Earnings call transcript: Virtus Q3 2025 results show mixed performance

Virtus Investment Partners (VRTS) reported its Q3 2025 earnings, revealing mixed results that impacted its stock performance. The company posted an earnings per share (EPS) of $6.69, falling short of the forecasted $6.83. However, revenue exceeded expectations, reaching $216.4 million against a forecast of $198.82 million. Following the earnings release, Virtus shares experienced a decline of 5.81% in the pre-market session, closing at $177.44, but showed a slight recovery with a 1.58% increase in premarket trading to $180.24. According to InvestingPro analysis, VRTS is currently trading below its Fair Value, suggesting potential upside opportunity. The stock maintains an attractive P/E ratio of 8.76, reflecting its value proposition in the asset management sector.

Key Takeaways

• Virtus missed EPS expectations by 2.05%, despite a 7% sequential increase.
• Revenue surpassed forecasts by 8.84%, reflecting strong performance in investment management fees.
• ETF assets grew significantly, with a 79% year-over-year increase.
• The stock experienced a 5.81% decline post-earnings, with some recovery in pre-market trading.

Company Performance

Virtus Investment Partners reported a solid increase in its assets under management, reaching $169.3 billion. The company saw a 3% rise in investment management fees, totaling $176.6 million. Despite the EPS miss, Virtus demonstrated resilience with a 7% sequential EPS growth and maintained a robust operating margin of 33%. The company’s focus on ETF growth paid off, with assets reaching $4.7 billion, marking a 79% increase from the previous year.

Financial Highlights

• Revenue: $216.4 million, surpassing forecasts by 8.84%.
• Earnings per share: $6.69, up 7% sequentially but below the forecast of $6.83.
• Operating margin: 33%, with net debt reduced to $29 million.

Earnings vs. Forecast

Virtus reported an EPS of $6.69, missing the forecast of $6.83 by 2.05%. This miss contrasts with the company’s historical trend of meeting or exceeding expectations. On the revenue side, Virtus outperformed, with actual revenue of $216.4 million against a forecast of $198.82 million, marking an 8.84% surprise.

Market Reaction

Following the earnings announcement, Virtus’ stock fell by 5.81%, reflecting investor disappointment with the EPS miss. However, the stock showed resilience with a 1.58% increase in pre-market trading, indicating some investor optimism due to the revenue beat and strong ETF performance.

Outlook & Guidance

Looking ahead, Virtus continues to focus on expanding its ETF offerings and exploring inorganic growth opportunities. The company plans to launch new ETFs, including growth equity and real estate income funds, and aims to enhance international client access. The guidance for future quarters suggests a steady EPS growth trajectory, with projections for Q4 2025 at $6.94. With a market capitalization of $1.13 billion and a dividend yield of 5.22%, VRTS has demonstrated strong shareholder returns, having raised its dividend for 8 consecutive years according to InvestingPro data.

Executive Commentary

CEO George Aylward emphasized the company’s strategic focus, stating, "We don’t fundamentally believe that lower quality, less profitable, highly shorted companies are going to continue to always lead the market." He also highlighted the importance of capital return as a critical part of Virtus’ strategy.

Risks and Challenges

• Market volatility could impact asset performance and management fees.
• Competition in the ETF space may pressure Virtus to innovate continuously.
• Economic downturns could affect investor sentiment and asset flows.
• Regulatory changes in financial markets could pose compliance challenges.
• Interest rate fluctuations may influence investment returns and borrowing costs.

Q&A

During the earnings call, analysts inquired about Virtus’ ETF growth strategies and institutional wins in emerging market debt and REITs. The company reiterated its commitment to evaluating M&A opportunities and maintaining flexibility in capital allocation.

Full transcript - Virtus Investment Partners Inc (VRTS) Q3 2025:

Deedee, Conference Operator: Good morning. My name is Deedee, and I will be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The slide presentation for this call is available in the investor relations section of the Virtus website, www.virtus.com. This call is being recorded and will be available for replay on the Virtus website. At this time, all participants are in a listen-only mode. After the speaker’s remarks, there will be a question and answer period, and instructions will follow at that time. I will now turn the conference to your host, Sean Rourke.

