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Virtus Emerging Markets Opportunities Fund

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Ticker
AOTAX
CUSIP
92837N808
POP
$ (as of )
Inception
08/21/2006
Total Assets by Class
$19,302,117.73 (as of 02/07/2023)
Total Assets by Fund
$126,073,486.93 (as of 02/07/2023)
Morningstar Category
Diversified Emerging Mkts

Portfolio Overview

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.

Effective July 25, 2022, this Fund's manager has changed.

Management Team

Investment Partner

Virtus Systematic

The Virtus Systematic team of Virtus Investment Advisers, Inc. specializes in differentiated investment solutions, strategies, and outcomes across asset classes, regions, and securities.


Learn more about Virtus Systematic

Investment Professionals

Kunal, Ghosh

Kunal Ghosh

Chief Investment Officer, Senior Managing Director, Portfolio Manager

Industry start date: 2003
Start date as fund Portfolio Manager: 2007

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Yu, Lu

Lu Yu, CFA, CIPM

Managing Director, Lead Portfolio Manager

Industry start date: 2002
Start date as fund Portfolio Manager: 2010

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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

Portfolio Characteristics

Characteristics4

(as of 12/30/2022)
Average Weighted Market Cap (billions) $58.45
Median Market Cap (billions) $9.66
Trailing P/E Ex-Negative Earnings 8.31
Price-to-Cash Flow 10.24
Price-to-Book Value 2.55
3-Year Earnings Growth Rate 25.66

Top Holdings (% Fund)

(as of 12/30/2022)
Security
Taiwan Semiconductor Manufacturing Co Ltd
7.12
 7.12%
Tencent Holdings Ltd
3.60
 3.60%
Grupo Financiero Banorte SAB de CV
3.53
 3.53%
PetroChina Co Ltd
3.33
 3.33%
Axis Bank Ltd
3.09
 3.09%
ICICI Bank Ltd
2.95
 2.95%
ITC Ltd
2.67
 2.67%
Bank Mandiri Persero Tbk PT
2.46
 2.46%
Yum China Holdings Inc
2.43
 2.43%
Archer-Daniels-Midland Co
2.31
 2.31%

Holdings are subject to change.

Sector Allocation (% Equity)

(as of 12/30/2022)
Financials
23.84
 23.84%
Information Technology
17.01
 17.01%
Consumer Discretionary
15.63
 15.63%
Industrials
10.92
 10.92%
Consumer Staples
8.81
 8.81%
Energy
8.06
 8.06%
Communication Services
5.83
 5.83%
Utilities
3.42
 3.42%
Real Estate
2.91
 2.91%
Materials
2.06
 2.06%
Health Care
1.52
 1.52%

Top Countries (% Invested Assets)

(as of 12/30/2022)

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

Risk Statistics3

(as of )
Fund Index
R2
Beta
Alpha
Std Dev

Risk Considerations

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. Price changes may be short- or long-term. Local, regional, or global events such as war or military conflict (e.g., Russia's invasion of Ukraine), acts of terrorism, the spread of infectious illness (e.g., COVID-19 pandemic) or other public health issues, recessions, or other events could have a significant impact on the portfolio and its investments, including hampering the ability of the portfolio's manager(s) to invest the portfolio's assets as intended.
Issuer Risk: The portfolio will be affected by factors specific to the issuers of securities and other instruments in which the portfolio invests, including actual or perceived changes in the financial condition or business prospects of such issuers.
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 or medium-sized companies may enhance that risk.
Foreign & Emerging Markets: Investing in foreign securities, especially in emerging markets, subjects the portfolio to additional risks such as increased volatility, currency fluctuations, less liquidity, and political, regulatory, economic, and market risk.
Focused Investments: To the extent the portfolio focuses its investments on a limited number of issuers, sectors, industries or geographic regions, it may be subject to increased risk and volatility.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

4Q22

Market Review

Emerging markets equities rebounded in the fourth quarter, as investors cheered a weaker U.S. dollar and growing expectations that the Federal Reserve (Fed) could start to slow its aggressive interest rate tightening, mitigating fears that it might push the U.S. into severe recession. Markets were further buoyed by China’s surprise U-turn decision to loosen its strict zero-COVID policy, which has constrained the country’s economy since the start of the pandemic. The MSCI Emerging Markets Index rose 9.70% during the quarter—its only quarterly gain for the year.

Lower-quality, higher-volatility securities that had generally lagged the broader market for most of 2022 largely outperformed. All of the index’s sectors rose in the period, with the largest gains in communication services (+13.77%), healthcare (+13.10%), and industrials (+12.37%), and the smallest in consumer staples (+6.51%), utilities (+4.57%), and energy (+4.16%). Turkey was the index’s top performing country, which rose an impressive 62.86%, followed by Poland (+47.75%), Hungary (+36.33%), and Greece (+29.14%). The only countries to deliver negative returns in the period were Qatar (-15.29%), Saudi Arabia (-7.44%), Indonesia (-3.57%), and the United Arab Emirates (-1.51%).

