Shareholder Information
Summary of Operations1
Security Listing
For More Information
To receive additional information about Virtus
Investment Partners and access to other
shareholder services, visit Investor Relations in the
“Our Story” section of our website at virtus.com, or
contact us at:
Virtus Investment Partners, Inc.
Investor Relations
One Financial Plaza
Hartford, CT 06103
Telephone: 800-248-7971 (Option 2)
Fax: 413-774-1714
Email: investor.relations@virtus.com
For more information on Virtus Mutual Funds or
other products, call your financial representative or
visit us at virtus.com.
The common stock of Virtus Investment Partners, Inc.
is traded on the New York Stock Exchange under the
symbol “VRTS.”
Transfer Agent and Registrar
For information or assistance regarding your account,
please contact our transfer agent and registrar:
Virtus Investment Partners
c/o Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
Toll-free (within U.S.): 866-205-7273
Foreign Shareowners: 413-775-6091
Website:
shareholder.broadridge.com/VRTS
Email:
Virtus.Investment.Partners@virtus.com
Annual Meeting of Shareholders
Shareholders are invited to attend the 2024 Annual
Meeting of Shareholders on Wednesday, May 15,
2024 at 9:00 a.m. EDT at the company’s offices, One
Financial Plaza, 19th Floor, Hartford, Connecticut.
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2023
ANNUAL
REPORT
(Dollars in millions,
except per share data)
Revenues
Revenues, as Adjusted
Operating Expenses
Operating Expenses, as Adjusted
Operating Income
2023
2022
Change
$845.3
$886.4
$758.3
$782.9
$693.8
$688.9
$518.5
$493.8
(5%)
(3%)
1%
5%
$151.5
$197.5
(23%)
Operating Income, as Adjusted
$239.8
$289.2
(17%)
Net Income attributable to Virtus Investment Partners, Inc. $130.6
$117.5
11%
Net Income attributable to Virtus Investment Partners, Inc.,
as Adjusted
$161.8
$195.2
(17%)
Operating Margin
Operating Margin, as Adjusted
18%
32%
22%
37%
Earnings per Share – Diluted
$17.71
$15.50
14%
Earnings per Share – Diluted, as Adjusted
$21.93
$25.74
(15%)
Weighted Average Shares Outstanding –
7,375
7,582
(3%)
Diluted (in thousands)
Ending Assets Under Management
$172,259 $149,376
15%
Per Share Data
Assets Under Management
(in millions)
By Product
(12/31/2023)
By Asset Class
(12/31/2023)
• U.S. Retail Funds
• Global Funds
• Exchange-Traded Funds
• Variable Insurance Funds
• Closed-End Funds
• Retail Separate Accounts
• Institutional Accounts
• Structured Products
$49,064
4,560
1,545
893
10,026
43,202
59,548
3,421
28.5%
2.6%
0.5%
0.9%
5.8%
25.1%
34.6%
2.0%
TOTAL
$172,259
100%
• Equity
• Fixed Income
• Multi-Asset 2
• Alternatives3
TOTAL
$96,703
37,192
21,411
16,953
56.1%
21.6%
12.4%
9.8%
$172,259
100%
1 Certain supplemental performance measures are provided in addition to, but not as a substitute for, performance measures determined in accordance with GAAP. These supplemental measures
may not be comparable to non-GAAP performance measures of other companies. “Operating Income, as Adjusted,” “Net Income attributable to Virtus Investment Partners, Inc., as Adjusted,”
“Operating Margin, as Adjusted,” and “Earnings per Share - Diluted, as Adjusted” are supplemental non-GAAP measures that net the distribution and administration expenses against the related
revenue and remove certain non-cash and other identified amounts. For our definition of these terms, as well as a reconciliation to GAAP measures, see “Non-GAAP Information and Reconciliations”
in the Supplemental Financial Information, included as an attachment to this annual report after the Form 10-K.
2 Consists of strategies and client accounts with substantial holdings in at least two of the following asset classes: equity, fixed income, and alternatives.
3 Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other strategies.
This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which, by their nature, are subject to significant risks and uncertainties.
Virtus Investment Partners, Inc. intends for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. For a
further discussion, see “Special Note About Forward-Looking Statements” on page 17 of the attached Form 10-K.
Shareholder Information
Summary of Operations1
Security Listing
For More Information
To receive additional information about Virtus
Investment Partners and access to other
shareholder services, visit Investor Relations in the
“Our Story” section of our website at virtus.com, or
contact us at:
Virtus Investment Partners, Inc.
Investor Relations
One Financial Plaza
Hartford, CT 06103
Telephone: 800-248-7971 (Option 2)
Fax: 413-774-1714
Email: investor.relations@virtus.com
For more information on Virtus Mutual Funds or
other products, call your financial representative or
visit us at virtus.com.
The common stock of Virtus Investment Partners, Inc.
is traded on the New York Stock Exchange under the
symbol “VRTS.”
Transfer Agent and Registrar
For information or assistance regarding your account,
please contact our transfer agent and registrar:
Virtus Investment Partners
c/o Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
Toll-free (within U.S.): 866-205-7273
Foreign Shareowners: 413-775-6091
Website:
shareholder.broadridge.com/VRTS
Email:
Virtus.Investment.Partners@virtus.com
Annual Meeting of Shareholders
Shareholders are invited to attend the 2024 Annual
Meeting of Shareholders on Wednesday, May 15,
2024 at 9:00 a.m. EDT at the company’s offices, One
Financial Plaza, 19th Floor, Hartford, Connecticut.
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2023
ANNUAL
REPORT
(Dollars in millions,
except per share data)
Revenues
Revenues, as Adjusted
Operating Expenses
Operating Expenses, as Adjusted
Operating Income
2023
2022
Change
$845.3
$886.4
$758.3
$782.9
$693.8
$688.9
$518.5
$493.8
(5%)
(3%)
1%
5%
$151.5
$197.5
(23%)
Operating Income, as Adjusted
$239.8
$289.2
(17%)
Net Income attributable to Virtus Investment Partners, Inc. $130.6
$117.5
11%
Net Income attributable to Virtus Investment Partners, Inc.,
as Adjusted
$161.8
$195.2
(17%)
Operating Margin
Operating Margin, as Adjusted
18%
32%
22%
37%
Earnings per Share – Diluted
$17.71
$15.50
14%
Earnings per Share – Diluted, as Adjusted
$21.93
$25.74
(15%)
Weighted Average Shares Outstanding –
7,375
7,582
(3%)
Diluted (in thousands)
Ending Assets Under Management
$172,259 $149,376
15%
Per Share Data
Assets Under Management
(in millions)
By Product
(12/31/2023)
By Asset Class
(12/31/2023)
• U.S. Retail Funds
• Global Funds
• Exchange-Traded Funds
• Variable Insurance Funds
• Closed-End Funds
• Retail Separate Accounts
• Institutional Accounts
• Structured Products
$49,064
4,560
1,545
893
10,026
43,202
59,548
3,421
28.5%
2.6%
0.5%
0.9%
5.8%
25.1%
34.6%
2.0%
TOTAL
$172,259
100%
• Equity
• Fixed Income
• Multi-Asset 2
• Alternatives3
TOTAL
$96,703
37,192
21,411
16,953
56.1%
21.6%
12.4%
9.8%
$172,259
100%
1 Certain supplemental performance measures are provided in addition to, but not as a substitute for, performance measures determined in accordance with GAAP. These supplemental measures
may not be comparable to non-GAAP performance measures of other companies. “Operating Income, as Adjusted,” “Net Income attributable to Virtus Investment Partners, Inc., as Adjusted,”
“Operating Margin, as Adjusted,” and “Earnings per Share - Diluted, as Adjusted” are supplemental non-GAAP measures that net the distribution and administration expenses against the related
revenue and remove certain non-cash and other identified amounts. For our definition of these terms, as well as a reconciliation to GAAP measures, see “Non-GAAP Information and Reconciliations”
in the Supplemental Financial Information, included as an attachment to this annual report after the Form 10-K.
2 Consists of strategies and client accounts with substantial holdings in at least two of the following asset classes: equity, fixed income, and alternatives.
3 Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other strategies.
This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which, by their nature, are subject to significant risks and uncertainties.
Virtus Investment Partners, Inc. intends for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. For a
further discussion, see “Special Note About Forward-Looking Statements” on page 17 of the attached Form 10-K.
Message to Shareholders
To Our Fellow Shareholders:
For 15 years as an independent
public company, Virtus Investment
Partners has been guided by a
singular mission: to be a distinctive
and trusted provider of asset
management solutions for individual
and institutional investors.
Today we are a company with more
than 800 employees, over $170
billion in assets under management,
and clients across the globe. We
provide clients with attractive
investment solutions to meet their
current and future investment
needs; we are a meaningful
and collaborative partner with
distributors and consultants for
institutional and retail clients;
and we manage the company’s
resources for profitability, growth,
risk mitigation, and the creation of
long-term shareholder value.
Our growth over these past 15
years is the result of a sharp focus
on our business priorities, strategic
investments in affiliated managers
and shared support services, a team
of dedicated professionals, and
a vision to position the company
to deliver long-term results for
shareholders.
