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Mutual Fund Specialty

Global Sustainability

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Ticker
ASUAX
CUSIP
92838V650
POP
$ (as of )
Inception
12/09/2014
Total Assets by Class
$4,570,953.69 (as of 06/27/2022)
Total Assets by Fund
$99,900,897.85 (as of 06/27/2022)
Morningstar Category
Global Large-Stock Blend

Portfolio Overview

Investment Overview

The Fund seeks attractive long-term competitive returns and to have a positive societal benefit by considering environmental, social, and corporate governance (ESG) criteria. A disciplined investment process is used to identify high quality companies considered best-in-class in both ESG practices and financial fundamentals.

Effective June 10, 2022, this Fund's name has changed.

Management Team

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

Gunnar Miller

Gunnar Miller

Director of Research and Portfolio Manager, Thematic Equities

Industry start date: 1987
Start date as fund Portfolio Manager: 2021

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Robbie Miles

Robbie Miles, CFA

Vice President, Portfolio Manager, Thematic Equities

Industry start date: 2010
Start date as fund Portfolio Manager: 2021

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Key Features

Sustainability and Robust Growth Potential

Assessing the quality of a corporation's ESG practices can help identify information not reflected in its stock price, and provide insights into how the company manages its business risk

Proprietary SRI Ratings

The team utilizes AGI's proprietary sustainable and responsible investment (SRI) ratings model, which was created almost 20 years ago and combines over 200 ESG indicators on a relative basis across 47 different sub-sectors. Selections are made from the best-in-class and positive ESG momentum-rated stocks

ESG Expertise

The Fund's managers use the firm's comprehensive SRI ratings, dedicated ESG research team, traditional fundamental research, and proprietary Grassroots® Research platform to inform their decisions, building a focused global portfolio of approximately 50 highly rated, quality growth stocks

Portfolio Characteristics

Characteristics4

(as of 03/31/2022)
Average Weighted Market Cap (billions) $347.61
Median Market Cap (billions) $96.40
Trailing P/E Ex-Negative Earnings 22.57
Price-to-Cash Flow 22.69
Price-to-Book Value 6.92
3-Year EPS Growth Rate 10.71

Top Holdings (% Fund)

(as of 03/31/2022)
Security
UnitedHealth Group Incorporated
4.78
 4.78%
Visa Inc. Class A
4.49
 4.49%
Microsoft Corporation
3.99
 3.99%
Intuit Inc.
3.93
 3.93%
Apple Inc.
3.70
 3.70%
Stora Enso Oyj Class R
3.68
 3.68%
Shell PLC
3.41
 3.41%
S&P Global, Inc.
3.28
 3.28%
Applied Materials, Inc.
3.21
 3.21%
American Express Company
3.18
 3.18%

Holdings are subject to change.

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, acts of terrorism, the spread of infectious illness or other public health issue, 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 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.
Sustainable Investing: Because the portfolio focuses on investments in companies that the Manager believes exhibit strong environmental, social, and corporate governance records, the portfolio's universe of investments may be smaller than that of other portfolios and broad equity benchmark indices.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

1Q22

Market Review

Global equities retreated sharply over the quarter as sustained high inflation heightened concerns that central banks would need to be more aggressive in raising interest rates. These fears were further compounded when Russia invaded Ukraine, driving a steep rally in commodity prices as wide-ranging sanctions sparked worries of further supply chain disruptions.

US shares initially led the decline as ‘new technology’ stocks were hit by fears of higher rates before the brunt of the sell-off switched to Europe in February. By mid-March, global stocks were firmly in correction territory, having fallen around 15% since the start of the year, before a late-month rally helped to reduce these losses to around 5%.

Portfolio Review

The portfolio underperformed over the quarter. Sustained high inflation, and the expectation of rapid interest rate rises, was drove a sharp rotation towards value stocks in January. This was exacerbated further by Russia’s invasion of Ukraine, which is increasing supply chain difficulties, driving up the costs of energy and commodities, as well as decreasing risk appetites. Despite this heavily sentiment driven environment, stock selection continues to be the main driver of returns, with picks in Health Care and Energy helping to offset the weaker contribution from names in the Industrials, Information Technology and Consumer Staples sectors.

