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Mutual Fund Fixed Income Multi-Sector

Newfleet Core Plus Bond

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Ticker
SAVAX
CUSIP
92828R107
POP
$ (as of )
Inception
07/01/1998
Total Assets by Class
$28,928,924.24 (as of 05/20/2022)
Total Assets by Fund
$121,564,127.70 (as of 05/20/2022)
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, LLC

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.


Learn more about Newfleet Asset Management, LLC

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 03/31/2022)
Effective Duration (years) 5.48

Top Holdings (% Fund)

(as of 03/31/2022)
Security
United States Treasury Note/Bond, 3.0000% 08/15/2048
3.22
 3.22%
United States Treasury Note/Bond, 1.6250% 05/15/2031
1.65
 1.65%
United States Treasury Note/Bond, 2.2500% 02/15/2052
1.44
 1.44%
United States Treasury Note/Bond, 1.5000% 02/15/2030
1.11
 1.11%
United States Treasury Note/Bond, 1.8750% 02/15/2051
1.11
 1.11%
United States Treasury Note/Bond, 1.8750% 02/15/2032
0.96
 0.96%
United States Treasury Note/Bond, 1.3750% 08/15/2050
0.96
 0.96%
Broward County FL Water & Sewer Utility Revenue, 4.0000% 10/01/2047
0.90
 0.90%
United States Treasury Note/Bond, 1.8750% 11/15/2051
0.78
 0.78%
United States Treasury Note/Bond, 1.3750% 11/15/2031
0.76
 0.76%

Holdings are subject to change.

Sector Allocation (% Fund)

(as of 03/31/2022)
Corporate - High Quality
21.80
 21.80%
Non-Agency Residential MBS
20.68
 20.68%
Treasury
14.62
 14.62%
Asset Backed Securities
11.60
 11.60%
Bank Loans
9.70
 9.70%
Corporate - High Yield
8.16
 8.16%
Cash
4.17
 4.17%
Non-Agency Commercial MBS
3.74
 3.74%
Yankee - High Quality
1.78
 1.78%
Emerging Market - High Yield
1.43
 1.43%
Taxable Municipals
1.04
 1.04%
Municipals
0.91
 0.91%
Mortgage Backed Securities
0.37
 0.37%

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, 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.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

1Q22

Market Review

Volatility returned to global markets during the quarter. The pandemic remained in the headlines while cases flared and eased. The latest variant, Omicron, proved to be generally less severe, though certain global regions were more impacted than others. China’s “zero COVID” policy came under close scrutiny given its potential impact on supply chain disruptions that exacerbate inflation. A secondary market shock occurred as Russia invaded Ukraine. The military operation on the ground in Ukraine resulted in another supply shock, this time centered on commodities. The ultimate economic impact of this latest shock remains largely unknown. However, most forecasts indicate lower growth and higher, more prolonged inflation.

The Federal Reserve (Fed) and other major central banks shifted to a more sharply hawkish tone in response to elevated inflation metrics. As expected, the Federal Open Market Committee (FOMC) completed its asset purchase program and raised its policy rate for the first time since 2018, with more rate increases likely to come. It also signaled that the Fed is likely to begin reducing its $8.9 trillion-dollar balance sheet as soon as its next meeting in May. Markets have priced in significant Fed monetary tightening over the rest of the year. As a result, the U.S. Treasury curve shifted higher and flattened, which inflicted losses on fixed income assets. The 5-year Treasury yield jumped up 160 basis points (bps), the 10-year Treasury yield went up by 83 bps, and the 30-year Treasury yield moved 55 bps higher.

Spread sectors underperformed U.S. Treasuries, and volatility in the fixed income markets increased both due to a more hawkish Fed policy and the Russian invasion of Ukraine. With the spike in U.S. Treasury yields, less interest-rate-sensitive sectors such as high yield bank loans and other shorter-duration asset classes, including asset-backed securities, generally outperformed on a total return basis. Despite the quarter’s volatility, we see value being restored across most of the fixed income sectors in which we invest. Economic growth is expected to remain above-trend, corporate earnings are expected to keep growing, unemployment remains low, and the consumer and housing markets remain well supported. Near-term recession is not our base case. It’s our expectation that supply chains will heal over time and the Fed will be successful in restoring price stability.

