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
$69,783,532.64 (as of 12/01/2023)
Total Assets by Fund
$433,554,876.54 (as of 12/01/2023)
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 - 400x400

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 09/29/2023)
Security
United States Treasury Note/Bond, 4.0000% 11/15/2052
2.96
 2.96%
United States Treasury Note/Bond, 4.1250% 11/15/2032
2.31
 2.31%
United States Treasury Note/Bond, 1.8750% 02/15/2032
2.14
 2.14%
Fannie Mae Pool, 6.0000%
1.14
 1.14%
Freddie Mac Pool, 6.0000%
1.00
 1.00%
Angel Oak Mortgage Trust 2023-1, 4.7500%
0.70
 0.70%
United States Treasury Note/Bond, 1.8750% 11/15/2051
0.60
 0.60%
Angel Oak Mortgage Trust 2022-5, 4.5000%
0.56
 0.56%
AMSR 2020-SFR3 Trust, 1.8060% 09/01/2037
0.46
 0.46%
Fannie Mae Pool, 5.0000%
0.46
 0.46%

Holdings are subject to change.

Characteristics4

(as of 09/29/2023)
Effective Duration (years) 4.14

Sector Allocation (% Fund)

(as of 09/29/2023)
Corporate - High Quality
19.44
 19.44%
Corporate - High Yield
16.76
 16.76%
Asset Backed Securities
13.90
 13.90%
Bank Loans
12.61
 12.61%
Non-Agency Residential MBS
11.58
 11.58%
Treasury
9.10
 9.10%
Emerging Market - High Yield
4.68
 4.68%
Mortgage Backed Securities
3.93
 3.93%
Non-Agency Commercial MBS
3.20
 3.20%
Yankee - High Quality
2.78
 2.78%
Cash
1.62
 1.62%
Municipals
0.28
 0.28%
Taxable Municipals
0.08
 0.08%
Equity
0.03
 0.03%

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 or military conflict, 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

3Q23

Market Review

As we enter the home stretch of 2023, the economic transitions we expected to see are proceeding across the globe. China struggles with a slowing economy amid calls for more stimulus despite having exited its strict zero-COVID policies earlier this year. Europe, too, is wrestling with a slowing economy and inflation that remains above official targets. In the meantime, the U.S. economy has proven remarkably resilient – unlike other major world economies, it defied expectations of a slowdown, leading to a building consensus that the Federal Reserve (Fed) may pull off the often-elusive soft landing. The main risk to this scenario is the unpredictable cumulative effect of 18 months of monetary tightening on the economy. Monetary policy works on the economy with a lag, presenting a challenge to central bankers trying to return inflation to target without the associated economic pain of higher interest rates. We will be paying close attention to the labor market data in the weeks and months ahead to help inform our view on the likelihood of a soft landing scenario.

Financial market performance was weaker during the quarter as central bankers fought to tame ongoing inflation. We have seen significant progress on headline readings as supply chains healed, demand shifted from goods to services, and energy prices rebalanced. Core readings of inflation, however, remain stubbornly above targets. That said, the market expects that we are approaching the end of interest rate increases across most major global central banks. Evidence of this is found in the Fed’s most recent summary of economic projections, which indicated one more rate increase. The Bank of England (BOE) has paused its rate hikes, while the European Central Bank (ECB) has signaled a pause.  However, market expectations of a quick reversal of tighter policy have moderated, and the higher-for-longer narrative is taking hold. The Fed has tamped down expectations of rapid cuts in 2024 and 2025, and the ECB and BOE remain committed to the inflation fight, which may lead to their rates staying elevated for longer as well. There is clearly still work to be done on the inflation front. With the backup in rates, most fixed-income sectors had negative total returns in the third quarter.  A majority of spread sectors outperformed U.S. Treasuries and spreads tightened. Within spread sectors, shorter duration and risk asset classes outperformed. The U.S. Treasury curve shifted higher during the quarter and the curve steepened somewhat. The 2-year Treasury yield increased 15 basis points (bps), the 5-year Treasury yield increased by 45 bps, the 10-year Treasury yield increased by 73 bps, and the 30-year Treasury yield moved 84 bps higher.

We continue to see value being restored across most of the fixed income sectors in which we invest. Yields remain elevated and bond prices are broadly discounted. We expect the Fed will be successful in returning inflation to acceptable levels over time. We continue to watch data releases to inform our views on the global economic trajectory. As the markets digest economic and geopolitical 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, in our view, ideally suited for the current environment.

How The Fund Performed

The Fund (Class I) returned -0.58% in the third quarter, outperforming the U.S. Bloomberg Aggregate Bond Index return of -3.23%.