In 2023, we executed across each
primary strategic objective to deliver
these results:
Total Shareholder Return
January 1, 2009 – December 31, 2023
4000%
3500%
3000%
2500%
2000%
1500%
1000%
500%
00%
-50%
1 2/3 1/0 8
1 2/3 1/0 9
1 2/3 1/1 0
1 2/3 1/1 1
1 2/3 1/1 2
1 2/3 1/1 3
1 2/3 1/1 4
1 2/3 1/1 5
1 2/3 1/1 6
1 2/3 1/1 7
1 2/3 1/1 8
1 2/3 1/1 9
1 2/3 1/2 0
1 2/3 1/2 1
1 2/3 1/2 2
1 2/3 1/2 3
Companies comprising Peer Group average: Affiliated Managers Group, AllianceBernstein, Cohen & Steers,
Federated Hermes, Franklin Resources, Invesco, T. Rowe Price
VRTS
Peer Group Average
S&P 500
2,709%
589%
417%
Key Accomplishments
AlphaSimplex Group, a leading manager of systematic, quantitative
alternative investment solutions, joined as an affiliated investment
partner, further diversifying offerings of differentiated, non-
correlated strategies for institutional and individual clients. We
also increased our minority ownership of Zevenbergen Capital
Investments, a subadviser of high-growth equity portfolios, including
several mutual funds.
We have continued to diversify our business by asset class, client
type, and location as a result of a long-term focus on expanding
alternative investment capabilities and adding global and
institutional distribution resources. In 2023, 12% of all sales were in
alternative products compared with 5% of sales in 2021. Strategies
for institutional investors grew to 37% of assets under management
at December 31, 2023, compared with 28% two years earlier, and
strategies for international clients represented 18% of year-end
AUM, compared with 10% two years prior.
Efforts to leverage our expanded institutional distribution resources
and our proprietary operating and analytical platform have
increased opportunities to grow and generate operating efficiencies.
We have expanded the presence of our strategies in the institutional
market, particularly outside the U.S. We continued to transition
affiliated managers onto a common operating platform and build-out
additional capabilities.
Long-term investment performance of our investment
strategies is of critical importance to clients and we
are proud of our relative long-term performance across
products and asset classes. This includes 86% of retail
separate account assets and 67% of institutional assets
that outperformed their benchmarks on a five-year
basis as of year-end. In addition, 38 of 77 rated funds,
representing 70% of fund AUM, had a 5- or 4-star
Morningstar Rating™ at December 31, 20231, including
11 funds with $1 billion or more AUM, representing a
diverse set of strategies from seven different managers.
With our balanced and prudent approach to capital
management, we have returned meaningful capital to
shareholders, maintained appropriate levels of working
capital and leverage, and invested in growth initiatives,
such as the acquisition of AlphaSimplex. For the sixth
consecutive year we increased the quarterly common
stock dividend – in 2023 by 15% to $1.90 a share –
and also repurchased $45 million of common shares,
reducing the outstanding share count at December 31,
2023 by 1.3% from the prior year-end.
Financial and Operating Results
Financial results were challenged by lower sales, net
outflows, and lower average assets under management as a
result of conservative investor behavior, particularly during
the first half of the year, that carried over from the difficult
market conditions of 2022.
Assets under management were $172.3 billion as of
December 31, 2023, a 15% increase over 2022 ending
AUM of $149.4 billion, as positive market performance
across asset classes and the addition of AlphaSimplex’s
assets offset total net outflows.
Total sales of $25.9 billion for 2023 compared with
$30.3 billion for 2022 and included a 17% increase in
retail separate account sales to $6.7 billion. Sales of
other products included $9.9 billion in U.S. retail funds;
$8.0 billion in institutional accounts, including a new
affiliate-managed collateralized loan obligation (CLO)
that closed during the year; $0.8 billion in global funds;
1 Additional information regarding mutual fund investment performance is included as an attachment to
this annual report after the Form 10-K.
2 The referenced non-GAAP measures are described and reconciled to GAAP reported amounts in an
attachment to this annual report after the Form 10-K.
3 The companies that comprise our peer companies for TSR comparison are listed in an attachment to
this annual report after the Form 10-K.
and $0.4 billion in exchange-traded funds (ETFs). Total
net flows of ($7.2) billion improved from the prior year,
even as negative net flows in open-end mutual funds and
institutional offset positive net flows in retail separate
accounts, global funds, and ETFs.
Net income attributable to Virtus Investment Partners, Inc.
increased by 11% to $130.6 million, with a related margin
of 18%. Net income, attributable to Virtus Investment
Partners, Inc., as adjusted, was $161.8 million with a
related margin of 32%. Diluted earnings per share (EPS)
of $17.71 increased 14% from 2022 and diluted EPS, as
adjusted, was $21.93, compared with $25.74 in 2022. 2
Ultimately, the success of our long-term focus will be
measured by the value we provide shareholders. We have
delivered substantial results to shareholders based on the
total shareholder return (TSR) of our stock. One-, three-, and
five-year TSRs have significantly exceeded the median of our
peer companies3, and our five-year TSR of 245% is more than
twice that of the S&P 500 during the period.
These accomplishments would not have been possible
without the hard work and determination of our employees
who are dedicated to deliver on our commitments to clients,
business partners, and shareholders. We have employees who
have demonstrated they can effectively execute on a focused
business strategy, respond to the challenges of a dynamic
market environment, and address the evolving needs of our
clients.
As we build toward the future we are well prepared to take
advantage of the opportunities ahead. We have confidence in
our team, our strategy, and the investments we have made in
our company.
On behalf of the staff, management, and your board of
directors, we thank you for the trust you have placed in us and
for your investment in Virtus.
Sincerely,
George R. Aylward
Timothy A. Holt
President and Chief Executive Officer
Chairman
Directors and Officers
Board of Directors
Principal Corporate Officers
George R. Aylward
President and Chief Executive Officer
Virtus Investment Partners
Peter L. Bain2
President, Chief Executive Officer and Director (Retired)
BrightSphere Investment Group
(Formerly OM Asset Management)
Susan S. Fleming, Ph.D.1,3
Keynote Speaker and Executive Educator
Paul G. Greig1
Chairman of the Board (Retired)
Opus Bank
Timothy A. Holt 2,3
Non-Executive Chairman of the Board of Directors
Senior Vice President and Chief Investment Officer
(Retired) Aetna, Inc.
Melody L. Jones 2,3
Founder
32-80 Advisors
W. Howard Morris1
President and Chief Investment Officer
The Prairie & Tireman Group
Stephen T. Zarrilli1
President and Chief Executive Officer (Retired)
The University City Science Center
1 Audit Committee
2 Compensation Committee
3 Governance Committee
George R. Aylward
President, Chief Executive Officer and Director
Michael A. Angerthal
Executive Vice President
Chief Financial Officer and Treasurer
Barry M. Mandinach
Executive Vice President
Head of Distribution
Mardelle W. Peña
Executive Vice President
Chief Human Resources Officer
Andra C. Purkalitis
Executive Vice President
Chief Legal Officer, General Counsel and Corporate Secretary
Richard W. Smirl
Executive Vice President
Chief Operating Officer
Affiliated Companies
AlphaSimplex Group, LLC
alphasimplex.com
Ceredex Value Advisors LLC
ceredexvalue.com
Duff & Phelps Investment Management Co.
dpimc.com
Kayne Anderson Rudnick Investment Management, LLC
kayne.com
Newfleet Asset Management
newfleet.com
NFJ Investment Group, LLC
nfjinv.com
Seix Investment Advisors
seixadvisors.com
Silvant Capital Management LLC
silvantcapital.com
Stone Harbor Investment Partners
shipemd.com
Sustainable Growth Advisers, LP
sgadvisers.com
Virtus ETF Solutions
virtus.com/investment-partners/virtus-etf-solutions
Virtus Multi-Asset
virtus.com/investment-partners/virtus-multi-asset
Virtus Systematic
virtus.com/investment-partners/virtus-systematic
Westchester Capital Management, LLC
westchestercapitalmanagement.com
Message to Shareholders
To Our Fellow Shareholders:
For 15 years as an independent
public company, Virtus Investment
Partners has been guided by a
singular mission: to be a distinctive
and trusted provider of asset
management solutions for individual
and institutional investors.
Today we are a company with more
than 800 employees, over $170
billion in assets under management,
and clients across the globe. We
provide clients with attractive
investment solutions to meet their
current and future investment
needs; we are a meaningful
and collaborative partner with
distributors and consultants for
institutional and retail clients;
and we manage the company’s
resources for profitability, growth,
risk mitigation, and the creation of
long-term shareholder value.
Our growth over these past 15
years is the result of a sharp focus
on our business priorities, strategic
investments in affiliated managers
and shared support services, a team
of dedicated professionals, and
a vision to position the company
to deliver long-term results for
shareholders.
In 2023, we executed across each
primary strategic objective to deliver
these results:
Total Shareholder Return
January 1, 2009 – December 31, 2023
4000%
3500%
3000%
2500%
2000%
1500%
1000%
500%
00%
-50%
1 2/3 1/0 8
1 2/3 1/0 9
1 2/3 1/1 0
1 2/3 1/1 1
1 2/3 1/1 2
1 2/3 1/1 3
1 2/3 1/1 4
1 2/3 1/1 5
1 2/3 1/1 6
1 2/3 1/1 7
1 2/3 1/1 8
1 2/3 1/1 9
1 2/3 1/2 0
1 2/3 1/2 1
1 2/3 1/2 2
1 2/3 1/2 3
Companies comprising Peer Group average: Affiliated Managers Group, AllianceBernstein, Cohen & Steers,
Federated Hermes, Franklin Resources, Invesco, T. Rowe Price
VRTS
Peer Group Average
S&P 500
2,709%
589%
417%
Key Accomplishments
AlphaSimplex Group, a leading manager of systematic, quantitative
alternative investment solutions, joined as an affiliated investment
partner, further diversifying offerings of differentiated, non-
correlated strategies for institutional and individual clients. We
also increased our minority ownership of Zevenbergen Capital
Investments, a subadviser of high-growth equity portfolios, including
several mutual funds.
