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Mutual Fund Fixed Income Investment Grade

Seix Investment Grade Tax-Exempt Bond

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Ticker
SISIX
CUSIP
92837F615
POP
$ (as of )
Inception
06/09/1992
Total Assets by Class
$6,733,732.59 (as of 06/27/2022)
Total Assets by Fund
$197,011,508.43 (as of 06/27/2022)
Morningstar Category
Muni National Interm

Portfolio Overview

Investment Overview

The Fund seeks to maximize total return through current income that is exempt from federal income taxes, combined with capital appreciation consistent with capital preservation, by investing in investment grade municipal securities. A dynamic, multifaceted investment process balances emphasis across four facets: duration management, yield curve positioning, sector rotation, and security selection.

Management Team

Investment Partner

Seix Investment Advisors LLC

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.


Learn more about Seix Investment Advisors LLC

Investment Professionals

Ron Schwartz

Ronald H. Schwartz, CFA

Managing Director, Senior Portfolio Manager

Industry start date: 1982
Start date as fund Portfolio Manager: 1992

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Dusty Self

Dusty Self

Managing Director, Senior Portfolio Manager

Industry start date: 1992
Start date as fund Portfolio Manager: 2018

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Key Features

Tax-Exempt Income

Strives to generate income free from federal income taxes

Attractive Total Return Potential

Market inefficiencies may create buying and selling opportunities that facilitate meaningful return potential

Extensive Fundamental Research

Bottom-up security selection evaluates factors such as fundamental credit analysis, security structural features, and potential price volatility

Portfolio Characteristics

Characteristics4

(as of 03/31/2022)
Effective Duration (years) 4.59

Top Holdings (% Fund)

(as of 03/31/2022)
Security
Energy Northwest, 5.0000% 07/01/2034
4.01
 4.01%
State of Ohio, 5.0000% 06/15/2032
3.95
 3.95%
City of Dallas TX Waterworks & Sewer System Revenue, 5.0000% 10/01/2031
3.56
 3.56%
New York City Transitional Finance Authority Future Tax Secured Revenue, 5.0000% 02/01/2030
2.96
 2.96%
State of Minnesota, 5.0000% 08/01/2029
2.59
 2.59%
State of Washington, 5.0000% 02/01/2030
2.55
 2.55%
Virginia College Building Authority, 5.0000% 02/01/2029
2.42
 2.42%
Edina Independent School District No 273, 5.0000% 02/01/2030
2.35
 2.35%
State of California, 5.0000% 04/01/2037
1.95
 1.95%
New York City Transitional Finance Authority Future Tax Secured Revenue, 5.0000% 02/01/2028
1.95
 1.95%

Holdings are subject to change.

Sector Allocation (% Fund)

(as of 03/31/2022)
State General Obligation
24.32
 24.32%
Local General Obligation
13.64
 13.64%
Water & Sewer
11.66
 11.66%
Hospital
8.45
 8.45%
Power
7.86
 7.86%
Special Tax
7.08
 7.08%
Transportation
6.63
 6.63%
Education
6.14
 6.14%
Lease
6.01
 6.01%
Cash & Equivalents
3.89
 3.89%
Pre-Refunded
3.09
 3.09%
IDR/PCR
1.24
 1.24%

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.
Municipal Market: Events negatively impacting a municipality, municipal security, or the municipal bond market in general, may cause the portfolio to decrease in value.
State & AMT Tax: A portion of income may be subject to some state and/or local taxes and, for certain investors, a portion may be subject to the federal alternative minimum tax.
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

In one of the most difficult periods in recent market history, municipal bonds underperformed several other fixed income categories in the first quarter of 2022 as demand plunged. The Bloomberg 1-15 Municipal Bond Index was down 5.33% and the Bloomberg Municipal Bond High Yield Index was down 7.38%—the worst quarterly performance since the third quarter of 1981.  

Issuance for the first quarter of 2022 was light at approximately $93 billion, nearly 17% lower than the same time last year. Given the volatility experienced during the quarter many issuers were hesitant to come to the market. The 2022 pipeline is expected to be between $450 billion and $525 billion. 

Against a backdrop of rising inflation, higher rates, war in Ukraine, lingering pandemic, and supply chain issues, yields on municipals bonds rose. The yield on the two-year increased 152 basis points (bps); the five-year, 138 bps; the 10-year, 115 bps; the 20-year, 110 bps; and the 30-year, 104 bps. The municipal curve flattened as inflation, slower growth, and Federal Reserve tightening moved into the headlines. The slope of the municipal curve, the difference between the yield on the municipal 30-year and the municipal two-year, went from 125 bps at the beginning of the year to 77 bps at the end of the first quarter. Higher rates and negative returns fueled an outflow cycle that started the third week of January as nearly $22 billion left municipal mutual funds.

Looking at municipal yields as a percentage of Treasuries, or ratios, the five-year AAA-rated municipal bond yielded about 44% of the equivalent five-year Treasury. By the end of the first quarter, the ratio was 81%. The ratio for the 10-year municipal started the year at 64%, but finished the quarter at 94%, while the ratio on the 30-year went from 74% to 104%. To put it differently, at this writing, the 30-year AAA municipal bond yield was 2.53% versus the 30-year Treasury bond at 2.45%.

Performance/Positioning

The I-shares underperformed the Bloomberg 1-15 Year Municipal Bond Index by 15 bps for the quarter, partially attributed to exposure to bonds longer than 15 years and security selection in the healthcare and transportation sectors. 

Versus the Bloomberg 1-15 Year Municipal Bond Index, the Fund is underweight the 1-, 3-, and 15-year areas of the curve and overweight cash, 5-year, 7-year, and 20-year areas. At the end of the quarter the Fund’s effective duration was slightly shorter at 4.59 years from 4.66 years last quarter.     

The Fund is overweight state general obligation, leasing, and electric sectors while underweight transportation, special tax, and industrial revenue bond sectors.

Outlook

We believe current ratios are attractive on a historic basis. Municipals are cheaper than their five-year averages. For example, the 10-year ratio right now is at 94% and its five-year average is at 88%.  Contrast that with the 30-year Muni-Treasury ratio: where the five-year average is about 96%, we are now at 104%. We do not believe these ratios will remain at current levels. In our view, they might even get a little cheaper if outflows persist. We would expect modest improvement in late April and into May. Technicals usually turn positive in June, July, and August as more cash becomes available to investors than bonds typically issued in the municipal market.

Longer term, we believe municipals will still be an attractive asset class; the tax-exemption is valuable in all rate and tax environments to many different investors. The market was too rich last year and is starting to show value, attracting crossover, non-traditional buyers, and insurance companies.  

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 Investment Grade Tax Exempt Bond Fund Fact Sheet - I
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 Investment Grade Tax-Exempt Bond Summary Prospectus
Virtus Asset Trust SAI
Virtus Asset Trust Annual Report
Virtus Asset Trust Semi-Annual Report - Fixed Income

Holdings

Virtus Seix Investment Grade Tax-Exempt Bond Monthly Holdings
Virtus Seix Investment Grade Tax-Exempt Bond Fund Top Holdings
Virtus Seix Investment Grade Tax Exempt Bond Fund Holdings Fiscal Q1
Virtus Seix Investment Grade Tax-Exempt 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.