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Virtus Duff & Phelps Global Infrastructure Fund

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Ticker
PGUAX
CUSIP
92828R826
POP
$ (as of )
Inception
12/30/2004
Total Assets by Class
$24,302,866.56 (as of 03/18/2024)
Total Assets by Fund
$137,994,403.92 (as of 03/18/2024)
Morningstar Category
Infrastructure

Portfolio Overview

Investment Overview

The Fund seeks attractive capital appreciation and current income by investing globally in owners/operators of essential services companies involved in the communications, utility, transportation, and energy industries. The highly experienced portfolio team applies a disciplined, bottom-up investment process that strives to deliver superior risk-adjusted returns.

Management Team

Investment Partner

Duff & Phelps Investment Management Co.

Duff & Phelps Investment Management pursues specialized investment strategies with exceptional depth of resources and expertise. Since its earliest beginnings, providing research and analysis of income producing securities to Depression-era investors, the firm's attention has been set on identifying attractive opportunities through active management and fundamental research, while managing the associated risks. Today, building on a distinguished legacy, Duff & Phelps has earned a reputation as a leader in investing in Global Listed Infrastructure, Global Listed Real Estate, Clean Energy, and Diversified Real Assets.

Quality. Reliability. Specialization. Since 1932.


Learn more about Duff & Phelps Investment Management Co.

Investment Professionals

Connie Luecke

Connie Luecke, CFA

Senior Managing Director, Senior Portfolio Manager

Industry start date: 1983
Start date as fund Portfolio Manager: 2004

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Steven Wittwer

Steven Wittwer, CFA

Executive Managing Director, Senior Portfolio Manager

Industry start date: 1997
Start date as fund Portfolio Manager: 2018

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Image - Photo - Rodney Clayton

Rodney C. Clayton, CFA

Managing Director, Portfolio Manager, and Senior Research Analyst

Industry start date: 2004
Start date as fund Portfolio Manager: 2024

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Key Features

Attractive Income and Growth Potential

Pursues the relatively high, predictable dividends and solid capital appreciation opportunities that infrastructure companies can offer

Strong Protective Attributes

Focuses on essential services companies that historically have performed well regardless of economic conditions, with long-term contracts or regulatory agreements that provide a potential inflation hedge

Lower Relative Risk Profile

High-conviction portfolio of 40-60 securities emphasizes quality, developed market owner/operators with high-visibility revenues, above-average dividend payouts, and steady cash flow and earnings growth

Portfolio Characteristics

Top Holdings (% Fund)

(as of 12/29/2023)
Security
Transurban Group
5.92
 5.92%
American Tower Corp
5.80
 5.80%
Aena SME SA
4.48
 4.48%
Cheniere Energy Inc
4.35
 4.35%
Sempra
3.66
 3.66%
NextEra Energy Inc
3.53
 3.53%
Crown Castle Inc
3.30
 3.30%
National Grid PLC
3.29
 3.29%
CenterPoint Energy Inc
2.90
 2.90%
Southern Co/The
2.81
 2.81%

Holdings are subject to change.

Characteristics4

(as of 12/29/2023)
Average Weighted Market Cap (billions) $40.63
Median Market Cap (billions) $21.40
Trailing P/E Ex-Negative Earnings 17.89
Price-to-Cash Flow 10.79
Price-to-Book Value 2.27
3-Year Earnings Growth Rate 13.34

Industry Allocation (% Equity)

(as of 12/29/2023)
Electric Utilities
19.56
 19.56%
Multi-Utilities
19.21
 19.21%
Oil & Gas Storage & Transportation
13.99
 13.99%
Airport Services
10.24
 10.24%
Telecom Tower REITs
9.16
 9.16%
Highways & Railtracks
8.54
 8.54%
Rail Transportation
6.92
 6.92%
Water Utilities
4.16
 4.16%
Gas Utilities
3.22
 3.22%
Construction & Engineering
2.94
 2.94%
Integrated Telecommunication Services
2.07
 2.07%

Top Countries (% Invested Assets)

(as of 12/29/2023)

Performance & Risk

Growth of $10,000 Investment

From to
This chart assumes an initial investment of $10,000 made on for Class ddd shares including any applicable sales charges. Performance assumes reinvestment of dividends and capital gain distributions.

Performance

As of
As of

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

The Index shown represents the Fund's performance index, which may differ from the Fund's regulatory index included in the Fund's Prospectus.

