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Investment Opportunity

The fund seeks to generate total return, comprised of income and capital appreciation, by identifying undervalued sectors of the bond market. Individual opportunities are analyzed through extensive fundamental credit research. The portfolio seeks diversification across 14 bond market sectors. Security and sector convictions, and macro views, may be enhanced or hedged through the use of derivatives. The fund can also employ an options overlay strategy to generate incremental income. Investors should recognize that this strategy may detract from performance during periods of volatility.

Fund Risks

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

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

Bank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can make loans relatively illiquid at times.

ABS/MBS: Changes in interest rates can cause both extension and prepayment risks for asset- and mortgage-backed securities. These securities are also subject to risks associated with the repayment of underlying collateral.

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

Call/Put Spreads: Buying and selling call and put option spreads on the SPX Index risks the loss of the premium when buying, can limit upside participation and increase downside losses.

Prospectus: For additional information on risks, please see the fund's prospectus.

Key Stats (as of 3/27/2017)

Inception: 9/8/2014
Ticker: VISBX
CUSIP: 92835M851
Fund No: 2437
Net Assets by Fund: $30,971,955
Net Assets by Class: $29,213,873

Management Team

David L. Albrycht, CFA
David L. Albrycht, CFA Newfleet Asset Management, LLC

Industry start date: 1985

Start date with Fund: 2014

Francesco Ossino
Francesco Ossino Newfleet Asset Management, LLC

Industry start date: 1996

Start date with Fund: 2014

Jonathan Stanley, CFA
Jonathan Stanley, CFA Newfleet Asset Management, LLC

Industry start date: 1997

Start date with Fund: 2014

Newfleet Asset Management, LLC

Newfleet leverages the knowledge and skill of a team of investment professionals with expertise in every sector of the bond market, including evolving, specialized, and out-of-favor sectors. The team employs active sector rotation and disciplined risk management to portfolio construction.

Average Annual Total Returns

Monthly Performance (%) (as of 2/28/2017)
  3 Mon. YTD 1YR 3YR 5YR 10YR Since Inception
NAV 2.66 1.95 9.96 NA NA NA 3.62
POP 2.66 1.95 9.96 NA NA NA 3.62
Quarterly Performance (%) (as of 12/30/2016)
  3 Mon. YTD 1YR 3YR 5YR 10YR Since Inception
NAV -0.87 7.07 7.07 NA NA NA 3.02
POP -0.87 7.07 7.07 NA NA NA 3.02
Index 0.20 0.66 0.66 0.38 0.38 1.28 NA

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.

Sales Charge and Expenses

Offered primarily to eligible institutional investors who purchase the minimum amounts and may not be available to all investors. POP (Public Offering Price) performance reflects the deduction of the maximum sales charge of 0%.

The fund class gross expense ratio is 1.93%. The net expense ratio is 0.92%, which reflects a contractual expense reimbursement in effect through 03/01/2018. This ratio reflects the direct and indirect expenses paid by the Fund.

The net expense ratio minus the indirect expenses incurred by the underlying funds in which the Fund invests is 0.90%.

Index: BofA Merrill Lynch USD 3-Month LIBOR Constant Maturity Index
The BofA Merrill Lynch USD 3-Month LIBOR Constant Maturity Index is based on the assumed purchase of a synthetic instrument having 3 months to maturity and with a coupon equal to the closing quote for 3-Month LIBOR. That issue is sold the following day (priced at a yield equal to the current day closing 3-Month LIBOR rate) and is rolled into a new 3-Month instrument. The index, therefore, will always have a constant maturity equal to exactly 3 months. The index is unmanaged, its returns do not reflect any fees, expenses, or sales charges, and is not available for direct investment.

Daily Price (as of 3/27/2017)

NAV Change ($)
9.90 0.00
POP Change ($)
9.90 0.00

Yields/Distributions1 (as of 2/28/2017)

Distribution Yield (at NAV) 3.13%
SEC Yield 4.32%
SEC Yield (gross) 3.57%
Distributions Current Month $0.026000
Distributions YTD $0.051258

Distribution History2 (February 2017)

Ex-Date 02/28/2017
Income $0.026000
STCG $0.000000
LTCG $0.000000
Reinvest NAV $9.97

Top Sectors (% Fund)
(as of 12/30/2016)

Corporate - High Yield 39.08
Corporate - High Quality 21.01
Bank Loans 14.65
Non-Agency Residential MBS 12.17
Asset Backed Securities 7.67

(as of 12/30/2016)

Duration 3.91 years

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:
The Morningstar RatingTM for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product 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 managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.

© 2016 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.