Emerging Markets Opportunities
Emerging Markets Opportunities
Investment Overview
The Fund seeks capital appreciation through a systematic, bottom-up investing approach to emerging market equities that focuses on uncovering attractive investment opportunities while striving to mitigate downside risk. The all-cap core portfolio is built with high conviction at the stock level, focusing on securities that exhibit higher growth forecasts, lower valuations, and reduced volatility versus the benchmark.
Effective June 10, 2022, this Fund's name has changed.
Investment Partner
Allianz Global Investors U.S. LLC
At Allianz Global Investors, active is the most important word in our vocabulary. Active is how we create and share value with clients. We believe in solving, not selling, and in adding value beyond pure economic gain. We invest for the long term, employing our innovative investment expertise and global resources. Our goal is to ensure a superior experience for our clients, wherever they are based and whatever their investment needs.
Active is: Allianz Global Investors
Learn more about Allianz Global Investors U.S. LLC
Investment Professionals
Kunal Ghosh
Managing Director, Senior Portfolio Manager
Industry start date: 2003
Start date as fund Portfolio Manager: 2007
Lu Yu, CFA, CIPM
Managing Director, Portfolio Manager
Industry start date: 2002
Start date as fund Portfolio Manager: 2010
Key Features
Exploits Inefficiencies
A behavioral finance approach, rooted in investors' often-inefficient reaction to new information, helps identify companies poised to benefit from changes not yet fully reflected in the market
Broad Emerging Market Exposure
Daily analysis of 3,000+ securities from a proprietary multi-factor model has resulted in a clear investment view on each stock and a high active share
Risk-Focused Approach
Proactive risk controls are embedded throughout the investment process to help lower volatility exposure versus the benchmark while a statistically based risk model helps uncover hidden sources of market risk
Characteristics4
(as of 03/31/2022)| Average Weighted Market Cap (billions) | $81.15 |
| Median Market Cap (billions) | $12.16 |
| Trailing P/E Ex-Negative Earnings | 9.25 |
| Price-to-Cash Flow | 10.60 |
| Price-to-Book Value | 3.01 |
| 3-Year EPS Growth Rate | 18.25 |
Top Holdings (% Fund)
| Security | |
|---|---|
| Taiwan Semiconductor Manufacturing Co., Ltd. | |
| Infosys Limited | |
| Postal Savings Bank of China Co., Ltd. Class H | |
| China Merchants Bank Co., Ltd. Class H | |
| JBS S.A. | |
| Cathay Financial Holdings Co., Ltd. | |
| MTN Group Limited | |
| Fubon Financial Holding Co., Ltd. | |
| Tencent Holdings Ltd. | |
| Hana Financial Group Inc. |
Holdings are subject to change.
Sector Allocation (% Equity)
| Financials | |
| Information Technology | |
| Communication Services | |
| Materials | |
| Industrials | |
| Energy | |
| Consumer Discretionary | |
| Consumer Staples | |
| Utilities | |
| Real Estate | |
| Health Care |
Top Countries (% Invested Assets)
(as of 03/31/2022)Growth of $10,000 Investment
From toPerformance
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
Risk Statistics3
(as of )| Fund | Index | |
|---|---|---|
| R2 | ||
| Beta | ||
| Alpha | ||
| Std Dev |
Risk Considerations
Financial Materials
Holdings
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 by 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 total dollar market value of all of a company’s outstanding shares. 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.
© 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.
1Q22
Market Review
Emerging market equities declined 6.97% in the first quarter amid rising macroeconomic headwinds and risk concerns. This included the U.S. Federal Reserve’s more aggressive tone regarding rate hikes, Russia’s invasion of Ukraine, and the U.S. dollar’s strength.
Latin American shares rallied significantly, thanks to outperformance of commodity and value-oriented shares, with each country in the region posting gains. Asian equities declined, as positive returns in southeastern countries were offset by headwinds in China driven by slowing growth and rising COVID-19 cases. European shares were down significantly, as Russia’s invasion of Ukraine led to the country’s eventual removal from key emerging markets benchmarks. At the sector level, only financials and materials finished positive. This was offset by a significant decline in energy stocks, due to large benchmark weights in Russian oil and gas companies, followed by double-digit declines in consumer discretionary, healthcare, information technology, and communication services.
Performance
The Virtus AllianzGI Emerging Markets Opportunities Fund (Class INST) declined 6.01% in the first quarter, while the MSCI Emerging Markets Index fell 6.97%. Stock selection in communications services and information technology and an overweight in financials aided results. Stock selection in energy and industrials detracted from performance.
The Mosaic Company and MTN Group were among the strongest stock contributors. Mosaic, a U.S.-listed producer of fertilizer, crop nutrients, and other agricultural products advanced as the conflict in the Ukraine caused further disruptions in the global fertilizer industry, which were already impacted by rising prices and tightening supplies. Shares of South African wireless telecommunications company MTN Group advanced due to favorable earnings guidance and an improving balance sheet, which puts the company in a more competitive position to facilitate future growth initiatives.
Russia-based Gazprom and Lukoil were among the largest stock detractors. Both oil and gas companies were negatively impacted by the country’s conflict in Ukraine, which led to a slew of sanctions, a trading halt, and removal from key emerging markets benchmarks. During the period, we trimmed exposure to Russian equities and had a de minimis weight at the end of the quarter due to fair value pricing.
Outlook
Emerging markets are likely to be influenced by the unfortunate events in Ukraine in the near-term, despite Russia’s diminished significance in the asset class. The team’s behavioral finance and AI-focused process had been meaningfully overweight Russia last year and had significantly reduced that exposure in recent months due to rising risk concerns and moderating alpha expectations. Our viewpoint is that despite the dire situation in the region, which has decimated cites and impacted countless lives, the asset class will regain its footing. Emerging markets equities may continue to outperform developed markets, as was the case prior to the Russia invasion, due to their value and commodity-focus, particularly after having lagged over the last decade. Our expectation is that the team’s actively managed approach can deliver to outperformance above the benchmark, as has been the case in the past.
At the end of the first quarter, the Fund was positioned with a sizeable overweight to financials, followed by more modest overweights in information technology and energy. This was offset by a meaningful underweight in consumer discretionary, followed by healthcare and materials. At the country level, the Fund was overweight China, emerging markets-related companies traded in the U.S., South Africa, Taiwan, and Brazil. Saudi Arabia, South Korea, and India were the three largest active underweight allocations, due to less attractive opportunities at a bottom-up stock level.