchases on which a finder’s fee has been paid.

Fund class operating expenses are 2.60% and gross operating expenses are 3.98%.

Operating expenses reflect a contractual expense reimbursement in effect through 04/15/2015.

Operating expenses do not include expenses related to dividends and interest expenses on short positions.

Daily Price (as of 3/26/2015)

NAV Change ($)
10.03 -0.03
POP Change ($)
10.64 -0.03

Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contains this and other information about the fund. Please contact your financial representative, call 1-800- 243-4361 or visit www.virtus.com to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.

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.

Average annual total return is the annual compound return for the indicated period. It reflects the change in share price and the reinvestment of all dividends and capital gains. NAV returns do not include the effect of any applicable sales charges. POP and w/CDSC returns include the effect of maximum applicable sales charges.

Returns for periods of less than one year are cumulative total returns.

1 Yields/Distributions: Distribution Yield (at NAV) is calculated by (a) annualizing the latest distribution for fixed income funds or funds less than 1 year old (b) summing all distributions over the preceding 12 months for all other funds, and dividing the NAV on the last business date of the period. SEC Yield represents the net investment income earned by a fund over a 30-day period, expressed as an annual percentage rate based on the fund's public offering share price at the end of the 30-day period.  Gross SEC Yield represents the yield if there were no expense reimbursements.

2 Distribution History: Distributions are represented on a cash basis and may be reclassified at year end for tax purposes. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. STCG: Short Term Capital Gain, LTCG: Long Term Capital Gain

3 Risk Statistics:  R2 is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. Beta is a quantitative measure of the volatility of a given portfolio to the overall market. Alpha is a risk adjusted measure of an investment's excess return relative to a benchmark. A positive Alpha indicates that the investment produced a return greater than expected for the risk (as measured by Beta) taken. Standard Deviation measures variability of returns around the average return for an investment fund. Higher standard deviation suggests greater risk. Risk Statistics are calculated using 36 monthly returns.

4 Characteristics: For Equity Funds:Trailing P/E: Per-share stock price divided by the latest12-months Earnings per Share; Price/Cash Flow: Per-share stock price divided by the per-share operating cash flow; Price/Book: Per-share stock price divided by the latest 12-month per-share Book Value; 3-Year EPS Growth Rate: Average of earnings per share growth for latest 3-year period. The 3-Year EPS Growth Rate is not a forecast of the fund's performance.

4 Characteristics: For Fixed Income Funds:  Duration represents the interest rate sensitivity of a fixed income fund. For example, if a fund's duration is five years, a 1% increase in interest rates would result in a 5% decline in the fund's price. Similarly, a 1% decline in interest rates would result in a 5% gain in the fund's price.

Morningstar Disclosures: 
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for a variation in a fund’s monthly performance (including the effects of sales charges, loads, and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. The top 10% of funds in an investment category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its 3-, 5-, and 10-year (if applicable) Morningstar Rating metrics. Ratings are for the A Shares as shown only; other share classes bear different fees and expenses, which affect performance.

Load-waived A share star ratings do not include any front-end sales load and are intended for those investors who have access to such purchase terms (e.g., plan participants of a defined contribution plan). Not all A share mutual funds for which Morningstar calculates a load-waived A share star rating may actually waive their front-end sales load. Therefore, Morningstar strongly encourages investors to contact their investment professional to determine whether they are eligible to purchase the A share without paying the front load.

© 2013 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.