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Mutual Fund Fixed Income Investment Grade

Seix Core Bond

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Ticker
STGIX
CUSIP
92837F102
POP
$ (as of )
Inception
06/11/1992
Total Assets by Class
$6,694,336.89 (as of 09/23/2022)
Total Assets by Fund
$69,206,121.30 (as of 09/23/2022)
Morningstar Category
Intermediate Core Bond

Portfolio Overview

Investment Overview

The Fund seeks to maximize long-term total return through a combination of income and capital appreciation by investing in a diversified bond portfolio of corporate bonds, asset-backed securities, mortgage-backed securities, U.S. Treasuries, and U.S. government agency debentures. Seix's bottom-up focused, top-down aware investment approach seeks to provide superior risk-adjusted returns over a full market cycle, as well as competitive absolute and relative returns over shorter horizons.

Management Team

Investment Partner

Seix Investment Advisors

Seix Investment Advisors is an investment management boutique focused exclusively on managing fixed income securities since 1992. Seix seeks to generate competitive absolute and relative risk-adjusted returns over the full market cycle through a bottom-up focused, top-down aware process. Seix employs multi-dimensional approaches based on strict portfolio construction methodology, sell disciplines and trading strategies with prudent risk management as a cornerstone.

Seix Investment Advisors is a division of Virtus Fixed Income Advisers, LLC ("VFIA"), an SEC registered investment adviser.


Learn more about Seix Investment Advisors

Investment Professionals

Perry Troisi

Perry Troisi

Managing Director, Head of Investment Grade, Senior Portfolio Manager

Industry start date: 1986
Start date as fund Portfolio Manager: 2004

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Michael Rieger

Michael Rieger

Managing Director, Senior Portfolio Manager

Industry start date: 1986
Start date as fund Portfolio Manager: 2007

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Carlos Catoya

Carlos Catoya

Portfolio Manager, Head of Investment Grade Credit Research

Industry start date: 1987
Start date as fund Portfolio Manager: 2015

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John Yozzo

Jonathan Yozzo

Portfolio Manager, Head of Investment Grade Corporate Bond Trading

Industry start date: 1991
Start date as fund Portfolio Manager: 2015

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Key Features

Broad Fixed Income Exposure

Seeks to provide income, quality, diversification, and liquidity in order to serve as an anchor of a diversified portfolio

Prudent Risk Management

Strives to generate superior long-term risk-adjusted returns, which often entails risk reduction over the short term

Extensive Fundamental Research

Combines top-down and bottom-up analysis to exploit inefficiencies in multiple sectors of the global fixed income marketplace

Portfolio Characteristics

Characteristics4

(as of 06/30/2022)
Effective Duration (years) 6.34

Top Holdings (% Fund)

(as of 06/30/2022)
Security
United States Treasury Note/Bond, 2.2500% 02/15/2052
8.37
 8.37%
United States Treasury Note/Bond, 2.8750% 05/15/2032
7.09
 7.09%
United States Treasury Note/Bond, 0.3750% 07/15/2024
5.08
 5.08%
United States Treasury Inflation Indexed Bonds, 0.1250% 01/15/2032
4.93
 4.93%
United States Treasury Note/Bond, 1.3750% 06/30/2023
4.21
 4.21%
United States Treasury Note/Bond, 0.1250% 12/15/2023
1.83
 1.83%
United States Treasury Note/Bond, 0.5000% 03/31/2025
1.50
 1.50%
United States Treasury Note/Bond, 1.8750% 02/28/2027
1.38
 1.38%
Fannie Mae Pool, 3.5000%
1.28
 1.28%
Fannie Mae Pool, 4.0000%
1.22
 1.22%

Holdings are subject to change.

Sector Allocation (% Fund)

(as of 06/30/2022)
U.S. Treasury
34.29
 34.29%
Residential MBS
31.53
 31.53%
Corporate
16.61
 16.61%
Commercial MBS
7.72
 7.72%
Cash & Equivalents
4.97
 4.97%
Asset Backed
4.87
 4.87%

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.
Foreign Investing: Investing in foreign securities subjects the portfolio to additional risks such as increased volatility; currency fluctuations; less liquidity; less publicly available information about the foreign investment; 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. Price changes may be short- or long-term. Local, regional, or global events such as war (e.g., Russia's invasion of Ukraine), acts of terrorism, the spread of infectious illness (e.g., COVID-19 pandemic) or other public health issues, recessions, or other events could have a significant impact on the portfolio and its investments, including hampering the ability of the portfolio's manager(s) to invest the portfolio's assets as intended.
Prospectus: For additional information on risks, please see the fund's prospectus.