We have continued to diversify our business by asset class, client
type, and location as a result of a long-term focus on expanding
alternative investment capabilities and adding global and
institutional distribution resources. In 2023, 12% of all sales were in
alternative products compared with 5% of sales in 2021. Strategies
for institutional investors grew to 37% of assets under management
at December 31, 2023, compared with 28% two years earlier, and
strategies for international clients represented 18% of year-end
AUM, compared with 10% two years prior.
Efforts to leverage our expanded institutional distribution resources
and our proprietary operating and analytical platform have
increased opportunities to grow and generate operating efficiencies.
We have expanded the presence of our strategies in the institutional
market, particularly outside the U.S. We continued to transition
affiliated managers onto a common operating platform and build-out
additional capabilities.
Long-term investment performance of our investment
strategies is of critical importance to clients and we
are proud of our relative long-term performance across
products and asset classes. This includes 86% of retail
separate account assets and 67% of institutional assets
that outperformed their benchmarks on a five-year
basis as of year-end. In addition, 38 of 77 rated funds,
representing 70% of fund AUM, had a 5- or 4-star
Morningstar Rating™ at December 31, 20231, including
11 funds with $1 billion or more AUM, representing a
diverse set of strategies from seven different managers.
With our balanced and prudent approach to capital
management, we have returned meaningful capital to
shareholders, maintained appropriate levels of working
capital and leverage, and invested in growth initiatives,
such as the acquisition of AlphaSimplex. For the sixth
consecutive year we increased the quarterly common
stock dividend – in 2023 by 15% to $1.90 a share –
and also repurchased $45 million of common shares,
reducing the outstanding share count at December 31,
2023 by 1.3% from the prior year-end.
Financial and Operating Results
Financial results were challenged by lower sales, net
outflows, and lower average assets under management as a
result of conservative investor behavior, particularly during
the first half of the year, that carried over from the difficult
market conditions of 2022.
Assets under management were $172.3 billion as of
December 31, 2023, a 15% increase over 2022 ending
AUM of $149.4 billion, as positive market performance
across asset classes and the addition of AlphaSimplex’s
assets offset total net outflows.
Total sales of $25.9 billion for 2023 compared with
$30.3 billion for 2022 and included a 17% increase in
retail separate account sales to $6.7 billion. Sales of
other products included $9.9 billion in U.S. retail funds;
$8.0 billion in institutional accounts, including a new
affiliate-managed collateralized loan obligation (CLO)
that closed during the year; $0.8 billion in global funds;
and $0.4 billion in exchange-traded funds (ETFs). Total
net flows of ($7.2) billion improved from the prior year,
even as negative net flows in open-end mutual funds and
institutional offset positive net flows in retail separate
accounts, global funds, and ETFs.
Net income attributable to Virtus Investment Partners,
Inc. increased by 11% to $130.6 million, with a related
operating margin of 18%. Net income, attributable to
Virtus Investment Partners, Inc., as adjusted, was $161.8
million with a related operating margin of 32%. Diluted
earnings per share (EPS) of $17.71 increased 14%
from 2022 and diluted EPS, as adjusted, was $21.93,
compared with $25.74 in 2022.2
Ultimately, the success of our long-term focus will be
measured by the value we provide shareholders. We have
delivered substantial results to shareholders based on the
total shareholder return (TSR) of our stock. One-, three-, and
five-year TSRs have significantly exceeded the median of our
peer companies3, and our five-year TSR of 245% is more than
twice that of the S&P 500 during the period.
These accomplishments would not have been possible
without the hard work and determination of our employees
who are dedicated to deliver on our commitments to clients,
business partners, and shareholders. We have employees who
have demonstrated they can effectively execute on a focused
business strategy, respond to the challenges of a dynamic
market environment, and address the evolving needs of our
clients.
As we build toward the future we are well prepared to take
advantage of the opportunities ahead. We have confidence in
our team, our strategy, and the investments we have made in
our company.
On behalf of the staff, management, and your board of
directors, we thank you for the trust you have placed in us and
for your investment in Virtus.
Sincerely,
1 Additional information regarding mutual fund investment performance is included as an attachment to
George R. Aylward
Timothy A. Holt
this annual report after the Form 10-K.
2 The referenced non-GAAP measures are described and reconciled to GAAP reported amounts in an
attachment to this annual report after the Form 10-K.
3 The companies that comprise our peer group for TSR comparison are listed in an attachment to this
annual report after the Form 10-K.
President and Chief Executive Officer
Chairman
Directors and Officers
Board of Directors
Principal Corporate Officers
George R. Aylward
President and Chief Executive Officer
Virtus Investment Partners
Peter L. Bain2
President, Chief Executive Officer and Director (Retired)
BrightSphere Investment Group
(Formerly OM Asset Management)
Susan S. Fleming, Ph.D.1,3
Keynote Speaker and Executive Educator
Paul G. Greig1
Chairman of the Board (Retired)
Opus Bank
Timothy A. Holt 2,3
Non-Executive Chairman of the Board of Directors
Senior Vice President and Chief Investment Officer
(Retired) Aetna, Inc.
Melody L. Jones 2,3
Founder
32-80 Advisors
W. Howard Morris1
President and Chief Investment Officer
The Prairie & Tireman Group
Stephen T. Zarrilli1
President and Chief Executive Officer (Retired)
The University City Science Center
1 Audit Committee
2 Compensation Committee
3 Governance Committee
George R. Aylward
President, Chief Executive Officer and Director
Michael A. Angerthal
Executive Vice President
Chief Financial Officer and Treasurer
Barry M. Mandinach
Executive Vice President
Head of Distribution
Mardelle W. Peña
Executive Vice President
Chief Human Resources Officer
Andra C. Purkalitis
Executive Vice President
Chief Legal Officer, General Counsel and Corporate Secretary
Richard W. Smirl
Executive Vice President
Chief Operating Officer
Affiliated Companies
AlphaSimplex Group, LLC
alphasimplex.com
Ceredex Value Advisors LLC
ceredexvalue.com
Duff & Phelps Investment Management Co.
dpimc.com
Kayne Anderson Rudnick Investment Management, LLC
kayne.com
Newfleet Asset Management
newfleet.com
NFJ Investment Group, LLC
nfjinv.com
Seix Investment Advisors
seixadvisors.com
Silvant Capital Management LLC
silvantcapital.com
Stone Harbor Investment Partners
shipemd.com
Sustainable Growth Advisers, LP
sgadvisers.com
Virtus ETF Solutions
virtus.com/investment-partners/virtus-etf-solutions
Virtus Multi-Asset
virtus.com/investment-partners/virtus-multi-asset
Virtus Systematic
virtus.com/investment-partners/virtus-systematic
Westchester Capital Management, LLC
westchestercapitalmanagement.com
2023 FORM 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
For the fiscal year ended December 31, 2023
or
Commission file number 1-10994
VIRTUS INVESTMENT PARTNERS, INC.
(Exact name of registrant as specified in its charter)
Delaware
State or other jurisdiction of
incorporation or organization
26-3962811
(I.R.S. Employer
Identification No.)
One Financial Plaza, Hartford, CT 06103
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code:
(800) 248-7971
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol
Name of each exchange on which registered
Title of each class
Common Stock, $.01 par value
VRTS
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. È Yes ‘ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ‘ Yes È No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. È Yes ‘ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit
such files). È Yes ‘ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non–accelerated filer, a smaller reporting
company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Non-accelerated filer ‘
‘
Accelerated filer
Smaller reporting company ‘
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm
that prepared or issued its audit report. È
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements. ‘
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ‘ Yes È No
The aggregate market value of the registrant’s voting and non-voting common equity held by non-affiliates computed by reference to the price
at which the common equity was last sold (based on the closing share price as quoted on the NASDAQ Global Market) as of the last business day of
the registrant’s most recently completed second fiscal quarter was approximately $1.34 billion. For purposes of this calculation, shares of common
stock held or controlled by executive officers and directors of the registrant have been treated as shares held by affiliates.
There were 7,087,728 shares of the registrant’s common stock outstanding on February 9, 2024.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement that will be filed with the SEC in connection with the 2024 Annual Meeting of Shareholders are
incorporated by reference into Part III of this Form 10-K.
Virtus Investment Partners, Inc.
Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2023
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for the Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
Reserved
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
Page
1
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18
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20
20
20
21
22
23
39
40
40
40
41
41
42
42
42
42
43
44
47
PART I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
"We," "us," "our," the "Company," and "Virtus" as used in this Annual Report on Form 10-K (the "Annual
Report") refer to Virtus Investment Partners, Inc., aDe laware corporation, and its subsidiaries.
PART I
Item 1.
Business.
Organization
Virtus Investment Partners, Inc. (the "Company"), a Delaware corporation, commenced operations on
November 1, 1995 and became an independent publicly traded company on December 31, 2008.
