Virtus Newfleet Multi-Sector Intermediate Bond Fund

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Mutual Fund Fixed Income Multi-Sector

Virtus Newfleet Multi-Sector Intermediate Bond Fund

Image specific to each asset class and market style grouping.
Ticker
NAMFX
CUSIP
92828R677
POP
$ (as of )
Inception
12/15/1989
Total Assets by Class
$68,087,914.40 (as of 06/08/2023)
Total Assets by Fund
$294,885,920.13 (as of 06/08/2023)
Morningstar Category
Multisector Bond

Portfolio Overview

Investment Overview

The Fund seeks to generate high current income and total return by investing primarily in intermediate-term debt securities utilizing a relative value, research-driven approach. The investment team seeks to strategically overweight undervalued sectors while applying strict risk controls.

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 Professional

David Albrycht, CFA

David L. Albrycht, CFA

President and Chief Investment Officer

Industry start date: 1985
Start date as fund Portfolio Manager: 1994

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Key Features

Diversification

Highly diversified, duration-neutral opportunistic bond portfolio, which allows for higher allocations to lower-rated and non-U.S. debt

Flexibility

Newfleet rotates across 14 major bond segments, including ex-U.S. (Yankees and corporate bonds, and non-U.S. dollar bonds in both developed and emerging markets), in order to benefit from opportunity—and manage risk

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

Top Holdings (% Fund)

(as of 03/31/2023)
Security
United States Treasury Note/Bond, 4.1250% 11/15/2032
3.40
 3.40%
United States Treasury Note/Bond, 4.0000% 11/15/2052
2.62
 2.62%
United States Treasury Note/Bond, 1.8750% 02/15/2032
1.86
 1.86%
United States Treasury Note/Bond, 2.5000% 04/30/2024
1.85
 1.85%
United States Treasury Note/Bond, 0.1250% 08/31/2023
1.71
 1.71%
United States Treasury Note/Bond, 1.8750% 11/15/2051
0.76
 0.76%
United States Treasury Note/Bond, 0.2500% 05/31/2025
0.71
 0.71%
AMSR 2020-SFR3 Trust, 1.8060% 09/01/2037
0.65
 0.65%
Towd Point Mortgage Trust 2018-6, 3.7500%
0.60
 0.60%
Dominican Republic International Bond, 4.8750% 09/23/2032
0.51
 0.51%

Holdings are subject to change.

Characteristics4

(as of 03/31/2023)
Effective Duration (years) 4.29

Sector Allocation (% Fund)

(as of 03/31/2023)
Corporate - High Quality
20.61
 20.61%
Corporate - High Yield
19.22
 19.22%
Asset Backed Securities
13.09
 13.09%
Treasury
12.96
 12.96%
Non-Agency Residential MBS
11.39
 11.39%
Bank Loans
11.36
 11.36%
Emerging Market - High Yield
5.00
 5.00%
Yankee - High Quality
3.39
 3.39%
Non-Agency Commercial MBS
1.82
 1.82%
Mortgage Backed Securities
0.45
 0.45%
Municipals
0.43
 0.43%
Taxable Municipals
0.13
 0.13%
Cash
0.11
 0.11%
Equity
0.05
 0.05%

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.
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.
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.
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. Local, regional, or global events such as war, terrorism, pandemic, or recession could impact the portfolio, including hampering the ability of the portfolio's manager(s) to invest its assets as intended.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

1Q23

Market Review

2023 looks to be a year of transition. Global central banks are expected to transition from tightening monetary policy to pausing and assessing the tightening already in the system. China is well on its way to transitioning from its strict zero-COVID policy toward a return to normalcy. The global economy looks to transition towards a slower growth trajectory, while some major economies may transition to a mild recession. We hope to see a peaceful transition in Eastern Europe as well. During most of the first quarter, financial markets behaved as though most of these transitions would be orderly, and, perhaps, even avoided in some cases. March proved to disrupt that narrative as the rapid failures of three regional banks in the U.S. and distressed combination of Credit Suisse and UBS caused an increase in volatility and left confidence shaken. Policymakers responded forcefully and rapidly, but we do not yet know the economic impact. Tighter financial conditions may lead to slower growth and lower inflation. It’s certainly possible that the impact alters the expected course of monetary policy this year.

