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Home / Mutual Fund / Virtus Newfleet Core Plus Bond Fund
Mutual Fund Fixed Income Multi-Sector

Virtus Newfleet Core Plus Bond Fund

Image specific to each asset class and market style grouping.
Ticker
SAVAX
CUSIP
92828R107
POP
$ (as of )
Inception
07/01/1998
Total Assets by Class
$28,391,392.29 (as of 12/02/2022)
Total Assets by Fund
$85,007,067.22 (as of 12/02/2022)
Morningstar Category
Intermediate Core-Plus Bond

Portfolio Overview

Investment Overview

The Fund seeks to generate total return from both current income and capital appreciation by investing primarily in higher-quality intermediate-term debt securities across 14 global bond sectors. A disciplined, time-tested investment process and rigorous risk management approach aim to capitalize on opportunities across undervalued areas of the fixed income markets.

Management Team

Investment Partner

Newfleet Asset Management

Newfleet Asset Management 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.

Newfleet Asset Management is a division of Virtus Fixed Income Advisers, LLC ("VFIA"), an SEC registered investment adviser.


Learn more about Newfleet Asset Management

Investment Professionals

David Albrycht, CFA

David L. Albrycht, CFA

President and Chief Investment Officer

Industry start date: 1985
Start date as fund Portfolio Manager: 2012

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Stephen Hooker

Stephen H. Hooker, CFA

Managing Director and Portfolio Manager

Industry start date: 1993
Start date as fund Portfolio Manager: 2017

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Key Features

Broad Fixed Income Exposure

Highly diversified, duration-neutral core plus bond allocation, primarily focused on higher-quality, more liquid securities

Relative Value Focus

Top-down analysis weighs relative attractiveness of 14 global bond sectors, evaluating fundamentals, yields, spreads, and supply/demand dynamics

Extensive Fundamental Research

Security selection driven by bottom-up analysis of individual bond quality, credit risk, valuation, company management, structure, and technical elements

Portfolio Characteristics

Characteristics4

(as of 09/30/2022)
Effective Duration (years) 6.5

Top Holdings (% Fund)

(as of 09/30/2022)
Security
United States Treasury Note/Bond, 3.0000% 08/15/2048
3.42
 3.42%
United States Treasury Note/Bond, 1.6250% 05/15/2031
2.02
 2.02%
United States Treasury Note/Bond, 2.2500% 02/15/2052
1.74
 1.74%
United States Treasury Note/Bond, 2.3750% 02/15/2042
1.54
 1.54%
Metropolitan Transportation Authority, 5.0000% 11/15/2045
1.45
 1.45%
United States Treasury Note/Bond, 1.5000% 02/15/2030
1.38
 1.38%
New York State Environmental Facilities Corp, 5.0000% 06/15/2051
1.23
 1.23%
United States Treasury Note/Bond, 1.8750% 02/15/2032
1.17
 1.17%
United States Treasury Note/Bond, 1.8750% 02/15/2051
1.15
 1.15%
United States Treasury Note/Bond, 2.8750% 05/15/2052
1.07
 1.07%

Holdings are subject to change.

Sector Allocation (% Invested Assets)

(as of 09/30/2022)
Non-Agency Residential MBS
23.82
 23.82%
Corporate - High Quality
22.05
 22.05%
Treasury
17.94
 17.94%
Asset Backed Securities
12.22
 12.22%
Corporate - High Yield
6.51
 6.51%
Bank Loans
5.62
 5.62%
Non-Agency Commercial MBS
4.41
 4.41%
Municipals
3.50
 3.50%
Yankee - High Quality
1.27
 1.27%
Emerging Market - High Yield
1.17
 1.17%
Taxable Municipals
1.08
 1.08%
Mortgage Backed Securities
0.41
 0.41%

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

Yields / Distributions1

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

Distribution History2

(as of )
Ex-Date
Income
STCG
LTCG
Reinvest NAV

Risk Statistics3

(as of )
Fund Index
R2
Beta
Alpha
Std Dev

Risk Considerations

Credit & Interest: Debt instruments are subject to various risks, including credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt instruments may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.
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 non-repayment of underlying collateral, including losses to the portfolio.
High Yield Fixed Income Securities: There is a greater risk of issuer default, less liquidity, and increased price volatility related to high yield securities than investment grade securities.
Bank Loans: Bank loans may be unsecured or not fully collateralized, may be subject to restrictions on resale, may be less liquid and may trade infrequently on the secondary market. Bank loans settle on a delayed basis; thus, sale proceeds may not be available to meet redemptions for a substantial period of time after the sale of the loan.
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.
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 (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.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