Sean Rourke, Investor Relations, Virtus Investment Partners: Thanks, Deedee, and good morning, everyone. On behalf of Virtus Investment Partners, I’d like to welcome you to the discussion of our operating and financial results for the third quarter of 2025. Our speakers today are George Aylward, President and CEO, and Mike Angerthal, Chief Financial Officer. Following their prepared remarks, we’ll have a Q&A period. Before we begin, please note the disclosures on page two of the slide presentation. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and as such, are subject to known and unknown risks and uncertainties, including those factors set forth in today’s news release and discussed in our SEC filings. These risks and uncertainties may cause actual results to differ materially from those discussed in these statements.

In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results. Our non-GAAP financial measures are not substitutes for GAAP financial results and should be read in conjunction with them. Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today’s news release and financial supplement, which are available on our website. Now I’d like to turn the call over to George. George.

George Aylward, President and CEO, Virtus Investment Partners: Thank you, Sean, and good morning, everyone. I’ll start with an overview of the results we reported this morning, and then I’ll turn it over to Mike to give a little more detail. We delivered solid financial results in the third quarter, supported by higher average assets under management and favorable market momentum. We did, however, have net outflows, as our quality-oriented strategies continue to face headwinds in a market environment that has largely favored momentum. Our focus remains on our initiatives to increase our retail separate account offerings, expand the availability of ETFs in key channels, and grow the wealth management business.

Key highlights of the quarter included higher earnings per share and operating margin, strong growth in ETF assets with our highest level of quarterly sales and net flows, positive net flows in both fixed income and alternative strategies, an increase in our quarterly dividend for the eighth consecutive year, and we completed a debt refinancing, providing significant liquidity and flexibility to invest in the business and return capital to shareholders. Our exchange-traded fund business was a particular highlight this quarter. ETF assets reached $4.7 billion, up 79% over the prior year, with a strong organic growth rate over the period. In the third quarter, ETF sales and flows reached their highest quarterly level at $0.9 billion each, benefiting from strong investment performance and demand for some of our strategies.

As of September 30, 77% of ETF AUM were beating benchmarks over the three-year period, and 85% were outperforming peers over the same period. We continue to focus on broadening access to our ETFs in key distribution channels and introducing compelling new offerings. We currently have 21 ETFs across a variety of strategies, and we have several actively managed funds in filing that we anticipate will launch over the next few quarters, including several growth equity-oriented ETFs from Silvant, a real estate income ETF managed by Duff & Phelps, a multi-managed fixed income ETF collaboration between Newfleet and SGA, and a set of building block ETFs from Virtus Systematic. These follow the introduction of a global macro ETF from AlphaSimplex during the third quarter.

On the inorganic side, I would reiterate my comments from our last call that the environment remains very favorable with attractive opportunities to add compelling new capabilities or increase scale. As always, however, we take a highly disciplined approach to inorganic growth and will act only when an opportunity is both financially and strategically compelling. I would note that in the quarter, we did have $1 million of discrete business initiative expenses that were related to inorganic activity. Turning to investment performance, while recent equity performance reflects our quality orientation in a market that has favored momentum, we are pleased with the performance we have generated over market cycles. Over the 10-year period, 70% of our equity assets and 77% of our fixed income assets beat their benchmark. For just mutual funds, 70% of equity funds and 80% of fixed income funds outperformed the peer median.

I would also note that 25 of our retail funds are rated four and five-star funds, and 84% of our rated retail fund assets were in three, four, or five-star funds. Turning now to review the results, total assets under management were $169 billion at September 30, modestly below the prior quarter level, as favorable market performance was offset by net outflows. Total sales of $6.3 billion increased 12% from $5.6 billion in the second quarter, with higher sales of fixed income and alternative strategies. On a product basis, we saw higher sales in institutional and ETFs. Total net outflows for the quarter of $3.9 billion were unchanged sequentially in spite of our highest level of ETF flows and positive flows in fixed income and alternative strategies, which are more than offset by outflows in quality equity strategies.

