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Mutual Fund Fixed Income Multi-Sector

Newfleet Multi-Sector Intermediate Bond

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Ticker
NAMFX
CUSIP
92828R677
POP
$ (as of )
Inception
12/15/1989
Total Assets by Class
$74,416,557.90 (as of 01/27/2022)
Total Assets by Fund
$297,123,664.28 (as of 01/27/2022)
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, 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 Professional

David Albrycht, CFA

David L. Albrycht, CFA

President and Chief Investment Officer

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

Show More

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 12/31/2021)
Security
Indonesia Government International Bond, 2.8500% 02/14/2030
1.06
 1.06%
United States Treasury Note/Bond, 1.8750% 11/15/2051
1.01
 1.01%
Towd Point Mortgage Trust 2018-6, 3.7500% 03/01/2058
0.65
 0.65%
AMSR 2020-SFR3 Trust, 1.8060% 09/01/2037
0.63
 0.63%
Petroleos Mexicanos, 5.9500% 01/28/2031
0.63
 0.63%
VanEck High Yield Muni ETF
0.54
 0.54%
USASF Receivables 2020-1 LLC, 5.9400% 08/15/2024
0.47
 0.47%
Petroleos Mexicanos, 6.5000% 03/13/2027
0.47
 0.47%
Exeter Automobile Receivables Trust 2019-1, 4.1300% 12/16/2024
0.46
 0.46%
TVC Mortgage Trust 2020-RTL1, 5.1930%
0.45
 0.45%

Holdings are subject to change.

Characteristics4

(as of 12/31/2021)
Effective Duration (years) 3.64

Sector Allocation (% Invested Assets)

(as of 12/31/2021)
Corporate - High Yield
26.72
 26.72%
Bank Loans
21.29
 21.29%
Corporate - High Quality
14.04
 14.04%
Non-Agency Residential MBS
12.52
 12.52%
Asset Backed Securities
11.02
 11.02%
Emerging Market - High Yield
7.43
 7.43%
Yankee - High Quality
3.88
 3.88%
Non-Agency Commercial MBS
1.18
 1.18%
Treasury
1.00
 1.00%
Municipals
0.54
 0.54%
Equity
0.24
 0.24%
Taxable Municipals
0.14
 0.14%

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: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans are subject to credit and call risk, may be difficult to value, and have longer settlement times than other investments, which can make loans relatively illiquid at times.
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: Local, regional, or global events such as war, acts of terrorism, the spread of infectious illness 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 manager(s) to invest the portfolio's assets as intended.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

4Q21

Market Review

COVID variants – including the latest strain, Omicron – continue to complicate the response from healthcare systems and policymakers seeking to contain the pandemic.  Though some countries have imposed tighter restrictions in response to Omicron, early studies suggest the strain may be less severe than earlier variants. The economy has mostly recovered from the events of 2020 as financial markets grew accustomed to living with the virus, though distortions remain. Employment metrics continue to improve, corporate profits hit a new record for the year, and by many measures the U.S. consumer is in better shape today than pre-pandemic. We expect elevated cash levels and a high degree of personal savings to be a tailwind to growth in the coming quarters. 

Meanwhile, the persistence of inflation caused by problems with supply chains, labor shortages and pandemic-induced changes in consumer behavior led the administration’s stimulative economic agenda to be put on hold over inflation concerns.  With midterm elections on the horizon and narrow congressional majorities in place, it remains to be seen if elements of the stimulus can still move forward in 2022. We still believe that elevated inflation readings will likely fade over the course of 2022 as developments in technology, globalization, and consumption trends returning to normal levels help keep prices contained. In response to higher inflation and a strengthening economy, the Federal Reserve (Fed) has adjusted the pace of the taper. As of November, it had already begun winding down its asset purchases of $120 billion of U.S. Treasuries/mortgage-backed securities (MBS) per month and is now aiming to finish the taper by March 2022 rather than its prior mid-year target. Assuming no more adjustments, interest rate increases are expected to follow in the second quarter.  The pace, timing and magnitude of “lift-off” remains uncertain, but financial markets are pricing in three interest rate increases in 2022 and three more in 2023. In addition to interest rate increases, the market’s attention will turn to the Fed’s management of its $8.8 trillion balance sheet.

Spread sector returns were mixed relative to U.S. Treasuries due to modest volatility in the fixed income markets during the quarter. Higher beta, less interest rate sensitive sectors such as high yield bank loans and corporate high yield securities generally outperformed. U.S. Treasury rates increased both on the front end and in the belly of the curve while it decreased on the long end.  The 5-year Treasury yield increased 29 basis points, the 10-year Treasury yield was 2 basis points higher, and the 30-year Treasury yield was 14 basis points lower. As the market digests the Fed’s pivot on inflation, 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.

For more detail on the macroeconomic backdrop and specific sectors, see Newfleet’s 4Q21 Market Review & Outlook .

How the Fund Performed

The Fund (Class I) returned -0.08% in the fourth quarter versus the Bloomberg U.S. Aggregate Bond Index return of 0.01%.