3Q22

Market Review

The Fed raised its main policy rate 150 basis points (bps) during the quarter in two jumbo moves of 75 bps each and signaled its resolve to restore price stability. The Fed is also set to increase the pace of its $8.9 trillion balance sheet run-off in September. While we still expect this to be a largely passive exercise, the market is watching for signs that the Fed may be open to selling off its mortgage-backed securities (MBS) when caps are not met. The European Central Bank (ECB) also joined the inflation fight and raised its policy rate to 125 bps over two meetings, marking the first increases off zero since 2016. In addition to managing the start of its own balance sheet run-off, the ECB will have to manage the complex task of preventing financial fragmentation among its member countries. The Bank of Japan is still a relative dove given local economic conditions, but it remains to be seen how much yen weakness will be tolerated, given the policy divergences. Global central banks have a complicated task ahead, but we are confident in their ability to contain inflation.

Financial markets have priced in significant changes to the economic and earnings landscape during the quarter, as shown by total returns. The U.S. Treasury curve shifted higher: the 5-year Treasury yield jumped up 105 bps, the 10-year Treasury yield went up by 82 bps, and the 30-year Treasury yield moved 59 bps higher. Most spread sectors underperformed U.S. Treasuries with the shifting economic conditions.

Despite the quarter’s volatility, we see value being restored across most of the fixed income sectors in which we invest. It is our expectation that supply chains will heal over time and the Fed will be successful in returning inflation to acceptable levels. We continue to watch the economic data to inform our views on the possibility of recession. While our base case remains that any contraction would be mild, recession risks have risen.

As the markets digest global developments, we continue to believe active sector and issuer selection is critical to take advantage of market volatility as it arises. Our approach to fixed income – the approach we have implemented for close to three decades – enables us to scan the bond market for the most attractive investment opportunities and is ideally suited for the current environment.

How the Fund Performed

Allocation to the high yield bank loan sector had a positive impact on performance as the index gained early in the period. However, sentiment weakened over the quarter, especially around the Fed’s Jackson Hole meeting, as a very vocal Fed reminded markets of its firm commitment to fight inflation at the expense of economic growth. As investor angst increases around slowing growth and its impact on credit markets, our current up-in-quality position has performed well.

Allocation to the corporate high yield sector also had a positive impact on performance. The high yield market outperformed during the third quarter as the backup in rates was somewhat offset by tightening credit spreads in the higher-quality cohorts of the sector. Despite strong starting fundamentals, investors remain concerned about the forward outlook as an aggressive Fed is tightening to slow inflation. Technicals were mixed as negative flows were offset by light issuance during the period.

Allocation to asset-backed securities (ABS) also helped performance. We are still positive on the U.S. consumer as low unemployment and excess savings continue to create a solid backdrop over the near term, driving our investment thesis and overweight to the sector. We continue to focus on the front end of the yield curve, where we look to put dollars to work in investment grade amortizing assets, and in deal structures that lead to de-leveraging. Allocation to the non-agency residential mortgage-backed securities (RMBS) sector over MBS had a positive impact on performance during the quarter. We are still positive on mortgage credit, which drives our investment thesis and overweight to the sector. We feel RMBS is priced attractively for the risks and continue to add up-in-quality residential exposures as prepayments remain muted. Housing prices are slowing as sharply higher mortgage rates raise affordability questions.

An underweight to U.S. Treasuries hurt performance as most spread sectors underperformed with the shifting economic conditions. Timing associated with emerging markets (EM) high yield trades was a detractor for the quarter. Macro concerns continue to act as the primary driver of negative EM debt risk sentiment – specifically the Fed, China’s slowing growth, and the Russian/Ukraine war.

Current Fund Strategy

Reduced exposure to cash, corporate high-quality bonds, and U.S. Treasuries. Increased exposure to RMBS and corporate high yield bonds. In addition to changes to the Fund’s sector allocation during the quarter, we continue to optimize positioning within sectors based on our view of the best relative value.

EM Debt and Non-U.S. Exposure: EM exposure was slightly higher during the quarter. Spreads had an overall tightening bias through August, only to retrace come September. Spreads on the EMBI Global were marginally wider for the quarter, with high yield underperforming. Topics driving the EM market in the third quarter included rising inflation and tightening monetary policy, continued focus on the Fed’s comments and next moves, the war in Ukraine, China’s zero-COVID policy, and country-specific elections. We continued to look for relative value swaps within curves, or between sovereigns and quasi sovereigns. We maintain our preference for hard currency debt and have no local currency exposure in the Fund. 