Looking at flows across asset classes, the equity net outflows largely reflect our weighting towards quality-oriented strategies. While quality has historically outperformed over longer market cycles, it tends to underperform momentum in risk-on environments, which has been particularly stark over the past two years. Fixed income net flows were positive for the quarter and the trailing 12 months, supported by very strong investment performance both for the shorter and longer-term periods. For the quarter, we saw positive net flows in our fixed income strategies across several products, including ETFs, institutional, and retail separate accounts. Net flows of alternative strategies were also positive, primarily in ETFs. In terms of what we’re seeing in October, flows across products and asset classes are trending similarly. ETF sales and net flows remain strong, though U.S. retail mutual fund headwinds continue.

In institutional, trends are also similar to the third quarter, with known redemptions exceeding known wins, and with the wins across a range of strategies, including such things as emerging market debt and global and domestic REIT. Turning now to our financial results, the sequential improvement reflected growth in average assets under management and stable operating expenses. The operating margin was up 170 basis points to 33%, or 33.4% without squeezed items, with an incremental margin that continues to be above 50%. Earnings per share, as suggested, of $6.69 increased from $6.25 in the second quarter. Relative to the prior year period, earnings per share, as suggested, decreased 3% on lower average assets.

In terms of our balance sheet and capital, given the nearing maturity of our previous credit agreement, we refinanced with a new $400 million term loan and $250 million revolving credit facility, increasing our financial flexibility and extending our debt maturity profile with attractive terms. On a net basis, this added $158 million of cash to our balance sheet at the end of September. We also raised our quarterly dividend, representing the eighth consecutive annual increase. Regarding share repurchases, we were not in the market in the third quarter given other considerations and priorities. As a reminder, we bought back $50 million of our shares in the first half of the year, which was higher than our full year of repurchases in each of the prior two years.

Buybacks remain an important component of our capital management strategy, and given our strong liquidity position, we intend to continue to balance return of capital shareholders with investments in the business, including inorganic opportunities. With that, I’ll turn the call over to Mike. Mike.

Mike Angerthal, Chief Financial Officer, Virtus Investment Partners: Thank you, George. Good to be with you all this morning. Starting with our results on slide seven, assets under management. Our total assets under management at September 30 were $169.3 billion, and average assets increased 2% to $170.3 billion. Our AUM represented a broad range of products and asset classes. By product, institutional is our largest category at 33% of AUM, retail separate accounts, including wealth management, at 28%, and U.S. retail mutual funds at 27%. The remaining 12% comprises closed-end funds, global funds, and ETFs. Within open-end funds, ETF assets under management grew to $4.7 billion, up by $1 billion sequentially on continued strong net flows, and have increased 79% over the prior year. We are also diversified within asset classes. In equities, between international and domestic, and within domestic, well represented among mid, small, and large-cap strategies.

Fixed income is well diversified across duration, credit quality, and geography. Turning to slide eight, asset flows. Sales grew 12% to $6.3 billion, with higher sales of both fixed income and alternative strategies. Reviewing by product, institutional sales of $2 billion compared with $1.3 billion last quarter, driven by fixed income and multi-asset strategies, and included the issuance of a new $0.4 billion CLO. Retail separate account sales were $1.4 billion, essentially unchanged from the prior quarter. Open-end fund sales of $2.8 billion were consistent with the prior quarter, as strong growth in ETF sales were offset by lower sales of U.S. retail funds. ETF sales were $0.9 billion, more than double the prior quarter level. Total net outflows were $3.9 billion, consistent with the prior quarter. Reviewing by product, institutional net outflows of $1.5 billion improved from $2.2 billion due to the increase in inflows into fixed income strategies.

As always, institutional flows will fluctuate depending on the timing of client actions. Retail separate accounts had net outflows of $1.2 billion, driven by small and mid-cap strategies, while large-cap and fixed income generated positive net flows. We also continue to see positive net flows in our style-agnostic, high-conviction, large-cap growth offerings. For open-end funds, net outflows of $1.1 billion compared with $1 billion in the prior quarter were driven by equity strategies within U.S. retail funds, which more than offset positive net flows in ETFs. ETFs continue to generate strong double-digit organic growth rates with $0.9 billion of positive net flows. Turning to slide nine, investment management fees as adjusted of $176.6 million increased 3%, reflecting a consistent average fee rate and an increase in average assets under management. The average fee rate, excluding performance fees, was 41.1 basis points, unchanged from the prior quarter.