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’ve 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

The Fund returned -4.80% in the first quarter versus the Bloomberg U.S. Aggregate Bond Index return of -5.93%.

Allocation to high yield bank loans had a positive impact on performance during the quarter. Loans held in relatively well as demand, while slowed, remains strong for floating rate assets due to inflation, increasing hawkish rhetoric from the Fed, and rising U.S. Treasury yields. The Fund’s underweight to and positive issue selection within the corporate high-quality sector was beneficial to performance.  With rates and spreads moving higher, the sector was among the bottom performers.  Allocation to and issue selection within asset-backed securities (ABS) had a positive impact on performance as the sector benefited from both demand for shorter duration assets, and strength from the U.S. consumer. Securitized product continued to soften from a credit spread perspective, primarily driven by inflation and global macro concerns. However, we remain positive on the U.S. consumer, which is supported by a strong fundamental backdrop, and our portfolios emphasize an overweight to the sector. The Fund’s allocation to non-agency RMBS over agency mortgage-backed securities (MBS) had a positive impact on performance. We continue to see the tailwinds of limited supply within housing, and unlike agency MBS, non-agency RMBS offers direct exposure to real estate and mortgage credit. An underweight to U.S Treasuries detracted from performance, as did the timing of the Fund’s municipal bond crossover trade.

Current Fund Strategy 

Reduced exposure to corporate high yield and bank loans. Increased exposure to municipal bonds, ABS, and corporate high-quality bonds. In addition to changes to the Fund’s sector allocation during the quarter, we continue to look for the best relative value, which includes optimizing positions within sectors.

Emerging markets (EM) debt and non-U.S exposure.: The Fund’s overall EM exposure was slightly higher this quarter and remains at historical lows. We began 2022 with volatility in the rates market as central banks faced inflation pressures. To make matters worse, we plunged into geopolitical uncertainty as Russia invaded Ukraine in February, further exacerbating those pressures. Our Fund sustained minimal direct impact from this event, as we had already exited Russia exposure in mid-2021 due to rich valuations. As volatility settled, we selectively added to country exposures with compelling valuations that are less directly impacted by the event. We continue to prefer hard currency debt over local market instruments, but again see some potential opportunities arising as the Fed begins to lift rates. Investment grade (IG) corporates: Our exposure to the asset class is near a five-year low, which positioned us to take advantage of some of the recent spread weakness. We are positioned in the sector with an overweight to the BBB segment of the market, favor financials over industrials, and took advantage of elevated concessions in the new issue market during the quarter. Corporate High Yield: We’ve become less positive on the asset class given that spreads are relatively tight despite an expected aggressive tightening from the Fed and the potential fallout from the Russia/Ukraine war. We reduced exposures to industries challenged by competitive environments and rising input costs. We added names that will benefit from post-COVID reopening dynamics and rising commodity prices, which we expect will persist. Securitized: The massive move in U.S. Treasury rates over the last month of the quarter has reset pricing for all securitized products, enabling us to purchase new assets at wider spreads and higher yields. We continue to focus on the U.S. consumer and the housing sector, maintaining a significant overweight on ABS and non-agency RMBS. This is supported by strong fundamentals in both sectors: this past quarter, unemployment continued to trend lower (3.6%), and job openings remain high. On the housing side, we continue to see the tailwinds of limited supply.

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, where credit selection and positioning are key. Specific sectors that demonstrate the best relative value for us include:

  • Out-of-index/off-the-run ABS
  • Non-agency RMBS
  • Municipal Bonds
  • BBB-rated investment grade corporates
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 - R6
Virtus Newfleet Core Plus Bond Fund Fact Sheet - I
Virtus Newfleet Core Plus Bond Fund Enhanced Fact Sheet
Newfleet Monthly Sector Review
Braving the New World of Bonds
Morningstar - Quarterly Ratings
Newfleet Fixed Income Fund Capabilities
Newfleet Market Review & Outlook
Newfleet Tax-Exempt Market Review
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
Virtus Opportunities Trust Prospectus XBRL 485B 01 27 2022

Holdings

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