Investment Grade Corporates: Returns were pushed to modern era lows (down 18.7% YTD) in the third quarter as rates continued to rise. Dollar prices are down 20 points for the average bond in the index to a post-Global Financial Crisis (GFC) low of $86.62. Meanwhile, yields are now at post-GFC highs (~5.69%). Spreads widened 2 bps during the quarter to +158 bps. Fundamentals are holding in quite well with leverage returning to below pre-COVID levels while interest coverage ratios have been improving as EBITDA grows. The average coupon has been falling despite the rise in rates YTD. We find earnings estimates for the next six quarters to be too optimistic and believe the market is highly skeptical of these figures as well (they both call for solid growth). We are currently overweight financials and commodity sectors, which we believe perform well in a rising rate environment. We are positioned with an overweight to the BBB segment of the market and favor taking part in the new issue market as its concessions remain at extreme levels. Corporate High Yield: The high yield market experienced a small loss as rising rates offset some tightening credit spreads. However, this misses the volatility seen during the period – the high yield index was up 7.75% through August 15th before fully retracing in the second half of the quarter. CCCs outperformed on a total return basis, though this was solely driven by having less duration. Meanwhile, BB/B credit spreads tightened – consistent with portfolio managers high-grading their funds ahead of economic weakness. The technical environment is mixed as a light calendar helps support the market despite poor fund flows. Somewhat concerning is both the lack of CCC issuance and financings for LBOs that are struggling to clear the market. Valuations have improved from mid-August levels but are still well inside of recessionary levels. Volatility combined with the usual seasonal slowdown in summer has made trading more challenging. Consequently, we had less activity than normal during the quarter. Securitized: All securitized sectors saw negative returns as the Fed continued to tighten monetary policy. On the upside, we see yield opportunities not seen in many years. In the near term, low unemployment, strong consumer savings, and real wage growth are signs that the U.S. consumer will stay timely with its debt service payments. However, we are being selective with our transactions as we believe unemployment will tick higher, which may result in higher consumer delinquencies. We believe the risk/reward of higher quality short duration securitized products is extremely attractive after the rate back-up during the quarter. Most securitized products we invest in are being scrutinized using the Great Financial Crisis as a measure, and our thesis continues to be driven by good fundamentals. On the mortgage side, delinquencies are at historical lows, with limited to no affordable products compared to the market in the last housing crisis. With higher mortgage rates, we expect a significant drop in activity will lead to less supply for the back half of the year, which should allow credit spreads to respond favorably. As a result, our portfolios have an overweight to the sector.

Outlook

Our multi-sector relative value approach enables us to take advantage of opportunities when events that trigger volatility, such as inflation worries or the Russian invasion of Ukraine, affect valuations. In the current environment, we believe some of the best total return and yield opportunities can be found in spread sectors. However, given the increased risk of a recession, we have reduced some exposure to spread sectors that would typically be more negatively impacted, such as corporate high yield and bank loans. Credit selection and positioning remain key. Specific sectors that we believe demonstrate the best relative value for us include:

  • Out-of-index/off-the-run ABS
  • Non-agency RMBS
  • BBB-rated corporate investment grade
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 Newfleet Core Plus Bond Fund Fact Sheet - A
Virtus Newfleet Core Plus Bond Fund Fact Sheet - I
Virtus Newfleet Core Plus Bond Fund Fact Sheet - R6
Virtus Newfleet Core Plus Bond Fund Enhanced Fact Sheet
Newfleet Monthly Sector Review
Braving the New World of Bonds
Newfleet Fixed Income Fund Capabilities
Morningstar - Quarterly Ratings
Newfleet Market Review & Outlook
Newfleet 2022 Fixed Income Market Outlook

Distributions

Mutual Fund Distributions

Financial Materials

Virtus Opportunities Trust Statutory Prospectus
Virtus Newfleet Core Plus Bond Summary Prospectus
Virtus Opportunities Trust SAI
Virtus Opportunities Trust Annual Report
Virtus Opportunities Trust Semiannual Report

Holdings

Virtus Newfleet Core Plus Bond Fund - Monthly Update
Virtus Newfleet Core Plus Bond Fund Quarterly Holdings
Virtus Newfleet Core Plus Bond Fund Top Holdings
Virtus Newfleet Core Plus Bond Fund Holdings Fiscal Q1
Virtus Newfleet Core Plus Bond 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.