Looking ahead, we believe this fee rate is reasonable for the fourth quarter modeling purposes. As always, the fee rate will be impacted by markets and the mix of assets. Slide 10 shows the five-quarter trend in employment expenses. Total employment expenses as adjusted of $98.7 million increased slightly due to higher variable incentive compensation. As a percentage of revenues, employment expenses as adjusted declined by 70 basis points to 50.2%. Looking ahead, it is reasonable to anticipate employment expenses as a percentage of revenues will remain within our recent 49% to 51% range. Turning to slide 11, other operating expenses as adjusted were $31.1 million, down from $32 million due to lower rent expense from office consolidation and the prior quarter impact of the annual equity grants to the board of directors, partially offset by $1 million of discrete business initiative expenses.

As a percentage of revenue, other operating expenses were 15.8%, down from 16.7%. For modeling purposes, our range of $30 million to $32 million per quarter remains appropriate. Slide 12 illustrates the trend in earnings. Operating income as adjusted of $65 million increased 9% sequentially due to higher revenues and relatively stable operating expenses. The operating margin as adjusted of 33% increased 170 basis points from the second quarter. Excluding the discrete business initiative expenses, the operating margin was 33.4%. With respect to non-operating items, interest and dividend income of $4.1 million declined sequentially due to elevated CLO interest income in the prior quarter. Looking ahead to the fourth quarter, it would be reasonable to anticipate a higher level of interest income given increased cash balances at the end of the quarter as a result of the recent debt refinancing, offset partially by lower CLO interest income.

Interest expense was $4.8 million in the third quarter. It would be reasonable to assume that will increase in the fourth quarter given the higher debt level. Non-controlling interests, which reflect minority interests in one of our managers, were modestly lower, primarily due to the increase in our ownership late in the quarter. A reasonable run rate for the fourth quarter is approximately $2 million. Net income as adjusted of $6.69 per diluted share, which included $0.11 of discrete expenses, increased 7% from $6.25 in the second quarter. In terms of GAAP results, net income per share of $4.65 decreased from $6.12 per share in the second quarter due to $1.54 of unrealized losses on investments, partially offset by $0.42 of fair value adjustments to minority interests. Slide 13 shows the trend of our capital liquidity and select balance sheet items.

On September 26, we completed the refinancing of our credit agreement, increasing the company’s financial flexibility and extending the maturity profile. The new $400 million term loan has a seven-year maturity, and the revolver provides $250 million of capacity through 2030, each bearing interest at SOFR plus 225 basis points. Cash and equivalents at September 30 were $371 million. In addition, we had $300 million of other investments, including seed capital, to support growth initiatives. During the third quarter, we raised our quarterly common dividend by 7% to $2.40 per share. Other uses of capital during the quarter included $29.7 million to sponsor the new CLO, as well as $14.8 million for a planned increase in equity of our majority-owned affiliate. The last of the scheduled equity purchases of the affiliate will be approximately $7 million in the fourth quarter.

At September 30, gross debt to EBITDA was 1.3 times, up from 0.7 times at June 30 due to the upsizing of our credit facility, and we ended the quarter with $29 million of net debt, or 0.1 times EBITDA, which declined from 0.2 times at June 30. Our strong levels of liquidity, including the undrawn revolver and modest net leverage, provide meaningful financial flexibility to continue to invest in the business and return capital. With that, let me turn the call back over to George. George.

George Aylward, President and CEO, Virtus Investment Partners: Thank you, Mike. We will now take your questions. Deedee, would you open up the lines, please?

Deedee, Conference Operator: Thank you. To ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from Ben Budish of Barclays. Your line is open.

Hi. Good morning, and thank you for taking my questions. Maybe just first on the ETF side, you’ve noted that that’s an area of strength. Could you just maybe unpack for us a little bit, you know, what are the key strategies that are attracting the most interest? Is it the wrapper itself, or is it the particular strategies that are offered in that wrapper or the franchises? How do you think about that in terms of what informs the future pipeline? You mentioned a couple of things upcoming. As you think about the next couple of years, how else are you thinking what might make sense either to launch or to kind of rewrap? How are you thinking about all that?