Yields / Distributions1

(as of )
30-day SEC Yield
30-day SEC Yield (unsubsidized)
Distribution Rate (at NAV)
Income Distributions Current Month
Income Distributions YTD

Risk Statistics3

(as of )
Fund Index
R2
Beta
Alpha
Std Dev

Risk Considerations

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small, medium, or large-sized companies may enhance that risk.
Industry/Sector Concentration: A portfolio that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated portfolio.
Foreign Investing: Investing in foreign securities subjects the portfolio to additional risks such as increased volatility; currency fluctuations; less liquidity; less publicly available information about the foreign investment; and political, regulatory, economic, and market risk.
Income: Income received from the portfolio may vary widely over the short- and long-term and/or be less than anticipated if the proceeds from maturing securities in the portfolio are reinvested in lower-yielding 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.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

4Q23

Market Developments

The fourth quarter began with low expectations as rising long-term interest rates pressured financial markets. The stock and bond markets reached quarterly lows near the end of October before the tides turned. Third quarter corporate earnings results were better-than-expected amid increased evidence that inflation may have peaked in the U.S. and the eurozone. Investors began to sense that interest rates cuts may even be a possibility in 2024 as weaker housing, payroll, and labor data were revealed. Bond yields plummeted and equity markets rallied in response. Global developed markets (as measured by the MSCI World Index (net)) rose 11.42% on a total return basis. Global listed infrastructure stocks (as measured by the FTSE Developed Core Infrastructure 50/50 Index (net)) increased 11.27% in the quarter, slightly below the broader market.

The communications sector rose sharply and was the strongest sector in the quarter. After suffering from rising interest rates for much of the year, communications stocks reacted positively to the interest rate reversal. In addition, a round of solid earnings reports contributed to the group’s outperformance. While the pace of carrier upgrades has slowed after the initial 5G deployment, the telecom industry is in the midst of a multi-year investment cycle to deploy new spectrum and accommodate wireless data growth.

Transportation stocks climbed higher during the quarter and ended as the best-performing sector for the year. Airports were strong performers as the companies reported robust passenger traffic and airlines unveiled solid schedules for the winter months. Toll road stocks also traded higher amid continued reports of steady traffic growth. North American railroads traded higher as some management teams observed that soft freight activity may be showing signs of bottoming.

Utility stocks also registered a positive return in the quarter, benefiting from recent interest rate declines. Though higher interest rates have weighed upon utilities this year, the sector displays a resilient earnings and growth profile, as demonstrated by constructive earnings results and management commentary.

Energy infrastructure had positive returns but was the worst-performing sector in the quarter. Signs of weaker demand caused oil prices to decline from highs reached in September, despite reduced output from OPEC+ producers. Natural gas prices also retreated as global storage levels remained above average and weather conditions reduced demand. While midstream companies generally do not take on direct commodity price exposure, commodity price movements tend to influence investors, and higher prices are generally supportive of midstream companies.

Performance Review

Performance was helped by positive stock selection across all sectors except midstream energy. Sector allocation was additive, with the positive contributions from an overweight position in communications and an underweight position in utilities partly offset by the negative contributions from an overweight position in midstream energy and an underweight position in transportation.

At the security level, the largest positive contributors to performance were also the two largest holdings during the quarter, American Tower Corp. and Transurban Group. Both holdings benefited from a reversal of interest rates during the quarter as well as positive operating results. American Tower, the U.S.-based provider of wireless communication towers, led positive returns as management issued a solid third quarter report and offered an optimistic outlook for demand from carrier customers.

Transurban is an urban toll road developer and operator that manages a global portfolio of assets across Australia and North America. Management reported favorable traffic results during the period and reiterated expectations for growth of their 2024 cash distribution to investors.

The largest detractors to relative performance were Dominion Energy Inc. and Ameren Corp. and Cheniere Energy. Dominion Energy is a Virginia-based utility that we sold early in the quarter after a period of poor performance. Dominion undertook a corporate restructuring and we were disappointed in the proceeds from asset sales. We also had concerns about the underlying earnings power of the company. Dominion is a benchmark name that rallied along with its utility peers during the remainder of the quarter as interest rates retreated. Ameren is a regulated electric and natural gas utility that serves customers in Missouri and Illinois. Ameren’s stock was negatively impacted by the same negative regulatory decision outcome in Illinois that impacted Exelon. The Illinois Commerce Commission lowered the allowed investment returns in the state, which negatively impacted the earnings growth outlook for the company. While this development provides a near-term earnings challenge for Ameren, we continue to hold the stock as we believe management will successfully redirect their growth efforts to the state of Missouri, their largest jurisdiction.