Portfolio Overview

The Virtus Emerging Markets Opportunities Fund rose 6.05% (Class INST) in the quarter versus the MSCI Emerging Markets Index’s gain of 9.70%. Stock selection in information technology, consumer discretionary, and consumer staples detracted from performance. Stock selection in financials, energy, and industrials contributed the most to performance.

Contributors

Koc Holdings and Gerdau were among the strongest stock contributors.

  • Koc Holdings, one of the largest industrial conglomerate in Turkey, outperformed on export strength. Turkey was the strongest performing stock market in the Index during the quarter, with many of its stocks benefiting from record-high export business due to the country’s currency pressures and its continued friendly relations with Russia. Koc was no exception and experienced momentum in its auto business in Europe and Russia. Its energy business also helped to boost the stock. We maintained the position given the company’s continued favorable outlook.
  • Brazilian steel company Gerdau rose due to its attractive cash-flow yield and high dividend. We continued to hold the stock as we see room for additional gains.
  • Additional top contributors included Tencent Holdings, Taiwan Semiconductor, and Grupo Financiero Banorte.

Detractors

Daqo New Energy and ENN Natural Gas were among the largest stock detractors.

  • Chinese silicon and polysilicon manufacturer Daqo New Energy underperformed due to a collapse in polysilicon pricing during the quarter. The company’s offerings are primarily used in solar power solutions, and the sharp price deceleration and overall deteriorating supply/demand dynamics weighed on the stock. We trimmed the holding and continued to monitor it closely.
  • ENN Natural Gas, one of the largest private energy companies in China, lagged on softer natural gas prices. Despite this broader sector headwind, the company performed relatively well, widening its direct sales gas margin and delivering solid core profit. We held steady with the position based on the company’s continued strong business results.
  • Additional bottom detractors included Greentown China Holdings, Kweichow Moutai Co., and DB HiTek Co.

Outlook

Our current outlook for emerging markets equities hinges largely on two variables. The first is the speed of continued U.S. monetary tightening. If the Fed maintains its aggressive pace, emerging markets will likely face more pressure. The second is China’s economy. COVID seems to be spreading quickly in the country; however, as seen in past surges in other countries, the faster this works through the population, the quicker the Chinese economy should be able to rebound. Still, it will likely take some time for the Chinese economy to demonstrate a significant growth pickup as it normalizes, given its size.

There are several other favorable tailwinds to consider as well. We expect that the U.S. dollar will depreciate, which is usually a positive for emerging markets. Global supply chains should also continue stabilizing. The opening of China’s border is good news for surrounding countries, including Thailand, South Korea, the Philippines, and Indonesia. Additionally, Europe and the U.S. appear to face a high chance of recession. Collectively, these factors point to a potentially strong year for emerging markets relative to developed markets.

Against this outlook, we continue to apply a systematic, behavioral finance research process to uncover investment potential, while maintaining a disciplined focus on mitigating downside risk. We construct the Fund on a bottom-up basis with high conviction at the stock level. We also apply a dual-risk budget that targets a tracking error of 4% to 5% and lower forecast risk than the benchmark, striving to help protect capital during inevitable down-market periods. While this higher-quality, lower-volatility approach can lead to periods of underperformance in riskier, momentum-driven markets, we believe it leads to stronger outperformance and greater return consistency over the long term.

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 Emerging Markets Opportunities Fund Fact Sheet - A
Virtus Emerging Markets Opportunities Fund Fact Sheet - R6
Virtus Emerging Markets Opportunities Fund Fact Sheet - INST
Virtus Emerging Markets Equity Funds
Fantastic, Amazing...5 Stars - Utilizing Natural Language Processing to Bolster Active Management
The Next Generation Alpha Model: Seeding Intelligence with the Ground Truth
The Next Generation Alpha Model: Illuminating CEO and CFO Behavior Using NLP
The Next Generation Alpha Model: Introducing Natural Language Processing

Financial Materials

Virtus Investment Trust Statutory Prospectus
Virtus Emerging Markets Opportunities Fund Summary Prospectus
Virtus Investment Trust SAI
Virtus Investment Trust Annual Report
Virtus Investment Trust Semiannual Report

Holdings

Virtus Emerging Markets Opportunities Fund Monthly Holdings
Virtus Emerging Markets Opportunities Fund Top Holdings
Virtus Emerging Markets Opportunities Fund Holdings Fiscal Q1
Virtus AllianzGI Emerging Markets Opportunities Fund Holdings Fiscal Q3

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 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.

© 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.