George Aylward, President and CEO, Virtus Investment Partners: Sure. Yeah. I think in terms of what’s driving, I think it’s both components. I think the ETF wrapper itself is highly preferred by a large number of investors and financial advisors, you know, transparency, benefits, tax efficiency. I think in certain instances for specific strategies, it’s become a vehicle of choice. In terms of what strategies people are accessing, for us, our ETF business is a newer business, and we’ve been building out track records in many of our strategies. Currently, we’ve seen growth occurring in several of them, particularly those that I think we noted in the alt space or that have certain kinds of return patterns that are being found to be very attractive.

I commented a little bit on some of our pipelines because we really do see a lot of opportunities for very specific types of strategies in the ETF wrapper that increasingly will be utilized in portfolios. I also made comments, for us, getting availability for ETFs is a big focus. A lot of times with newer ETFs, it’s harder to get access in certain of the sub-channels. As we grow them, including in this quarter, we had one that we got to a level of access, and that drove some of our flows this quarter. That continues to be a priority for us. Just separately, I would note for the ETF share class relief, we are one of the firms that do have filings in process related to that as well.

Very helpful. Thank you. Maybe just following up in terms of growth priorities, you mentioned inorganic opportunities in your brief comments about uses of capital. Just any update on pipeline, potential timing, and are there any changes in the environment that make things more or less feasible? You talked about sort of growth versus momentum. Does that sort of inform the types of assets you’re interested in acquiring? Just any update there would be helpful as well. Thank you very much.

Yeah. Just on the last point in terms of the quality versus momentum, and again, having been in a period where, you know, for the last two years, quality has significantly underperformed the momentum, you know, that is a current event. In terms of a long-term M&A strategy, that might not necessarily have a huge impact on it, though it would influence it. We look forward to the reversion for quality coming back into favor, which is generally when quality-oriented strategies have their best performance. Unless momentum continues to lead the markets for the next multiple years, we’ll have a headwind. When it inverts, we will be well positioned to take care of that.

In terms of inorganic, I repeated some of the comments from last quarter, which is that the activity remains very active and that there are a lot of opportunities in terms of things that could potentially make sense. We really focus in on a very disciplined and focused approach on what really makes sense in terms of either adding another differentiated, high-performing traditional capability or private market expansion or something that would allow us to have access to more clients outside the U.S. Those are the three areas I believe we previously have commented on, and we do think all of those could potentially be interesting opportunities for us. We have nothing specific to announce at this time on anything that we’re doing. It continues to be a very active area for us.

All right. Understood. Thanks for taking my questions.

No, thank you.

Deedee, Conference Operator: Thank you. Our next question comes from Kristen Love of Piper Sandler. Your line is open.

Thank you. Good morning. First, just looking big picture at net flows, they’ve been pretty elevated for four consecutive quarters of net outflows. When you look forward, do you see any key levers to be able to improve those flows to get to more neutral, at least less negative, outside of just quality coming more into favor versus momentum?

George Aylward, President and CEO, Virtus Investment Partners: Yeah. I mean, a couple of things. We did have positive flows in fixed income strategies in the quarter. We had positive flows in alternative strategies. We have positive flows in our ETFs. In multi-asset, I think we were kind of break even. A lot of our flows are really around, are overweight to quality-oriented equity strategies. Actually, our equity strategies that are not highly correlated to quality actually are in positive flows. It’s just the significant overweight that we have to those types of strategies is the reason that it’s overshadowed any of the other areas that have been positive. What we’re focusing in on primarily now, while the cycle is still negative towards us, is to grow those things that don’t have that same correlation.

As I commented on, some of our more style-agnostic or momentum-oriented equity strategies actually were in positive flows, and we’re actually seeing activity there. They’re just such a smaller part of our business. They’re not going to overshadow the quality and the momentum. In terms of the quality momentum, and again, this has really been, we highlighted how bad of a two-year period this has been, to give some examples. For the S&P mid-cap quality index, it’s trailed the S&P mid-cap momentum by about 32%, which really kind of ranks in the 93rd percentile of the data that goes all the way back to 1992, and actually is the worst level since October of 2000. Similarly, on the small caps, the Morningstar U.S. small cap quality trailed the Morningstar U.S. small cap momentum by about 82%, and that’s the worst level going back to 2008.