Outlook

Wireless tower activity in the U.S. should remain healthy as carriers shift from the initial stages of 5G buildout and blanket coverage to focus on more targeted network densification. Internationally, we expect solid organic growth to continue into 2024 as Europe and other regions forge ahead with their 5G expansion, while many emerging markets are still building 4G networks. Even though tower activity has moderated compared to historical trends, the long-term master lease agreements between the towers and the carriers provide a predictably healthy level of organic growth and cash flows for the tower companies. As interest rate headwinds begin to dissipate, we believe the attractive risk-reward profile for tower stocks will become more apparent.

Utilities will benefit from the transition to renewable energy and renewal of assets, tailwinds we expect to last for years to come. We believe there are multiple capital growth opportunities not just for renewables but also for transmission and resiliency spending as well. These investments in the utility grid both in the U.S. and Europe will support earnings and represent a long-term positive for the sector. We find valuations of North American regulated utilities to be attractive, while the integrated utility companies in Europe possess a good risk/reward balance.

Our view on the transportation sector is cautious due to mixed outlooks for the near and medium term. Toll roads have shown resiliency in various market environments due to their stable business models, including inflation-linked tolling regimes and efficient cost structures. Therefore, we foresee relatively steady operations ahead and maintain an overweight position compared to the benchmark. Airports have experienced a strong recovery of passenger air travel, especially leisure travel. While there is line of sight for continued momentum into 2024, we expect higher airline ticket prices and tighter monetary conditions to weigh upon demand for leisure travel. Business travel is likely to continue to face continued competition from video conferencing and corporate ESG objectives. North American railroads have improved their service offerings, enabling them to reclaim market share from trucking, improve pricing, and drive fluidity gains. However, near-term weakness in freight volumes and potential margin compression lead us to be cautious on the rails. Relative to the benchmark, the portfolio has an underweight position in both airports and railroads.

We remain constructive on the midstream energy space heading into 2024 with supply-side constraints a key pillar of our positive outlook. OPEC+ production cuts should continue to drive fundamental tightness in crude oil markets for the foreseeable future, sustaining prices at elevated levels. This will enable North American energy companies to grow production volumes modestly, which in turn supports higher midstream earnings and cash flow. For natural gas, all eyes remain on the intensity of this heating season. A normal-to-cold winter would likely drive global prices higher from here. The LNG market should remain fundamentally tight in 2024, with growing Asian demand and continued high imports into Europe.

The coming year will present challenges as companies adjust to higher interest rates, volatile commodity prices, and continued political uncertainties. We believe secular trends support continued progress within each sector. Asset renewal, energy security, decarbonization, and data growth are driving durable, long-term investment cycles that will continue for years to come despite any potential negative short-term economic developments. As always, we will continue to closely monitor global developments through our research and management meetings, incorporating changes to portfolio positioning as warranted.

The commentary is the opinion of the subadviser. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities.

Related Literature

Marketing Materials

Virtus Duff & Phelps Global Infrastructure Fund Fact Sheet
Morningstar - Quarterly Ratings
Duff & Phelps 2024 Outlook: Listed Real Assets

Financial Materials

Virtus Opportunities Trust Statutory Prospectus
Virtus Duff & Phelps Global Infrastructure Fund Summary Prospectus
Virtus Opportunities Trust SAI
Virtus Opportunities Trust Annual Report
Virtus Opportunities Trust Semiannual Report - Equity Funds

Holdings

Virtus Duff & Phelps Global Infrastructure Fund Quarterly Holdings
Virtus Duff & Phelps Global Infrastructure Fund Top Holdings
Virtus Duff & Phelps Global Infrastructure Fund Holdings Fiscal Q1
Virtus Duff & Phelps Global Infrastructure Fund Holdings Fiscal Q3

SEC 19(a) Notices

Section 19(a) Notice for Ex-Date December 21, 2023
Section 19(a) Notice for Ex-Date December 22, 2022

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 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: 30-day SEC Yield is a standardized yield calculated according to a formula set by the SEC, and is subject to change. 30-day SEC Yield (unsubsidized) is the 30-day SEC Yield without the effect of applicable expense waivers. Distribution Rate is calculated by (a) annualizing the latest income distribution for fixed income funds or funds less than 1 year old, or (b) summing all income distributions over the preceding 12 months for all other funds, and dividing the NAV on the last business date of the period, unless otherwise indicated. The Distribution Rate may be comprised of ordinary income, net realized capital gains and returns of capital.

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: Avg. Weighted Market Cap (bn): The sum of each security's weight within the fund (or index) multiplied by the security's market capitalization; Trailing P/E Ex-Negative Earnings: Per-share stock price divided by the latest 12-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: Effective Duration represents the interest rate sensitivity of a fixed income fund. For example, if a fund's effective 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 Rating 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. Ratings do not take into account the effects of sales charges and loads.

© year 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.