Our Business
We provide investment management and related services to institutions and individuals. We use a
multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its
own distinct investment style, autonomous investment process, individual brand, as well as from select
unaffiliated managers for certain of our retail funds. By offering abroa d array of products, we believe we can
appeal to a greater number of investors and have offerings across market cycles and through changes in
investor preferences. Through our multi-manager model, we provide our affiliated managers with retail and
institutional distribution capabilities and business and operational support.
We offer investment strategies for institutional and individual investors in different investment
products and through multiple distribution channels. Our investment strategies are available in a diverse
range of styles and disciplines, managed by differentiated investment managers. We have offerings in various
asset classes (equity, fixed income, multi-asset and alternatives), geographies (domestic, global, international
and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment
approaches (fundamental and quantitative). Our products include mutual funds registered pursuant to the
Investment Company Act of 1940, as amended ("U.S. retail funds"); Undertaking for Collective Investment in
Transferable Securities and Qualifying Investor Funds (collectively, "global funds") and collectively with U.S.
retail funds, variable insurance funds, exchange-traded funds ("ETFs"), the "open-end funds"); closed-end
funds (collectively, with open-end funds, the "funds"); and retail separate accounts that include intermediary-
sold and private client accounts; and institutional separate and commingled accounts, including structured
products. We also provide subadvisory services to other investment advisers and serve as the collateral
manager for structured products.
Our Investment Managers
We provide investment management services through our affiliated investment managers who are
registered directly and indirectly as investment advisers under the Investment Advisers Act of 1940, as
amended (the "Investment Advisers Act"). The investment managers are responsible for portfolio
management activities for our retail and institutional products operating under advisory, subadvisory or
collateral management agreements. We also use the investment management services of select unaffiliated
managers to sub-advise certain of our open- and closed-end funds. We monitor our managers' services by
assessing their performance, style and consistency and the discipline with which they apply their investment
process.
1
Our affiliated investment managers, their respective investment styles and assets under management
as of December 31, 2023 were as follows:
Affiliated Manager
Headquarters
Investment Style
AlphaSimplex
Founded 1999
Ceredex Value Advisors
Founded 1995
Duff & Phelps Investment
Management
Founded 1932
Kayne Anderson Rudnick Investment
Management
Founded 1984
Newfleet Asset Management (1)
Founded 2011
NFJ Investment Group
Founded 1989
Seix Investment Advisors (1)
Founded 1992
Silvant Capital Management
Founded 2008
Stone Harbor Investment Partners (1)
Founded 2006
Sustainable Growth Advisers
Founded 2003
Virtus Multi-Asset (2)
Founded 2022
Virtus Systematic (2)
Founded 2022
Westchester Capital Management
Founded 1989
Zevenbergen Capital Investments (3)
Founded 1987
Boston, MA
Systematic Alternatives
Orlando, FL
Value Equity
Chicago, IL
Listed Real Assets
Los Angeles, CA
Quality-Focused Equity
Hartford, CT
Multi-Sector Fixed Income
Dallas, TX
Global Value Equity
Park Ridge, NJ
Specialty Fixed Income
Atlanta, GA
Growth Equity
New York, NY
Emerging Markets Debt
Stamford, CT
Global Growth Equity
Hartford, CT
Global Multi-Asset
San Diego, CA
Systematic Global Equity
Valhalla, NY
Event-Driven Alternatives
Seattle, WA
Disruptive Growth Equity
Assets
(in billions)
7.4
$
$
$
$
$
$
$
$
$
$
$
$
$
$
6.2
12.3
59.6
14.7
6.6
13.1
2.2
5.6
26.4
0.2
0.4
3.7
1.9
(1) Operates as adivi sion of Virtus Fixed Income Advisors LLC, awholly owned subsidiary of the Company.
(2) Operates as adivi sion of Virtus Investment Advisers, Inc., a wholly owned subsidiary of the Company.
(3) Affiliated through ownership of ami nority interest.
Summary information regarding our select unaffiliated subadvisers, their respective investment styles
and assets under management as of December 31, 2023 were as follows:
Unaffiliated Subadviser
Investment Style
Voya Investment Management
Other
Income & Growth and Convertible
International Growth Equity, Income-
Focused Equity, Risk Managed and
Quantitative
Assets
(in billions)
9.7
$
2.3
$
2
Our Investment Products
Our assets under management are in open-end funds, closed-end funds, retail separate accounts and
institutional accounts. Our earnings are primarily from asset-based fees charged for services relating to these
various products, including investment management, fund administration, distribution and shareholder
services.
Assets Under Management by Product as of December 31, 2023
Products
Open-end funds (1)
Closed-end funds
Retail separate accounts
Institutional accounts (2)
Total Assets Under Management
(in billions)
$
$
56.1
10.0
43.2
63.0
172.3
(1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable
insurance funds.
(2) Represents assets under management of institutional separate and commingled accounts,
including structured products.
Open-End Funds
Our U.S. retail funds are offered in a variety of asset classes (domestic, global and international
equity, taxable and non-taxable fixed income, multi-asset and alternatives), market capitalizations (large, mid
and small), styles (growth, core and value) and investment approaches (fundamental and quantitative). Our
global funds are offered in select investment strategies to non-U.S. investors. Our ETFs are offered in a range
of actively managed and index-based investment capabilities across multiple asset classes. Summary
information about our open-end funds as of December 31, 2023 was as follows:
Asset Class
Domestic Equity
Fixed Income
International Equity
Multi-Asset
Alternatives
Specialty Equity
Global Equity
Total Open-End Funds
Number of Funds
28
43
13
4
17
10
7
122
Total Assets
(in millions)
20,159
14,454
3,364
5,777
7,456
2,937
1,915
56,062
$
$
Advisory Fee
Range % (1)
2.15 - 0.29
1.85 - 0.17
1.85 - 0.21
0.75 - 0.45
1.65 - 0.45
1.80 - 0.59
1.85 - 0.55
(1) Percentage of average daily net assets. The percentages listed represent the range of management
advisory fees paid by the funds, from the highest to the lowest. The range indicated includes the
impact of breakpoints at which management advisory fees for certain of the funds in each fund type
decrease as assets in such funds increase. Subadvisory fees paid on funds managed by unaffiliated
subadvisers are not reflected in the percentages listed.
3
Closed-End Funds
Our closed-end funds are offered in a variety of asset classes such as equity, fixed income, multi-asset
and alternatives, each of which is traded on the New York Stock Exchange. Summary information about our
closed-end funds as of December 31, 2023 was as follows:
Asset Class
Multi-Asset
Fixed Income
Equity
Alternatives
Total Closed-End Funds
Number of Funds
5
6
1
1
13
Total Assets
(in millions)
7,058
1,572
826
570
10,026
$
$
Advisory Fee
Range % (1)
1.00 - 0.50
1.00 - 0.50
1.25
1.00
(1) Percentage of average weekly or daily net assets. The percentages listed represent the range of
management advisory fees paid by the funds, from the highest to the lowest. The range indicated
includes the impact of breakpoints at which management advisory fees for certain of the funds in
each fund type decrease as assets in such funds increase. Subadvisory fees paid on funds managed
by unaffiliated subadvisers are not reflected in the percentages listed.
Retail Separate Accounts
Intermediary-Sold Managed Accounts
Intermediary-sold managed accounts are individual investment accounts that are contracted through
intermediaries as part of investment programs offered to retail investors.
Private Client Accounts
Private client accounts are investment accounts offered by certain affiliates directly to individual
investors. Services provided include wealth advisory and investment services that include third-party
investment services.
The following table summarizes our retail separate accounts by asset class as of December 31, 2023:
(in millions)
Equity
Domestic
International equity
Global equity
Specialty equity
Fixed Income
Leveraged finance
Investment grade
Multi-Asset (1)
Alternatives
Total Retail Separate Accounts
Total Assets
Intermediary-Sold
Managed Accounts
Private Client Accounts
$
$
33,105
81
366
70
1,444
196
175
1
35,438
$
$
29
—
—
—
2
298
7,435
—
7,764
(1) For private client accounts, consists of individual client accounts with substantial holdings in at least
two of the following asset classes: equity, fixed income, and alternatives.
4
Institutional Accounts
Our institutional clients include corporations, multi-employer retirement funds, public employee
retirement systems, foundations and endowments. We also act as collateral manager for nine collateralized
loan obligations ("CLOs"). In addition, we provide subadvisory services to unaffiliated mutual funds. Summary
information about our institutional accounts as of December 31, 2023 was as follows:
Asset Class
Equity
Domestic
International
Global
Fixed Income
Leveraged finance
Investment grade
Alternatives
Multi-Asset
Total Institutional Accounts
Total Assets
(in millions)
23,970
1,610
8,271
10,303
8,923
8,926
966
62,969
$
$
Other Fee Earning Assets
Other fee earning assets include assets for which we provide services for an asset-based fee but do
not serve as the investment adviser. Other fee earning assets are not included in our assets under
management. At December 31, 2023, we had $2.6 billion of other fee earning assets.
Our Investment Management, Administration and Shareholder Services
Our investment management, administration and shareholder service fees earned in each of the last
three years were as follows:
(in thousands)
Open-end funds
Closed-end funds
Retail separate accounts
Institutional accounts
Total investment management fees
Administration fees
Shareholder service fees
Total
Investment Management Fees
$
$
2023
Years Ended December 31,
2022
2021
305,238
$
335,585
$
58,136
171,357
176,744
711,475
52,858
20,999
63,841
171,509
157,404
728,339
61,344
24,518
785,332
$
814,201
$
395,152
63,301
174,919
148,213
781,585
73,113
29,418
884,116
We provide investment management services through our affiliated investment managers (each an
"Adviser") pursuant to investment management agreements. For our sponsored funds, we earn fees based on
each fund's average daily or weekly net assets with most fee schedules providing for rate declines or
"breakpoints" as asset levels increase to certain thresholds. For funds managed by subadvisers, the day-to-
day investment management of the fund's portfolio is performed by the subadviser, which receives a fee
based on a percentage of the management fee. Each fund bears all expenses associated with its operations.