It really has been an unusually stark underperformance of quality versus momentum for a longer period of time. I think, as I just commented previously, historically, as they invert, is usually when quality has some of its strongest outperformance, right? In some of these strategies, and some of these strategies I’ve personally been watching for over 20 years, they can generally have some of their best performance and then following that, some of their best flows after that inversion. We don’t fundamentally believe that lower quality, less profitable, highly shorted companies are going to continue to always lead the market. Lastly, when we sell our strategies, we sell them how they’ll fit into a portfolio, right? Generally, people aren’t just buying one equity manager hoping for the highest return.

Where we’re positioning those capabilities is that someone should have a portion of their equity allocation not only in just the pure indexes, which is really a small number of names leading those indices, but to also have certain allocations to either quality or other types of capabilities in the event that the markets inflect. I think increasingly, as people will look at do they need to have some protection in case there is that flip, that will be an area that we would be able to take advantage of.

Great. Thank you, George. Appreciate all the color there. Just a second question for me on other OpEx. You had the office space consolidation. Is this something that you’ve been thinking about for several quarters? Shouldn’t that drive down the run rate for OpEx going forward, or are there offsets in there as well? Also, if you can just detail what the $1 million of discrete business initiative expenses were in the quarter.

Sure, Kristen, I’ll jump in. It’s Mike. Good morning. With respect to the office consolidation, this is the quarter that you actually see it in the run rate. Those are some actions that we have taken starting late last year and earlier this year that have now been reflected in the run rate. We talked about the $30 to $32 million range, ex the discrete items, sort of coming in at the low end of that range, given the benefit of that office consolidation. We provided the transparency around the discrete items. As George alluded to, they’re generally related to at elevated levels based on some of the inorganic activity that we have been focused on. We thought providing that transparency would be helpful in the analysis of other operating.

It is specific to some of those activities and at levels higher than what we would anticipate at a more normalized level.

Perfect. Appreciate that, Mike. Thank you for taking my questions.

Thanks, Kristen.

Deedee, Conference Operator: Thank you. Our next question comes from Bill Katz of TD Cowen. Your line is open.

George Aylward, President and CEO, Virtus Investment Partners: Okay. Thank you very much. I apologize for the hoarse voice, being under the weather. Just sticking on the discrete spend here, is that now over, or should we anticipate that that will persist? Relatedly, are you back in the market for buyback at present? Yeah. On the first part of the question, in the prepared comments, we’re clear that we’re still being very active, and there’s still a lot of opportunities for us. We’ll stand by that and say we are still being very active in evaluating potential opportunities. As it relates, we don’t have anything specific to discuss or announce at this point. That continues to be an area where we are being very active.

I’m sorry. I promised I shouldn’t buy back.

I’ll buy back something. Nothing specific to say other than, you know, we continue to view that as a core element of our capital strategy, right? Halfway through the year, we had done $50 million, which had gotten us to the highest level of over two years. That will continue to be something that we will always evaluate. As always, we have to balance it with other factors and other considerations for that. Nothing specific on what that might be in the short term other than to say we still view return of capital as a critical part of our capital strategy.

Okay. Thank you for that. Just as a follow-up, going back to your commentary that the fourth quarter of the institutional trends are sort of looking like they were in the prior quarter, can you unpack that a little bit? Where are you seeing strength? Where are you seeing the weakness? Underneath that, I sort of wonder if you could just talk about what you’re just sort of seeing generally in terms of allocations. I’m curious specifically about the demand for liquid alts. Thank you.

Yeah. Actually, two of the areas I was very happy to see, as I mentioned, are emerging market debt, which is an area that had previously maybe not been as much in favor as some of us believe it should have been. I commented on opportunities that we’ve seen in emerging market debt, as well as global REIT, as well as domestic REIT. Those are really nice to see there. I think generally in the institutional, which for us, you know, we have a nice non-U.S. institutional business, and I believe both of the ones I referenced are non-U.S. You kind of have a slightly different investor profile there. That’s why sometimes we can see interest in strategies that may not be as in favor in the U.S. retail market, even the U.S. institutional market, but that have some opportunities there.