At a single stock level, Shell made the largest positive contribution to performance. Shares in the integrated energy company rallied strongly as oil and gas prices reached new heights. With integrated gas, renewables, and energy solutions within Shell now generating over 60% of group earnings, the division’s growing momentum speaks to the company’s longer-term role in enabling the energy transition.

American Express also performed well. The global provider of credit cards and payments is seen as a strong beneficiary of the global economic reopening and – on account of the pass-through effect of its services – relatively insulated from inflation. This was borne out by the stock’s Q4 results towards the end of January, where both revenue and earnings per share (EPS) meaningfully beat expectations.

Intuit made the worst contribution to performance. Shares in the provider of tax and accountancy software have weakened as its relatively elevated multiple has compressed in the face of higher interest rate expectations. However, Q2 results came in strong, with overall revenue above consensus and TurboTax revenues in particular increasing 180% year on year.

Keyence also weakened returns. Shares in the maker of machine vision systems have weakened significantly on account of the market’s sharp rotation to value stocks. However, at the start of February Keyence reported Q3 results which saw a 38% rise in sales while net profits grew 60%. The consistency of this growth suggests that Keyence is able to offset inflationary pressures on raw materials through pricing on account of sustained demand.

Over the quarter we initiated new positions in Tate & Lyle, Norsky Hydro, Sandvik, SSAB, Linde and Paypal. We exited our positions in Bureau Veritas and AIA Group.

Market Outlook

While the initial shock of Russia’s invasion of Ukraine has now passed, each day brings new stories of human suffering and courageous defiance. As the conflict becomes more and more drawn out, the clearest outcome at this stage is the unified response from Europe, the United States and other NATO-aligned countries. Financial markets are similarly moving beyond the immediate impact.

Inflation was already front of mind before the conflict erupted. Further supply chain disruption will sustain price rises which are beginning to have knock on economic effects. As real wages are squeezed, and disposable income is reoriented to essentials like food and heating, the result will likely be slower economic growth. Some consumers may prove more resilient than others, thanks to a backlog of pandemic savings, but in time these too will dwindle.

The conflict is also likely to engender new trends, as well as accelerating existing ones. Germany’s pledge to increase defence spending has struck a chord across many other countries that were demilitarising. This in turn has forced asset managers to reflect on the sector’s place within a “sustainable” investment universe. And if the energy transition, along with food, commodity and technology security were already relevant themes in an increasingly deglobalized world, the conflict has made them only more so.

Perversely, some of our weakest performers are lagging precisely due to the strength of their business models in the face of Covid-19. Valuations in the likes of Adobe (creative software) and Intuit (tax and accounting software), which proved highly resilient through 2020 and 2021, are softening despite robust fundamentals. Conversely, stronger performers are portfolio companies with clearer links to immediate concerns, such as helping consumers and businesses cut costs (Atlas Copco), supporting the energy transition (Kingspan, Assa Abloy), and enabling technology localisation (ASML).

It is one of our investment philosophy’s key principles that identifying and investing in longer-term structural shifts can sustain meaningful growth that is less correlated with the global economy. When paired with demonstrable pricing power, we believe our high-Quality businesses are well positioned to navigate this uncertain environment. This rotation, along with the still highly sentiment driven market, is providing opportunities for us as bottom-up stock pickers with a much longer time horizon.

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 Global Sustainability Fund Fact Sheet - INST
Virtus Global Sustainability Fund Presentation
Doing Well by Doing Good

Financial Materials

Virtus Strategy Trust Statutory Prospectus
Virtus Global Sustainability Fund Summary Prospectus
Virtus Strategy Trust SAI
Virtus Strategy Trust Annual Report
Virtus Strategy Trust Semiannual Report

Holdings

AllianzGI Global Sustainability Holdings Monthly
Virtus AllianzGI Global Sustainability Fund Top Holdings
Virtus AllianzGI Global Sustainability Fund Holdings Fiscal Q1
Virtus AllianzGI Global Sustainability 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 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.