5
In some cases, to the extent total fund expenses exceed a specified percentage of a fund's average net assets,
the Adviser has agreed to reimburse the fund's expenses in excess of that level.
For retail separate accounts and institutional accounts, investment management fees are negotiated
and based primarily on portfolio size and complexity, individual client requests and investment strategy
capacity, as appropriate. In certain instances, institutional fees may include performance-related fees,
generally earned if the returns on the portfolios exceed agreed upon periodic or cumulative return targets,
primarily benchmark indices. Fees for CLOs are generally calculated at a contractual fee rate applied against
the end of the preceding quarter par value of the total collateral being managed.
Administration Fees
We provide various administrative services to our U.S. retail funds, ETFs and the majority of our
closed-end funds. We earn fees based on each fund's average daily or weekly net assets. These services
include: record keeping, preparing and filing documents required to comply with securities laws, legal
administration and compliance services, customer service, supervision of the activities of the funds' service
providers, tax services and treasury services as well as providing office space, equipment and personnel that
may be necessary for managing and administering the business affairs of the funds.
Shareholder Service Fees
We provide shareholder services to our U.S. retail funds. We earn fees based on each fund's average
daily net assets. Shareholder services include maintaining shareholder accounts, processing shareholder
transactions, preparing filings and performing necessary reporting, among other things.
Our Distribution Services
Our products are offered through various retail and institutional distribution channels.
Retail
Our retail distribution resources in the U.S. consist of regional sales professionals, a national account
relationship group and specialized teams for retirement and ETFs. Our U.S. retail funds and retail separate
accounts are distributed through financial intermediaries. We have broad distribution access in the U.S. retail
market, with distribution partners that include national and regional broker-dealers, independent broker-
dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have
a number of products that are on preferred or "recommended" lists and on fee-based advisory programs. Our
private client business is marketed directly to individual clients by financial advisory teams at our affiliated
investment managers.
Institutional
Our institutional distribution resources include affiliate-specific institutional sales teams primarily
focused on the U.S. market, supported by shared consultant relations and U.S. and non-U.S. institutional sales
distribution. Our institutional products are marketed through relationships with consultants as well as directly
to clients. We target key market segments, including foundations and endowments, corporations, public and
private pension plans, sovereign wealth funds and subadvisory relationships.
Our Broker-Dealer Services
We operate abroker-d ealer that is registered under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and is a member of the Financial Industry Regulatory Authority ("FINRA"). Our broker-
dealer serves as the principal underwriter and distributor of our funds, provides market advisory services to
sponsors of retail separate accounts, and is also a program manager and distributor of a qualified tuition plan
6
under Section 529 of the Internal Revenue Code ("529 Plan"). Our broker-dealer is subject to, among others,
the net capital rule of the Securities and Exchange Commission (the "SEC"), which is designed to enforce
minimum standards regarding the general financial condition and liquidity of broker-dealers.
Our Competition
We face significant competition from a wide variety of financial institutions, including other
investment management companies, as well as from proprietary products offered by our distribution partners
such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several
factors, including investment performance, fees charged, access to distribution channels, and service to
financial advisors and their clients. Our competitors, many of which are larger than us, often offer similar
products and use similar distribution sources, and may also offer less expensive products, have greater access
to key distribution channels and have greater resources than we do.
Our Regulatory Matters
The financial services industry is highly regulated, regulations are complex, and failure to comply with
related laws and regulations can result in the revocation of registrations, the imposition of censures or fines
and the suspension or expulsion of a firm and/or its employees from the industry. We are subject to
regulation by the SEC, other federal and state agencies, certain international regulators, as well as FINRA and
other self-regulatory organizations.
Each of our affiliated investment managers is registered directly and indirectly as an investment
adviser with the SEC under the Investment Advisers Act. The Investment Advisers Act imposes numerous
obligations on registered investment advisers, including fiduciary duties, compliance and disclosure
obligations, and operational and recordkeeping requirements. Certain investment management affiliates are
also members of the National Futures Association and are regulated by the U.S. Commodity Futures trading
Commission ("CFTC") with respect to the management of funds and other products that utilize futures, swaps,
or other CFTC regulated instruments.
Our affiliated investment managers also advise registered and unregistered funds in the U.S. and
other jurisdictions and are subject to the regulatory requirements in the jurisdiction where those funds are
sponsored or offered, including with respect to mutual funds and closed end funds in the U.S., the Investment
Company Act of 1940, as amended (the "Investment Company Act"). The Investment Company Act governs
the operations of mutual funds and imposes obligations on their advisers, including investment restrictions
and other governance, compliance, reporting and fiduciary obligations with respect to the management of
those funds.
Affiliated investment managers operating outside of the U.S. are also subject to regulation by various
regulatory authorities and exchanges in the relevant jurisdiction. Some of our investment affiliates are subject
to directives and regulations in the European Union and other jurisdictions related to funds, such as the
Undertakings for the Collective Investment of Transferable Securities ("UCITS") Directive and the Alternative
Investment Fund Managers Directive ("AIFMD"), with respect to depository functions, remuneration policies
and sanctions and other matters. Our global funds are registered with and subject to regulation by the Central
Bank of Ireland. New regulations or interpretations of existing laws may result in enhanced disclosure
obligations. Increased regulations generally increase our costs, and we could continue to experience higher
7
costs if new laws require us to spend more time, hire additional personnel, or purchase new technology to
comply effectively.
Our broker-dealer is subject to SEC and FINRA rules and regulations, including extensive regulatory
requirements related to sales practices, registration of personnel, compliance and supervision and
compensation and disclosure. Sales and marketing activities of investment management services are also
subject to regulation by non-U.S. authorities in the jurisdictions in which investment management products
and services are offered. The ability to transact business in these jurisdictions and to conduct cross-border
activities, is subject to the continuing availability of regulatory authorizations and exemptions. We have
distribution teams that operate offices in the United Kingdom and Singapore and are subject to regulation by
the Financial Conduct Authority and Monetary Authority of Singapore, respectively.
Due to the extensive laws and regulations to which we and our investment management affiliates are
subject, we and our investment management affiliates must devote substantial time, expense, and effort to
remain current on, and to address, legal and regulatory compliance matters. We and our investment
management affiliates have established compliance programs to address regulatory compliance and we have
experienced legal and compliance professionals in place to address these requirements. We also have
established legal and regulatory advisers in each of the countries where we conduct business.
Our officers, directors and employees may, from time to time, own securities that are also held by
one or more of our funds or strategies offered to clients. We have adopted a Code of Ethics pursuant to the
provisions of the Investment Company Act and the Investment Advisers Act that require the disclosure of
personal securities holdings and trading activity by all employees on a quarterly and annual basis. Employees
with investment discretion or access to investment decisions are subject to additional restrictions with respect
to the pre-clearance of the purchase or sale of securities over which they have investment discretion or
beneficial interest. Our Code of Ethics also imposes restrictions with respect to personal transactions in
securities that are held, recently sold, or contemplated for purchase by our mutual funds, and certain
transactions are restricted so as to avoid the possibility of improper use of information relating to the
management of client accounts.
Human Capital
As of December 31, 2023, we employed 824 employees and operated offices throughout the U.S.,
and in the U.K. and Singapore. We strive to attract and retain talented individuals by creating an environment
of excellence and opportunity that serves as a foundation for all employees to reach their potential and make
meaningful contributions to the organization.
We offer competitive salaries and a comprehensive suite of benefits, including programs that support
wellness, financial security, and professional development. As part of our offerings, we:
▪
▪
▪
▪
Regularly assess and benchmark our compensation and benefit practices and conduct internal
and external pay comparisons to assist us in ensuring that employees are compensated fairly,
equitably and competitively.
Offer career enhancement opportunities to maximize each employee's potential and develop
leaders throughout the organization.
Provide an education assistance program with tuition reimbursement for employees who wish to
continue their education to secure increased responsibility and growth within the organization
and inth eir careers.
Offer benefits that promote financial and personal security including comprehensive medical,
dental, prescription, disability and life insurance coverages as well as an employee assistance
program; company match to employees' 401(k) contributions; and an employee stock purchase
plan.
8
▪
Provide wellness programs that include health screenings and wellness earned premium rebates,
as well as paid time off for vacation, illness, bereavement, parental and family care leave, and
volunteer activities.
We rely upon key personnel to manage our business, including senior executives, portfolio managers,
securities analysts, investment advisers, sales personnel and other professionals. The retention of senior
executives and key investment personnel is material to the management of our business.
Our value as a company derives from the talents and diversity of all employees, and we are
committed to creating and maintaining an environment where every employee is treated with dignity and
respect. The collective sum of employees' backgrounds, unique skills, and life experiences creates an
environment where they and the company can achieve the highest levels of performance. Programs and
practices -incl uding those supporting workforce diversity, an inclusive culture, employee involvement in
community activities and corporate philanthropy -ar e designed to help us deliver on our commitment to
maintaining an organization that is diverse and inclusive for all employees.
