Virtus Investment Partners, Inc. Q3 FY2025 earnings call

• Delivered solid financial results in Q3 supported by higher average assets under management and favorable market momentum. • Had net outflows due to quality-oriented strategies facing headwinds in a momentum-favored market. • Key highlights: higher EPS and operating margin, strong growth in ETF assets with highest quarterly sales and net flows, positive net flows in fixed income and alternative strategies, eighth consecutive annual dividend increase, and debt refinancing providing liquidity and flexibility. • Focus on increasing retail separate account offerings, expanding ETF availability in key channels, and growing the wealth management business. • ETF business was a highlight with $4.7 billion in assets, 77% of ETF AUM beating benchmarks over 3 years, and several new ETFs in the filing process.

Total assets under management were $169 billion at September 30. By product, institutional accounts for 33% of AUM, retail separate accounts (including wealth management) make up 28%, U.S. retail mutual funds are 27%, and the remaining 12% consists of closed-end funds, global funds, and ETFs. ETF assets reached $4.7 billion, up 79% over the prior year, with $0.9 billion in both quarterly sales and net flows. Fixed income and alternative strategies saw positive net flows, while quality equity strategies experienced outflows.

• Focus remains on initiatives to increase retail separate account offerings, expand ETF availability in key channels, and grow the wealth management business. • Continues to evaluate inorganic opportunities in areas like adding differentiated high-performing traditional capabilities, private market expansion, or access to more clients outside the U.S. • Anticipates launching several actively managed ETFs in the next few quarters, including growth equity-oriented, real estate income, and fixed income ETFs. • Intends to balance return of capital to shareholders with investments in the business, including inorganic opportunities.

• Market environment favoring momentum poses challenges for quality-oriented strategies. • Potential differences between forward-looking statements and actual results due to known and unknown risks and uncertainties. • Inorganic growth involves risks related to evaluating and executing opportunities that may not be financially or strategically compelling as anticipated.

Q: On the ETF side, what are the key strategies attracting interest and future pipeline?

A: Both the ETF wrapper (transparency, tax efficiency) and specific strategies are driving interest. Pipeline includes growth equity-oriented, real estate income, and fixed income ETFs. Focus on increasing ETF availability in subchannels.

Q: Update on inorganic opportunities and timing?

A: Inorganic activity remains active with opportunities in traditional capabilities, private market expansion, or global access. No specific announcements, but evaluating opportunities disciplinedly.

Q: Net flows and levers to improve?

A: Positive flows in fixed income, alternative, and ETFs, but overshadowed by outflows in quality equity. Focus on growing strategies not highly correlated to quality.

Q: Office consolidation and discrete business initiative expenses?

A: Office consolidation actions reflected in Q3 run rate, reducing OpEx. Discrete business initiative expenses related to elevated inorganic activity, not normalized.

Q: Discrete spend persistence and buybacks?

A: Inorganic activity still active, no specific buyback announcements, but return of capital remains a core part of capital strategy.

Q: Institutional trends and liquid alts?

A: Strength in emerging market debt, global REIT, and domestic REIT. Non-U.S. institutional business has interest in strategies not as favored in U.S. markets.

Q: ETF distribution and models?

A: Focus on expanding ETF availability in wires, RIAs, and model providers. Working on increasing access and expanding offerings for solution-oriented capabilities.