Commentary

2Q22

Market Review

The overriding theme of higher rates and wider spreads prevailed again in the second quarter, consistent with the market dynamics that drove returns in the first quarter. For the overall bond market, the Bloomberg Aggregate Bond Index (the Agg) suffered a -4.69% total return over the quarter. While that was better than the -5.93% total return in the first quarter, the year-to-date total return of -10.35% still leaves most participants shell-shocked. A small consolation comes from the fact that on June 14, the day interest rates peaked thus far in 2022, the Agg’s total return was -12.65% - just brutal.

The movement in rates over the quarter was higher again, although the yield curve flattening witnessed in the first quarter ultimately subsided as longer-term rates rose slightly more than shorter term rates. The shift became apparent in the early part of the quarter, as the first few weeks of April saw the yield curve (as represented by the yield spread between the two-year and 10-year Treasury benchmarks) steepen by over 40 basis points (bps), undoing half of the flattening seen over the first quarter. The steeper curve persisted for most of the quarter until the last few weeks of June, when the fear of an aggressive Federal Reserve (Fed) tightening cycle pushing the economy into a recession sooner rather than later reinvigorated the flatter curve trend. By June 30, the 2s/10s curve was back to about +6 bps, with fears of curve inversion and a pending recession re-entering the market narrative.

The Fed continued to be front and center for investors after an early April speech by Vice Chair Lael Brainard set the tone. Historically a more dovish Federal Open Market Committee (FOMC) voter – meaning that her bias is typically for looser or more accommodative monetary policy – Brainard emphasized the need for higher rates as well as “quantitative tightening” – where the Fed lets its balance sheet shrink. Recall, as recently as March the Fed was still purchasing Treasuries and mortgage-backed securities, which expanded its balance sheet (quantitative easing) and was a staple of the Fed’s exceptionally loose policy in place since the COVID lockdown in March 2020. The Fed’s need to pivot to tighter policy was happening fast and the guidance for a 50-bps rate hike at the May meeting was underway.

The early May FOMC meeting on May 4 saw the Fed deliver a 50-bps rate hike, and the consensus for this to be the new rate hike cadence strengthened with another higher-than-expected inflation report on May 11th. All communication from the FOMC was consistent in emphasizing the need to return to price stability amidst year-over-year Consumer Price Index readings north of 8%. Surprisingly, amidst this shift to a more aggressive tightening cycle, the Treasury market took a pause and most rates managed to decline slightly in May. Developments in June made sure that the reprieve from higher rates was brief.

Performance

In a very challenging market for fixed income investors, the Virtus Seix Core Bond Fund returns reflected the further increases in interest rates during the quarter with a return of -4.91%, modestly underperforming the Bloomberg Aggregate Bond Index return of -4.69%.  The securitized allocation was once again the primary contributor to relative performance, but only in the residential mortgage backed securities (RMBS) sleeve. Security Selection in the RMBS allocation was the largest contributor, as the Fund continued to avoid “Fed” coupons which were the worst performers in the class. Partially offsetting the RMBS position, the asset backed securities (ABS)/commercial mortgage backed securities (CMBS) sector was a modest detractor. The corporate allocation was not a material contributor nor detractor to relative performance during the quarter, as the Fund’s beneficial underweight to the sector was offset by unfavorable security selection. A further detractor from relative performance was attributed to the addition of Treasury Inflation Protected Securities (TIPS) into the Fund mid-quarter, as these securities underperformed in the second half of June.

Strategy

The Fund’s overall allocations to the primary spread sectors shifted over the past quarter, reflecting a more cautious approach to the credit sector. On a percentage of Duration Contribution (DC), the Fund’s Investment Grade corporate allocation was reduced to an underweight versus the benchmark, or approximately 0.7x the index weight, from a neutral allocation in the previous quarter. Conversely, the Fund’s RMBS weighting moved up close to neutral over the quarter from a meaningful underweight, reflecting better valuations in the sector. The Fund’s CMBS, ABS and Treasury allocations were relatively unchanged on a duration contribution or market value basis.