The Fund’s shorter duration relative to the benchmark had a positive impact on performance during the period with the underperformance on the longer end of the U.S. Treasury curve. Allocation to and selection within corporate high yield bonds had a positive impact on performance. High yield had another positive quarter led by CCCs, with BBs underperforming due to the increase in Treasury yields. Earnings season, which saw a large portion of companies beating forecasts, also helped propel risk assets. In addition, technicals continue to play a positive role despite outflows for the asset class, with demand outpacing supply. Allocation to bank loans had a positive impact on performance. Loans rallied early in the quarter on the back of growing expectations for a soft landing and limited new issue supply in the face of surging loan repayments. The market change in sentiment to a higher-for-longer view on rates has also led investors to reassess the space. With rates still rising, loans are outperforming investment grade and high yield. Allocation to RMBS over agency mortgage-backed securities (MBS) and positioning within RMBS had a positive impact on performance. We continue to prefer non-agency residential exposure as credit performance remains stable, prepayments stay muted, and credit spreads are still wide of averages. With higher mortgage rates and a subsequent fall in housing activity, we see solid fundamental and technical backdrops.

The Fund’s duration and curve positioning within U.S. Treasuries detracted from performance as the backup in rates during the quarter negatively impacted maturities further out the curve. Selection within emerging markets (EM) high yield had a negative impact on performance. EM high yield outperformed EM investment grade during the period.  The drivers are still very much macro in nature and centered on China’s economic slowdown, the Fed’s inflation-fighting path, and global growth. The Fund’s underweight to investment grade corporates compared to the Bloomberg U.S. Aggregate Index had a negative impact on performance during the quarter.  Issue selection, however, was positive during the period as the Fund’s allocation outperformed versus the index. While the allocation to bank loans had a positive impact on performance, bank loan selection detracted from performance. More specifically, the Fund’s underweight to CCCs compared to the Credit Suisse Leveraged Loan Index detracted as lower-quality cohorts within the sector outperformed during the period.

Current Fund Strategy and Positioning

Reduced exposure to cash, corporate high yield, and investment grade corporates. Increased exposure to agency MBS, commercial mortgages (CMBS), and asset-backed securities (ABS). 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 (EM) and Non-U.S. Exposure: Strength in emerging markets continued in July, led by advances in the high yield portion of the index. August marked a reversal in returns as lower volumes and headlines on China’s slowdown hurt the markets. While the new issue market opened up in the first half September, rate volatility and uncertainty dampened enthusiasm for EM, causing it to quickly shutter. Tighter valuations largely persisted throughout the quarter despite the lackluster returns. We continue to maintain our preference for hard currency debt and have no local currency exposure in the Fund. The Fund’s positioning remains largely unchanged, with EM exposure near historical lows, though we did take advantage of some swaps in exposure throughout the period. Investment Grade Corporates: Yields ended the third quarter at a year-to-date high, while spreads approached year-to-date lows. Nearly all industries tightened, with REITS and the energy complex faring the best. Banks continued to lag due to regional bank concerns and heavy supply. Autos, amid strike uncertainty, was the weakest-performing industry. Technicals are in the driver's seat as yield buyers made their presence known. Fundamentals are broadly stable. With weak to negative earnings growth, credit metrics took a small step backward but are expected to improve as growth resumes in the second half. We see buying opportunities in banking and utilities, both of which have lagged. An overweight to BBB-rated bonds remains prudent, especially considering the pace of ratings improvements within that category. Corporate High Yield: The high yield market returns were slightly positive in the third quarter. Spreads tightened through July and remained rangebound until the last week of the quarter, when they widened about 25 bps and ended the third quarter 3 bps wider. As soft landing and higher-for-longer themes dominated the quarter, CCCs outperformed because they are less rate sensitive, more sensitive to a hard landing scenario, and have higher carry. Housing and leisure continued to post strong results while chemicals and parts of healthcare remained weak. Credit fundamentals are staying strong, though they may have peaked in the first quarter, in our view. Despite high yield issuance volumes up 60% versus 2022, technicals remain favorable as net supply is still negative. Securitized: Though total returns for securitized product were negative for the quarter, spreads for the asset class were marginally tighter versus U.S. Treasuries, thus generating positive excess returns versus risk-free assets. As rates rose, our exposure to short duration consumer-backed assets held up well. We maintained our overweight in ABS and RMBS. As the repricing within the commercial real estate market continues, we judiciously added to our CMBS exposure. Lastly, we increased our exposure to the agency MBS market as spreads reached historically wide levels versus their corporate investment grade counterparts. In our view, agency MBS afford our portfolios good liquidity and attractive yields.

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 surrounding 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 risk of a recession, the Fund's exposure to spread sectors that would typically be more negatively impacted, such as corporate high yield and emerging markets high yield, are at low levels relative to historical averages. 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
  • BBB 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 Mutli-Sector Intermediate Bond Fund Fact Sheet - R6
Newfleet Multi Sector Intermediate Bond Fund Fact Sheet - A
Virtus Newfleet Multi-Sector Intermediate Bond Fund Fact Sheet - I
Virtus Newfleet Multi-Sector Intermediate Bond Fund Enhanced Fact Sheet
Spotlight on Global Credit
Braving the New World of Bonds
Morningstar - Quarterly Ratings
Newfleet Fixed Income Fund Capabilities
Virtus Core and Core Plus Bond Funds Flyer
The Case for Multi-Sector Fixed Income Investing Remains Strong in the Current Environment
Is It Time to Start Adding Duration?
Newfleet 2023 Fixed Income Market Outlook
Newfleet Market Review & Outlook - Multi Sector

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.

© 2023 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.