▪
▪
▪
As an employer, we prohibit any form of discrimination and have no tolerance for harassment in
any form or any behavior that may contribute to a hostile, intimidating, unwelcoming, and/or
inaccessible work environment.
Collaborative efforts with organizations, institutions, and referral sources support us in
identifying diverse talent pools, increasing the diversity of potential candidates, and engaging
with employees across the organization to raise the awareness of and advance our inclusion
efforts.
Community engagement is ingrained into our culture. The Company and employees have
supported a wide range of philanthropic activities that help to enrich and sustain the
communities in which we have abusiness p resence.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K,
and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act,
as well as proxy statements, are available free of charge on our website located at www.virtus.com as soon as
reasonably practicable after they are filed with, or furnished to, the SEC. Reports, proxy statements and other
information regarding issuers that file electronically with the SEC, including our filings, are also available to the
public on the SEC's website at http://www.sec.gov.
A copy of our Corporate Governance Guidelines, our Code of Conduct and the charters of our Audit
Committee, Compensation Committee, and Governance Committee are posted on our website at http://
ir.virtus.com under "Corporate Governance" and are available in print without charge to any person who
requests copies by contacting Investor Relations by email to: investor.relations@virtus.com or by mail to
Virtus Investment Partners, Inc., c/o Investor Relations, One Financial Plaza, Hartford, CT 06103. The Company
may use its website as a distribution channel of material company information. Financial and other important
information regarding the Company is routinely posted on and accessible through the Company’s website at
http://ir.virtus.com. In addition, you may automatically receive email alerts and other information about the
Company when you enroll your email address by visiting http://ir.virtus.com. Information contained on the
website is not incorporated by reference or otherwise considered part of this document.
Item 1A.
Risk Factors.
This section describes some of the potential risks relating to our business. The risks described below
are some of the more important factors that could affect our business. You should carefully consider the risks
described below, together with all of the other information included in this Annual Report on Form 10-K, in
9
evaluating the Company and our common stock. If any of the risks described below actually occur, our
business, revenues, profitability, results of operations, financial condition, cash flows, reputation and stock
price could be materially adversely affected.
RISKS RELATED TO OUR INDUSTRY, BUSINESS AND OPERATIONS
We earn substantially all of our revenues based on assets under management that fluctuate based on
many factors, and any reduction would negatively impact our revenues and profitability.
The majority of our revenues are generated from asset-based fees from investment management
products and services to individuals and institutions. Therefore, if assets under management decline, our fee
revenues would decline, reducing profitability as certain of our expenses are fixed or have contractual terms.
Assets under management could decline due to a variety of factors including, but not limited to, the following:
▪
▪
General domestic and global economic, political and public health conditions. Capital, equity and credit
markets can experience substantial volatility. Changes in interest rates, the availability and cost of credit,
inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency
exchange rates, national and international political circumstances and conflicts, public health issues and
other conditions may impact the capital, equity and credit markets. Employment rates, economic
weakness and budgetary challenges in parts of the world, uncertainty regarding governmental regulations
and international trade policies, conflicts such as in Ukraine and the Middle East, concern over prospects
in China and emerging markets, and growing debt for certain countries all indicate that economic and
political conditions remain unpredictable. The occurrence of public health issues such as a major
epidemic or pandemic that affect public health and public perception of health risk, as well as local, state
and/or national government restrictive measures implemented to control such issues, could adversely
affect the global financial markets, our employees and the systems we rely on. Any of the conditions
listed herein, among others, may impact our assets under management.
Past volatility in the markets has highlighted the interconnection of the global economies and markets
and has demonstrated how deteriorating financial condition of one institution may adversely impact the
performance of other institutions. Our assets under management have exposure to many different
industries and counterparties and may be exposed to credit, operational or other risk due to the default
by a counterparty or client or in the event of ama rket failure or disruption. Negative, uncertain or
diminishing investor confidence in the markets and/or adverse market conditions could result in a
decrease in investor risk tolerance. Such a decrease could prompt investors to reduce their rate of
investment or to partially or fully withdraw from markets, which could reduce our overall assets under
management and have an adverse effect on our revenues, earnings and growth prospects. In the event of
extreme circumstances, including economic, political or business or health crises, such as a widespread
systemic failure in the global financial system, failures of firms that have significant obligations as
counterparties, political conflicts or global pandemics, we may suffer significant declines in assets under
management and severe liquidity or valuation issues.
Price declines in individual securities, market segments or geographic areas. Portfolios that we manage
that are focused on certain geographic markets or industry sectors are particularly vulnerable to political,
social and economic events in those markets and sectors. If those markets or industries decline or
experience volatility, this could have anegati ve impact on our assets under management and our
revenues. For example, certain non-U.S. markets, particularly emerging markets, are not as developed or
as efficient as the U.S. financial markets and, as a result, may be less liquid, less regulated and significantly
more volatile than the U.S. financial markets. In addition, certain industry sectors can experience
significant volatility, such as the technology or oil sector. Liquidity or values in such markets or sectors
may be adversely impacted by factors including political or economic events, government policies,
expropriation, volume trading limits by foreign investors, social or civil unrest, etc. These factors may
negatively impact the market value of a security or our ability to dispose of it.
10
▪
Real or perceived negative absolute or relative performance. Sales and redemptions of our investment
strategies can be affected by investment performance relative to established benchmarks or other
competing investment strategies. Our investment management strategies are rated, ranked or assessed
by independent third-parties, distribution partners and industry periodicals and services. These
assessments often influence the investment decisions of clients. If the performance of our investment
strategies is perceived to be underperforming relative to peers, it could result in increased withdrawals of
assets by existing clients and the inability to attract additional investments from new and existing clients.
We may engage in significant transactions that may not achieve the anticipated benefits or could
expose us to additional or increased risks.
We have executed several inorganic transactions over the past years and we regularly evaluate
potential transactions, including acquisitions, consolidations, joint ventures, strategic partnerships, or similar
transactions, some of which could be significant. Our past acquisitions and strategic transactions have led to a
significant increase in our assets under management and an expansion of our product and service offerings.
We cannot provide assurance that we will continue to be successful in closing on transactions or achieving
anticipated financial benefits, including such things as revenue or cost synergies.
Any transaction may also involve a number of other risks, including additional demands on our staff,
unanticipated problems regarding integration of operating facilities, technologies and new employees, and the
existence of liabilities or contingencies not disclosed to, or otherwise unknown by, us prior to closing a
transaction. In addition, any business we acquire may underperform relative to expectations or may lose
customers or employees.
Our investment management agreements are subject to renegotiation or termination on short notice,
which could negatively impact our business.
Our clients include our sponsored fund investors, represented by boards of trustees or directors (the
"fund boards"), managed account program sponsors, individual private clients, and institutional clients. Our
investment management agreements with these clients may be terminated on short notice and without
penalty. As a result, there would be little impediment for these clients to terminate our agreements. Our
clients may renegotiate their investment contracts, or reduce the assets we manage for them, due to a
number of reasons including, but not limited to: poor investment performance; loss of key investment
personnel; a change in the client's or third-party distributors' decision makers; and reputational, regulatory or
compliance issues. The fund boards may deem it to be in the best interests of a fund's shareholders to make
decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund
expenses over certain thresholds, or imposing restrictions on our management of the fund. Under the
Investment Company Act, investment management agreements automatically terminate in the event of an
assignment, which may occur if, among other events, the Company undergoes ach ange in control, such as any
person acquiring 25% of the voting rights of our common stock. If an assignment were to occur, we cannot be
certain that the funds' boards and shareholders would approve anew i nvestment management agreement. In
addition, investment management agreements for the separate accounts we manage may not be assigned
without the consent of the client. If an assignment occurs, we cannot be certain that the Company will be able
to obtain the necessary approvals or client consents. The withdrawal, renegotiation or termination of any
investment management agreement relating to a material portion of assets under management would have
an adverse impact on our results of operations and financial condition.
Our business could be harmed by any damage to our reputation and lead to aredu ction in our revenues
and profitability.
Maintaining aposi tive reputation with existing and potential clients, the investment community and
other constituencies is critical to our success. Our reputation is vulnerable to many threats that can be
difficult or impossible to control, and costly or impossible to remediate even if they are without merit or
11
satisfactorily addressed. Our reputation may be impacted by many factors including, but not limited to: poor
performance; litigation; conflicts of interests; regulatory inquiries, investigations or findings; operational
failures (including cyber breaches); intentional or unintentional misrepresentation of our products or services
by us or our third-party service providers; material weaknesses in our internal controls; or employee
misconduct or rumors. Any damage to our reputation could impede our ability to attract and retain clients
and key personnel, adversely impact relationships with clients, third-party distributors and other business
partners, and lead to a reduction in the amount of our assets under management, any of which could
adversely affect our results of operations and financial condition.
Our debt agreements contain covenants, required principal repayments and other provisions that could
adversely affect our financial condition or results of operations.
We incur indebtedness for avariet y of business reasons, including in relation to financing acquisitions
and transactions. The indebtedness we incur can take many forms including, but not limited to, term loans or
revolving lines of credit that customarily contain covenants.