Those are the two that I would highlight, but I think there’s a variety of managers, Mike. I don’t know if there’s anything else you’d add to that.

Mike Angerthal, Chief Financial Officer, Virtus Investment Partners: No, I think you covered it. The pipeline is across managers and across geographies, including from our European and Middle Eastern teams.

George Aylward, President and CEO, Virtus Investment Partners: Okay, thank you.

Mike Angerthal, Chief Financial Officer, Virtus Investment Partners: Thank you.

Deedee, Conference Operator: Thank you. Our next question comes from Michael J. Cyprys of Morgan Stanley. Your line is open.

Hey, good morning. Thanks for taking the question. Just want to ask about ETFs. I was hoping maybe you could speak to how broadly distributed your ETFs are today across the wirehouses, IBDs, RIAs, etc., and how that is compared to where you’d like that to be. Talk about some of the steps you’re taking to expand your distribution presence for your ETFs, including in models, and if you could maybe just update us on how models are contributing, if at all, today.

George Aylward, President and CEO, Virtus Investment Partners: Yeah. No, it’s a great question. That’s specific to the comments we made and where we’re focusing. One of the main areas of focus is increasing the availability of our ETFs in certain channels. As you’re kind of intimating, getting access is not the same in every channel, right? The wirehouses versus the registered investment advisors, as well as getting access into some of the big model providers and professional ETF buyers. For us, we’re focused on all of those areas where we’re not where we want to be. We think we have a great opportunity, particularly if we can get some of our ETFs up to a certain level of scale, which will matter in some of the channels, like the wirehouses, where you need a certain period of time and you need a certain asset level to have access.

We always have focused in on some of the model providers and the professional buyers. I still think that’s a huge opportunity for us. One of the reasons that we’re focused on both sides of increasing the distribution as well as increasing the offerings is because we just really see that there is a great opportunity set for us and some of the areas that we focus in on as we move forward. Our hope is that the growth will come from getting a lot more of the access that we currently don’t have that we do want, but then expanding those offerings to provide more building blocks for ETF models as well as for individual investors.

I think, as I commented on a previous call, another area that we focus in on is our own models and using our ETFs for solution-oriented, outcome-oriented types of capabilities, which we have seeded and designed several things along that way. That’s why it’s just been a big area for focus for us. I think, as you’ve seen, almost all of our product development has either been on the ETF side or the global fund side, as well as, and I don’t want to leave retail separate accounts out because retail separate accounts, our focus there has really been on expanding the offerings. We have a strong placement in retail separate accounts on the equity side, and we have been expanding the number of fixed income offerings and have put together several structures to allow us to take advantage of that.

That’s another area that we would like to see some additional growth because we think we have a good opportunity set.

Great. Just a follow-up question on inorganic activity. I was hoping maybe you could elaborate on the types and size of properties that you’re evaluating. Talk about your process of how you’re going about sifting and sorting through these properties, and remind us of your criteria and hurdle rates. Does a transaction need to be created day one or within the first 12 months? How are you thinking about that?

Yeah. When we speak about inorganic, we’re covering the whole continuum of those things which really could add meaningful scale, those things that can add capabilities that are quite additive to our current set of offerings. That would also include expanding us from the public market offerings into the private markets. When we talk about inorganic, we also, because of our flexible model, that could include things like joint ventures or other types of structures. We leave ourselves open to a variety of different opportunities set and evaluate, primarily what we’re trying to evaluate is the best strategic fit, the financial benefit, and really the long-term value creation. We’ll include a lot of factors, which will include things like accretion, but we’ll also include factors like what impact we’ll have in our growth rates, etc.

I don’t have specific hurdles that I would provide, but we do go through a filter of various elements as we determine between two alternatives or three alternatives, what we would prioritize. The good news is, with our current level of net debt being de minimis and our cash flow still generating, we do have flexibility to evaluate different types of opportunities.

Great. Thank you.

Thank you.

Deedee, Conference Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Aylward.

George Aylward, President and CEO, Virtus Investment Partners: Great. No, thank you. I want to thank everyone today for joining us. Obviously, as always, if you have any other questions, please reach out. Thank you very much.

Deedee, Conference Operator: That concludes today’s call. Thank you for participating, and you may now disconnect.

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