Allocation to the corporate high yield sector contributed positively during the quarter.  Although the sector was volatile during the quarter, it outperformed most other fixed income sectors due to a drop-off in supply later in the quarter, strong corporate earnings, a very low default rate, and resilience in the global economy. Overall, fundamentals within the sector continue to improve and valuations are reflective of that. Allocation to the high yield bank loan sector had a positive impact on performance during the fourth quarter.  The sector benefited from a continued strong macroeconomic recovery, improving fundamentals, positive technical environment, and a constructive backdrop for risk assets.  The technical environment remains healthy, supported by an increase in inflation, a more aggressive stance on rates from the Federal Reserve, and subsequent demand for floating rate assets to protect against rising rates.  Loan demand from both retail and institutional investors has remained strong with December marking the thirteenth straight month of retail inflows and record CLO issuance in 2021. Issue selection within the asset-backed securities (ABS) sector contributed positively during the quarter.  The U.S. consumer continues to perform extremely well as the ability to service its debts remains strong, driven by a strong labor market, stimulus programs, low rates, and access to credit. Allocation to the emerging markets (EM) high yield sector had a negative impact during the quarter.  While we remain involved in the EM debt market, overall exposure as a percentage of the Fund’s total assets remains near the lowest levels in 10 years. 

Current Fund Strategy

Reduced exposure to high yield bank loans and corporate high yield securities while increasing exposure to corporate high-quality securities. 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. 

EM debt and non-U.S. exposure: While the Fund’s EM exposure ticked slightly higher throughout the quarter, it remains below our historical averages.  Amidst increasing volatility in the global backdrop due to central bank policy aimed at combatting inflation, we continued our bias of preferring large cap structures with more liquidity.  On the margin we were able to use brief moves of spread widening to add to names whose fundamentals were compelling and whose valuations were affected by the macro backdrop with modest spread widening.  We continue to prefer hard currency debt over local market instruments but continue to look for specific entry points in a handful of countries where real rates are becoming more attractive. Investment grade (IG) corporates: Spreads broke out of a tight trading range in the fourth quarter as the market digested the Omicron variant, inflation, and the Fed hiking forecast. Ending the year at 92 basis points, spreads remain tight to the five-year average (+115), but well off the mid-year lows (+80). The technical environment was favorable – net supply was manageable while flows were consistently positive through early December when modest outflows were reported. With long end rates moving lower, the asset class has avoided ugly total returns, which we feared given its long duration. Fundamentals are also encouraging – net leverage has declined relative to pre-COVID levels and should improve further once fourth quarter earnings are reported. Third quarter revenues and earnings rose 19% and 40% respectively as margins held in better than expected given the supply chain concerns for large firms.  The consensus forecast expects 20% earnings growth in the fourth quarter and 9% growth in 2022. We don’t expect much increase in debt in 2022, which will improve credit metrics further. Our exposure to the asset class is at a five-year low, which positions us to take advantage of some of the recent spread weakness. However, valuations remain tight on a historical basis. We favor the BBB segment of the market. Corporate High Yield: While the total return for high yield was positive, there were bouts of both positive and negative total returns throughout the three-month period driven by volatility stemming from third quarter earnings impacted by rising input costs and supply chain disruption, uncertainty around Jerome Powell’s renomination and subsequent policy pivot, and the Omicron variant.  The quarter started off strong as the index spread tightened 20 basis points to a low of +274 but would later gap out to +337 as news of the Omicron variant surfaced late November.  As more data emerged on Omicron, spreads settled in and tightened into the +300 range.  Quality slightly outperformed during the month.  Technicals were mixed as we saw outflows for the quarter but a slower primary market (2021 set a record for total supply at north of $460 billion).  We remain favorable on high yield but will keep a watchful eye on the impact of Omicron and the Fed’s reaction.  Activity during the quarter was light, but we kept our bias of increasing overall credit quality in the Fund.  Industry-wise we were active in the cable/telecom space, which remains volatile as cable faces competition from wireline players and the satellite industry sees numerous new constellations being launched. Securitized: We continue to focus on the U.S. consumer and the housing sector, maintaining an overweight on ABS and non-agency residential mortgage-backed securities (RMBS).  This is supported by strong fundamentals in both sectors: this past quarter, unemployment continued to trend lower (3.9%), and job openings remain high.  Consumer confidence has trended lower, though driven by virus fears rather than a cooling labor market.  The U.S. consumer’s debt service is also near its lowest point in history, while the savings rate remains historically high.  On the housing side, we continue to see the tailwinds of low mortgage rates and limited supply. Housing also benefits from demand driven by the pandemic. Unlike agency MBS, non-agency RMBS offers direct exposure to real estate and mortgage credit. We continue to overweight both.

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 Omicron variant, 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
  • High yield bank loans
  • Corporate high yield
  • 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 Mutli-Sector Intermediate Bond Fund Fact Sheet - R6
Virtus Newfleet Multi-Sector Intermediate Bond Fund Fact Sheet - I
Newfleet Monthly Sector Review
Newfleet Fixed Income Fund Capabilities
Morningstar - Quarterly Ratings
Braving the New World of Bonds
Spotlight On: Virtus Newfleet Multi-Sector Intermediate Bond Fund
Securitized Credit – Short on Duration, Long on Relative Value
Newfleet Market Review & Outlook
Newfleet Tax-Exempt Market Review
Newfleet 2022 Fixed Income Market Outlook
The Case for Multi-Sector Fixed Income Investing Remains Strong in the Current Environment

Distributions

Mutual Fund Distributions

Financial Materials

Virtus Opportunities Trust Statutory Prospectus
Virtus Newfleet Multi-Sector Intermediate Bond Summary Prospectus
Virtus Opportunities Trust Prospectus XBRL 485B 02 01 2021
Virtus Opportunities Trust SAI
Virtus Opportunities Trust Annual Report
Virtus Opportunities Trust Semiannual Report

Holdings

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