At December 31, 2023, we had $258.8 million of total debt outstanding under its credit agreement,
excluding debt of consolidated investment products ("CIP"), and had no borrowings outstanding under our
$175.0 million revolving credit facility. Under our credit agreement, we are required to use a portion of our
cash flow to service interest and make required annual principal payments, which may restrict our cash flow
available for other purposes. The credit agreement also contains covenants that may limit our ability to return
capital to shareholders. We cannot provide assurances that at all times in the future we will satisfy all such
covenants or obtain any required waiver or amendment, in which event all indebtedness could become
immediately due. Any or all of the above factors could adversely affect our financial condition or results of
operations.
We may need to obtain additional capital that may not be available to us in sufficient amounts or on
acceptable terms, which could have an adverse impact on our business.
Our ability to meet our future cash needs is dependent upon our ability to generate or have short-
term access to cash. Although we have generated sufficient cash in the past, we may not do so in the future.
We had unused capacity under our revolving credit facility of $175.0 million as of December 31, 2023. Our
ability to access capital markets efficiently depends on a number of factors, including the state of credit and
equity markets, interest rates and credit spreads. At December 31, 2023, we had $258.8 million in debt
outstanding, excluding the notes payable of our CIP for which risk of loss to the Company is limited to our
$95.5 million investment in such products. (See Note 20 of our consolidated financial statements for
additional information on the notes payable of the CIP). We may need to raise capital to fund new business
initiatives in the future, and financing may not be available to us in sufficient amounts, on acceptable terms, or
at all. If we are unable to access sufficient capital on acceptable terms, our business could be adversely
impacted.
Our business relies on the ability to attract and retain key employees, and the loss of such employees
could negatively affect our financial performance.
The success of our business is dependent to a large extent on our ability to attract and retain key
employees, such as senior executives, portfolio managers, securities analysts and sales personnel. There is
significant competition in the job market for these professionals and compensation levels in the industry are
highly competitive. Our industry is also characterized by the movement of investment professionals among
different firms.
If we are unable to continue to attract and retain key employees, or if compensation costs required to
attract and retain key employees increase, our performance, including our competitive position, could be
adversely affected. Additionally, we utilize equity awards as part of our compensation plans and as ame ans
for recruiting and retaining key employees. Declines in our stock price would result in deterioration of the
12
value of equity awards granted, thus lessening the effectiveness of using stock-based awards to retain key
employees.
In certain circumstances, the departure of key investment personnel could cause higher redemption
rates in certain strategies or the loss of certain client accounts. Any inability to retain key employees, attract
qualified employees or replace key employees in a timely manner could lead to a reduction in the amount of
our assets under management, which would have an adverse effect on our revenues and profitability. In
addition, there could be additional costs to replace, retain or attract new talent that could result in a decrease
in our profitability and have an adverse impact on our results of operations and financial condition.
We operate in ahigh ly competitive industry that may require us to reduce our fees or increase amounts
paid to financial intermediaries, which could result in aredu ction of our revenues and profitability.
We face significant competition from a wide variety of financial institutions, including other
investment management companies, as well as from proprietary products offered by our distribution partners
such as banks, broker-dealers and financial planning firms. Competition in our businesses is based on several
factors, including investment performance, fees charged, access to distribution channels and service to
financial advisors. Our competitors, many of which are larger, often offer similar products, use the same
distribution sources, offer less expensive products, maintain greater access to key distribution channels, and
have greater resources, geographic footprints and name recognition. Additionally, certain products and asset
classes that we do not currently offer, such as passive or index-based products, are popular with investors.
Existing clients may withdraw their assets in order to invest in these products, and we may be unable to
attract additional investments from existing and new clients, which would lead to a decline in our assets under
management and market share.
Our profits are highly dependent on the fees we earn for our products and services. Competition
could cause us to reduce the fees that we charge. If our clients, including our fund boards, were to view our
fees as being inappropriately high relative to the market or the returns generated by our investment products,
we may choose, or be required, to reduce our fee levels, or we may experience significant redemptions in our
assets under management, which could have an adverse impact on our results of operations and financial
condition.
We utilize unaffiliated firms to provide investment management services and any matters that
adversely impact them or any change in our relationships with them could adversely affect our revenues and
profitability.
We utilize unaffiliated subadvisers as investment managers for certain of our retail funds. Because
we have no ownership interests in these firms, we do not control their business activities. Problems stemming
from the business activities of those firms may negatively impact or disrupt their operations or expose them to
disciplinary action or reputational harm. Furthermore, any such matters at these unaffiliated firms may have
an adverse impact on our business or reputation or expose us to regulatory scrutiny, including with respect to
our oversight of such firms.
We periodically negotiate provisions and renewals of these relationships, and we cannot provide
assurance that such terms will remain acceptable to us or the unaffiliated firms. These relationships can also
be terminated upon short notice without penalty. In addition, the departure of key employees at unaffiliated
subadvisers could cause higher redemption rates for certain assets under management. An interruption or
termination of unaffiliated firm relationships could affect our ability to market our products and result in a
reduction in assets under management, which would have an adverse impact on our results of operations and
financial condition.
We distribute our products through intermediaries and changes in key distribution relationships could
13
reduce our revenues, increase our costs and adversely affect our profitability.
Our primary source of distribution for retail products is through intermediaries that include third-
party financial institutions such as: major wire-houses; national, regional and independent broker-dealers and
financial advisors; banks and financial planners; and registered investment advisers. We are highly dependent
on access to these distribution systems to raise and maintain assets under management. These distributors
are generally not contractually required to distribute our products and typically offer their clients various
investment products and services, including proprietary products and services, in addition to, and in
competition with, our products and services. While we compensate these intermediaries pursuant to
contractual agreements, we may not be able to retain access to these channels at all or at similar pricing.
Increasing competition for these distribution channels could cause our distribution costs to rise, which could
have an adverse effect on our business, revenues and profitability. To the extent that existing or future
intermediaries prefer to do business with our competitors, the sales of our products as well as our market
share, revenues and profitability could decline.
We and our third-party service providers rely on numerous technology systems and any business
interruption, security breach, or system failure could negatively impact our business and profitability.
Our technology systems, and those of third-party service providers, are critical to our operations. The
ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and
fund shareholder transactions, and provide reports and other services to clients is an essential part of our
business. Any delays or inaccuracies in obtaining pricing information, processing such transactions or reports,
other breaches and errors, and any inadequacies in other client service could result in reimbursement
obligations or other liabilities or alienate clients and potentially give rise to claims against us. Any failure or
interruption of third-party systems, whether resulting from technology or infrastructure breakdowns, defects
or external causes such as fire, natural disaster, computer viruses, acts of terrorism or power disruptions, or
public health events could result in financial loss, negatively impact our reputation and negatively affect our
ability to do business. Although we and our third-party service providers have disaster recovery plans in place,
we may nonetheless experience interruptions if a natural or man-made disaster or prolonged power outage
were to occur, which could have an adverse impact on our business and profitability.
In addition, our computer systems are regularly the target of viruses or other malicious codes,
unauthorized access, cyber-attacks or other computer-related penetrations. The sophistication of cyber
threats continues to increase, including through the use of "ransomware" and phishing attacks, and our
controls and the preventative actions we take to reduce the risk of cyber incidents and protect our
information systems may be insufficient to detect or prevent unauthorized access, cyber-attacks or other
security breaches to our systems or those of third parties with whom we do business. Our third-party service
providers' systems may also be affected by, or fail, as a result of, catastrophic events, such as fires, floods,
hurricanes and tornadoes. A breach of our systems, or of those of third-party service providers, through
cyber-attacks or failure to manage and sufficiently secure our technology environment could result in
interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen
assets or information, remediation costs to repair damage caused by a breach or to recover access to our
systems, additional costs to mitigate against future incidents, and litigation costs resulting from an incident.
Any of these conditions could have an adverse impact on our business and profitability.
We and certain of our third-party service providers receive and store personal information as well as
non-public business information. Although we and our third-party service providers take precautions, we may
still be vulnerable to hacking or other unauthorized use. A breach of the systems or hardware could result in
unauthorized access to our proprietary business or client data or release of this type of data, which could
subject us to legal liability or regulatory action under data protection and privacy laws, which may result in
fines or penalties, the termination of existing client contracts, costly mitigation activities and harm to our
reputation. The occurrence of any of these risks could have an adverse impact on our business and
profitability.
14
We have significant capital invested in marketable securities, which exposes us to earnings volatility as
the value of these investments fluctuate, as well as risk of capital loss.
We use capital to incubate new investment strategies, introduce new products or to enhance
distribution access of existing products. At December 31, 2023, we had $275.6 million of such investments,
comprising $180.1 million of marketable securities and $95.5 million of net investments in CLOs. These
investments are in a variety of asset classes, including alternatives, fixed income and equity strategies and
first-loss tranches of CLO equity. Many of these investments employ a long-term investment strategy with an
optimal investment period spanning several years. Accordingly, during this investment period, the capital held
in these investments may not be available for other corporate purposes without significantly diminishing our
investment return. We cannot provide assurance that these investments will perform as expected. Increases
or decreases in the value of these investments could increase the volatility of our earnings, and an other-than-
temporary or permanent decline in the value of these investments could result in the loss of capital and have
an adverse impact on our results of operations and financial condition.
LEGAL AND REGULATORY RISKS
We are subject to an extensive and complex regulatory environment and changes in regulations or
failure to comply with them could adversely affect our revenues and profitability.