This backdrop provides challenges for the central bankers who are still tasked with returning inflation to target while maintaining financial stability. To date, policymakers have continued to tighten monetary policy with both the Federal Reserve (Fed) and European Central Bank (ECB) raising interest rates in the quarter. Both Fed and ECB members have sought to separate the inflation fight from issues affecting stability through their rhetoric, and by introducing new programs to counter banking sector concerns while using the interest rate tool to combat inflation. We expect these efforts to be successful. We are also keeping an eye on Washington for progress on the looming debt ceiling issue.

Despite all the volatility during the quarter, financial market performance has been very resilient, with most risk assets posting positive total returns during the period. The U.S. Treasury curve shifted lower on maturities longer than six months as traders adjusted views around the monetary policy path and banking sector concerns created a flight to quality: the 1-year Treasury yield decreased 8 basis points (bps), the 5-year Treasury yield fell by 32 bps, the 10-year Treasury yield decreased by 27 bps, and the 30-year Treasury yield moved 19 bps lower. These moves resulted in a slightly flatter curve to close out the quarter.

We continue to see value being restored across most of the fixed income sectors in which we invest. We expect the banking sector concerns will abate, and the Fed will successfully return inflation to acceptable levels. We continue to watch the economic data to inform our views on the possibility of recession. While our base case is still 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 over 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 (Class I, Accumulating) returned 2.91% in the first quarter versus the U.S. Bloomberg Aggregate Bond Index return of 2.96%.

Allocation to high yield bank loans had a positive impact on performance. Loans outperformed most spread sectors during the period amid risk asset volatility, benefiting from a constructive technical and attractive valuations. Allocation to non-agency residential mortgage-backed securities (RMBS) over agency mortgage-backed securities (MBS) and positioning within the RMBS sector had a positive impact on performance. RMBS outperformed due to strong mortgage credit performance and the yield advantage over MBS. Allocation to the corporate high yield sector had a positive impact on performance during the period.  Despite the volatility seen during the quarter, the corporate high yield sector outperformed most spread sectors. Issue selection within investment grade corporates had a positive impact on performance. The Fund’s overweight to BBBs and general positioning within that sector contributed to the outperformance relative to the sector’s index. Issue selection within asset-backed securities (ABS) also had a positive impact on performance during the quarter.

The Fund’s shorter duration relative to the benchmark had a negative impact on performance during the period due to the outperformance on the longer end of the U.S. Treasury curve. For similar reasons, the Fund’s shorter duration curve positioning within U.S. Treasuries also detracted from performance as the rally in rates impacted maturities further out the curve. Allocation to emerging markets (EM) high yield also had a negative impact on performance. The drivers were still very much macro in nature and centered around the Fed’s inflation-fighting path, China’s reopening, and stress in the banking system. Selection, however, had a positive impact for the period.