Outlook

The Fed has proclaimed inflation as enemy number one, with a return to price stability a critical prerequisite for long-term economic growth. Peak inflation may be at hand, then again, it may not. Recent history should offer pause to anyone making a high conviction call on future inflation outcomes. More important will be the level inflation settles at over the next 12 to 24 months as the policy tightening in motion takes hold and has an impact. While peak inflation may be close at hand, it is difficult to conclude that a glide path back to 2% inflation is as easily achievable as what is implied by some of the markets’ forward inflation expectations. Such policy impacts come with long and variable lags, so the outcome will take time to observe and react to. The market’s read on both a pending recession as well as an inflation battle won feels premature. The challenges to this unique economic backdrop warrant considerable humility on a go forward basis. The additional challenges that come with the geopolitical backdrop – war in the Ukraine, a global energy transition/crisis – to name just a few, only further complicates the investment landscape. While risk assets have certainly begun to price in a more challenged backdrop, a more defensive posture still seems warranted entering the second half of the year, as the volatility that has prevailed over the first half is unlikely to recede any time soon. A return to some form of Seventies-like stagflation driven by high energy prices remains possible given current economic trends and monetary headwinds.

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 Seix Core Bond Fund Fact Sheet - I
Virtus Seix Core Bond Fund Fact Sheet - R6
Virtus Seix Core Bond Fund Fact Sheet - A
Seix Market Review and Outlook - Investment Grade
Inside ESG Investing at Seix

Distributions

Mutual Fund Distributions

Financial Materials

Virtus Asset Trust Statutory Prospectus
Virtus Seix Core Bond Fund Summary Prospectus
Virtus Asset Trust SAI
Virtus Asset Trust Annual Report
Virtus Asset Trust Semi-Annual Report - Fixed Income

Holdings

Virtus Seix Core Bond Monthly Holdings
Virtus Seix Core Bond Fund Top Holdings
Virtus Seix Core Bond Fund Holdings Fiscal Q1
Virtus Seix Core Bond Fund Holdings Fiscal Q3

Section 19(a) Notices

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 by the NAV on the last business date of the period, unless otherwise indicated. The Distribution Rate may be comprised of ordinary income, net realized capital gains and returns of capital.

2 Distribution History: Distributions are represented on a cash basis and may be reclassified at year end for tax purposes. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes. STCG: Short Term Capital Gain, LTCG: Long Term Capital Gain

3 Risk Statistics: R2 is a statistical measure that represents the percentage of a fund or security's movements that can be explained by movements in a benchmark index. Beta is a quantitative measure of the volatility of a given portfolio to the overall market. Alpha is a risk adjusted measure of an investment's excess return relative to a benchmark. A positive Alpha indicates that the investment produced a return greater than expected for the risk (as measured by Beta) taken. Standard Deviation measures variability of returns around the average return for an investment fund. Higher standard deviation suggests greater risk. Risk Statistics are calculated using 36 monthly returns.

4 Characteristics: For Equity Funds: Avg. Weighted Market Cap (bn): The sum of each security's weight within the fund (or index) multiplied by the security's market capitalization. Trailing P/E Ex-Negative Earnings: Per-share stock price divided by the latest 12-months Earnings per Share; Price/Cash Flow: Per-share stock price divided by the per-share operating cash flow; Price/Book: Per-share stock price divided by the latest 12-month per-share Book Value; 3-Year EPS Growth Rate: Average of earnings per share growth for latest 3-year period. The 3-Year EPS Growth Rate is not a forecast of the fund's performance.

4 Characteristics: For Fixed Income Funds: Effective Duration represents the interest rate sensitivity of a fixed income fund. For example, if a fund's effective duration is five years, a 1% increase in interest rates would result in a 5% decline in the fund's price. Similarly, a 1% decline in interest rates would result in a 5% gain in the fund's price.

Morningstar Disclosures:
The Morningstar Rating for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Ratings do not take into account the effects of sales charges and loads.

© Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.