Current Fund Strategy and Positioning

Reduced exposure to non-agency RMBS and investment grade corporate securities. Increased exposure to asset backed securities, corporate high yield, and commercial mortgage-backed securities. 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: The first quarter saw an uptick in volatility across markets both due to factors seen last year, such as inflation and China’s re-opening, as well as the shakeup in confidence in banking in March, which supported a bid for U.S. Treasuries. Our exposure was marginally lower throughout the quarter. We have used both the new issue and secondary markets to add positions that offer relative value in this environment. Exposure to EM has remained near historically low levels, and we continue to avoid non-USD exposure in the Fund. Investment Grade Corporates: Investment grade spreads were tighter YTD through early March when Silicon Valley's abrupt failure triggered a sharp selloff from +120 to +160 in a matter of days. We are set to end the quarter at +138 − 8 bps wider YTD. Rates have moved lower during this selloff, so while excess returns are slightly negative, total returns are positive by 3.5%. Industrials outperformed financials handily in the first quarter − wider by 9 basis points versus 43 bps of widening for financials. Regional banks were hit particularly hard, with spreads over 100 bps wider. We view this weakness as a potential opportunity and are seeking to gradually lean into this trade at these wider levels. We remain overweight to the BBB segment of the market as overall fundamentals remain strong, ratings trajectory is positive, and fallen angel risk is low. Corporate High Yield: High yield started the year with credit spreads tightening over 80 bps into early February. Total returns were hurt later in February by rising Treasury rates, but the real volatility started in March when the regional banking crisis weighed on the market and drove credit spreads to a year-to-date high of +518 bps on March 24. The technical picture remains weak as outflows have increased, reaching over $17 billion by quarter-end. Unsurprisingly, new issuance has been below average, with multiple weeks of zero issuance. Though fourth quarter results were generally positive, there were notable pockets of weakness and increasing dispersion in certain industries such as wirelines, media, and REITS. Though we increased our allocation during March given the wider credit spreads, overall, we remain below long-term average allocations.  Over the quarter, we further de-risked in the energy sector and trimmed a more aggressive healthcare position. We did add some risk via a technology name and a satellite firm. Securitized: Despite levels of volatility not seen in many years, all securitized sectors saw positive returns driven by the rate rally. We view the securitized market as offering some of the best yield opportunities within fixed income. Though fundamentals remain strong, we are being selective with our investments because we believe unemployment will trend higher and increase consumer delinquencies. On the mortgage side, delinquencies are at historical lows. With higher mortgage rates and a subsequent fall in housing activity, we will see less supply for the year, which sets up a favorable technical for the mortgage-backed securities market. As a result, our portfolios continue to have a significant weight 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 concerns about the banking industry, 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 demonstrate the best relative value for us include:

  • Out-of-index/off-the-run ABS
  • Non-agency RMBS
  • 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 Multi-Sector Intermediate Bond Fund Fact Sheet - I
Newfleet Mutli Sector Intermediate Bond Fund Fact Sheet - A
Virtus Newfleet Mutli-Sector Intermediate Bond Fund Fact Sheet - R6
Newfleet Monthly Sector Review
Virtus Core and Core Plus Bond Funds Flyer
Braving the New World of Bonds
Morningstar - Quarterly Ratings
Newfleet Fixed Income Fund Capabilities
The Case for Multi-Sector Fixed Income Investing Remains Strong in the Current Environment
Newfleet Market Review & Outlook
Newfleet 2023 Fixed Income Market Outlook

Distributions

Mutual Fund Distributions

Financial Materials

Virtus Opportunities Trust Statutory Prospectus
Virtus Newfleet Multi-Sector Intermediate Bond Summary Prospectus
Virtus Opportunities Trust SAI
Virtus Opportunities Trust Annual Report
Virtus Opportunities Trust Semiannual Report - Fixed Income Funds

Holdings

Virtus Newfleet Multi-Sector Intermediate Bond Fund - Monthly Update
Virtus Newfleet Multi-Sector Intermediate Bond Fund Quarterly Holdings
Virtus Newfleet Multi-Sector Intermediate Bond Fund Top Holdings
Virtus Newfleet Multi-Sector Intermediate Bond Fund Holdings Fiscal Q1
Virtus Newfleet Multi-Sector Intermediate Bond Fund Holdings Fiscal Q3

SEC 19(a) Notices

Section 19(a) Notice for Ex-Date May 31, 2023
Section 19(a) Notice for Ex-Date April 28, 2023
Section 19(a) Notice for Ex-Date March 31, 2023
Section 19(a) Notice for Ex-Date February 28, 2023
Section 19(a) Notice for Ex-Date January 31, 2023
Section 19(a) Notice for Ex-Date November 30, 2022
Section 19(a) Notice for Ex-Date September 30, 2022
Section 19(a) Notice for Ex-Date August 31, 2022
Section 19(a) Notice for Ex-Date July 29, 2022
Section 19(a) Notice for Ex-Date June 30, 2022

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 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.