The investment management industry in which we operate is subject to extensive and frequently
changing regulation. We are subject to regulation by the SEC, other federal and state agencies, certain
international regulators, as well as FINRA and other self-regulatory organizations. Each of our affiliated
investment managers and unaffiliated subadvisers is registered with the SEC under the Investment Advisers
Act. There are various regulatory reform initiatives in the U.S. and other jurisdictions and new regulations or
interpretations of existing laws may result in enhanced disclosure obligations which could negatively affect us
or materially increase our regulatory burden. Increased regulations generally increase our costs, and we could
continue to experience higher costs if new laws require us to spend more time, hire additional personnel, or
purchase new technology to comply effectively.
Although we spend extensive time and resources to ensure compliance with all applicable laws and
regulations, if we fail to properly adhere to our policies or modify and update our compliance procedures in a
timely manner in this changing and highly complex regulatory environment, we may be subject to various legal
proceedings, including civil litigation, governmental investigations and enforcement actions that could result in
fines, penalties, suspensions of individual employees, or limitations on particular business activities, any of
which could have an adverse impact on our revenues and profitability.
We manage assets under agreements that have investment guidelines or other contractual
requirements and failure to comply could result in claims, losses, or regulatory sanctions, which could
negatively impact our revenues and profitability.
The agreements under which we manage client assets often have established investment guidelines
or other contractual requirements with which we are required to comply in providing our investment
management services. Although we maintain various compliance procedures and other controls to prevent,
detect and correct such errors, any failure or allegation of a failure to comply with these guidelines or other
requirement could result in client claims, reputational damage, withdrawal of assets and potential regulatory
sanctions, any of which could have an adverse impact on our revenues and profitability.
We could be subject to civil litigation and government investigations or proceedings, which could
adversely affect our business.
Many aspects of our business involve substantial risks of liability, and there have been substantial
incidences of litigation and regulatory investigations in the financial services industry in recent years, including
customer claims as well as class action suits seeking substantial damages. From time to time, we and/or our
sponsored funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that
involve the threat of lawsuits seeking substantial damages. We and/or our sponsored funds are also involved
15
from time to time in governmental and self-regulatory organization investigations and proceedings. (See Item
3. "Legal Proceedings" for further information.)
Any lawsuits, investigations or proceedings could result in reputational damage, loss of clients and
assets, settlements, awards, injunctions, fines, penalties, increased costs and expenses in resolving a claim,
diversion of employee resources and resultant financial losses. Predicting the outcome of such matters is
inherently difficult, particularly where claims are brought on behalf of various classes of claimants or by a large
number of claimants, when claimants seek substantial or unspecified damages, or when investigations or legal
proceedings are at an early stage. A substantial judgment, settlement, fine or penalty could be material to our
operating results or cash flows for a particular period, depending on our results for that period, or could cause
us significant reputational harm, which could harm our business prospects.
We depend to a large extent on our business relationships and our reputation to attract and retain
clients. As a result, allegations of improper conduct by private litigants, including investors in our funds, or
regulators, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and
press speculation about us, our investment activities or the asset management industry in general, whether or
not valid, may harm our reputation. We may incur substantial legal expenses in defending against proceedings
commenced by a client, regulatory authority or other private litigant. Substantial legal liability levied on us
could cause significant reputational harm and have an adverse impact on our results of operations and
financial condition.
We are subject to multiple tax jurisdictions and any changes in tax laws or unanticipated tax obligations
could have an adverse impact on our financial condition, results of operations and cash flow.
We are subject to income as well as non-income-based taxes and are subject to ongoing tax audits, in
various jurisdictions in which we operate. Tax authorities may disagree with certain positions we have taken
that may result in the assessment of additional taxes. We regularly assess the appropriateness of our tax
positions and reporting. We cannot provide assurance that we will accurately predict the outcomes of audits
and the actual outcomes of these audits could be unfavorable. Any changes to tax laws could impact our
estimated effective tax rate and tax expense and could result in adjustments to our treatment of deferred
taxes, including the realization or value thereof, which could have an adverse effect on our business, financial
condition and results of operations.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
We may not pay dividends as intended or at all.
The declaration, payment and determination of the amount of our quarterly dividends may change at
any time. In making decisions regarding our dividends, we consider general economic and business conditions
as well as our strategic plans and prospects, business and investment opportunities, financial condition and
operating results, working capital requirements and anticipated cash needs, contractual and regulatory
restrictions (including under the terms of our credit agreement) and other obligations, that may have
implications on the payment of distributions by us to our shareholders or by our subsidiaries to us, and such
other factors as we may deem relevant. Our ability to pay or increase our dividends maybe subject to
restrictions under the terms of our credit agreement. We cannot make any assurances that any dividends,
whether quarterly or otherwise, will continue to be paid in the future.
We have corporate governance provisions that may make an acquisition of us more difficult.
Certain provisions of our certificate of incorporation and bylaws could discourage, delay or prevent a
merger, acquisition or other change in control that stockholders may consider favorable, including
transactions by which stockholders might otherwise receive a premium for their shares. These provisions also
could limit the price that investors might be willing to pay in the future for shares of our common stock,
thereby depressing the market price of our common stock. Stockholders who wish to participate in these
transactions may not have the opportunity to do so. In addition, the provisions of Section 203 of the Delaware
16
General Corporation Law also restrict certain business combinations with interested stockholders.
GENERAL RISK FACTORS
Our insurance policies may not cover all losses and costs to which we may be exposed, which could
adversely impact our results of operations and financial condition.
We carry insurance in amounts and under terms that we believe are appropriate. Our insurance may
not cover all liabilities and losses to which we may be exposed. Certain insurance coverage may not be
available or may be prohibitively expensive in future periods. As our insurance policies come up for renewal,
we may need to assume higher deductibles or pay higher premiums, which could have an adverse impact on
our results of operations and financial condition.
We have goodwill and other intangible assets on our balance sheet that could become impaired, which
could impact our results of operations and financial condition.
As of December 31, 2023, the Company had $829.2 million in intangible assets and goodwill. We
cannot be certain that we will realize the value of such intangible assets. Our intangible assets may become
impaired as a result of avariet y of factors which could adversely affect our financial condition and results of
operations.
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains statements that are, or may be considered to be, forward-
looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended,
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). All statements that are not historical facts, including statements about our
beliefs or expectations, are "forward-looking statements." These statements may be identified by such
forward-looking terminology as "expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may,"
"will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future,"
"forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.
Our forward-looking statements are based on a series of expectations, assumptions and projections
about the Company and the markets in which we operate, are not guarantees of future results or
performance, and involve substantial risks and uncertainty, including assumptions and projections concerning
our assets under management, net asset inflows and outflows, operating cash flows, business plans and ability
to borrow, for all future periods. All forward-looking statements contained in this Annual Report on Form 10-K
are as of the date of this Annual Report on Form 10-K only.
We can give no assurance that such expectations or forward-looking statements will prove to be
correct. Actual results may differ materially. We do not undertake or plan to update or revise any such
forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections,
or other circumstances occurring after the date of this Annual Report on Form 10-K, even if such results,
changes or circumstances make it clear that any forward-looking information will not be realized. If there are
any future public statements or disclosures by us that modify or impact any of the forward-looking statements
contained in or accompanying this Annual Report on Form 10-K, such statements or disclosures will be
deemed to modify or supersede such statements in this Annual Report on Form 10-K.
Our business and our forward-looking statements involve substantial known and unknown risks and
uncertainties, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this Annual Report on Form 10-K, resulting from: (i) any
reduction in our assets under management; (ii) inability to achieve the expected benefits of strategic
transactions; (iii) withdrawal, renegotiation or termination of investment management agreements; (iv)
damage to our reputation; (v) inability to satisfy financial debt covenants and required payments; (vi) inability
17
to attract and retain key personnel; (vii) challenges from competition; (viii) adverse developments related to
unaffiliated subadvisers; (ix) negative changes in key distribution relationships; (x) interruptions, breaches, or
failures of technology systems; (xi) loss on our investments; (xii) lack of sufficient capital on satisfactory terms;
(xiii) adverse regulatory and legal developments; (xiv) failure to comply with investment guidelines or other
contractual requirements; (xv) adverse civil litigation, government investigations, or proceedings; (xvi)
unfavorable changes in tax laws or limitations; (xvii) inability to make common stock dividend payments; (xviii)
impediments from certain corporate governance provisions; (xix) losses or costs not covered by insurance; (xx)
impairment of goodwill or other intangible assets; and other risks and uncertainties. Any occurrence of, or any
material adverse change in, one or more risk factors or risks and uncertainties referred to in this Annual
Report on Form 10-K and our other periodic reports filed with the SEC could materially and adversely affect
our operations, financial results, cash flows, prospects and liquidity.
Certain other factors that may impact our continuing operations, prospects, financial results and
liquidity, or that may cause actual results to differ from such forward-looking statements, are discussed or
included in the Company's periodic reports filed with the SEC and are available on our website at
www.virtus.com under "Investor Relations." You are urged to carefully consider all such factors.
Item 1B.
Unresolved Staff Comments.
None.
Item 1C.
Cybersecurity
Cybersecurity Strategy and Risk Management
We maintain a cybersecurity and information protection program that is supported by policies and
procedures designed to protect our systems and assets and the Company’s sensitive or confidential business
information, including that entrusted to us by our clients and business partners. Identifying and assessing
cybersecurity risk is integrated into our overall enterprise risk management (“ERM”) processes. Our ERM
processes consider cybersecurity threat risks alongside other company risks as part of our overall management
activities. Cybersecurity risks related to our business are identified and managed though a multi-faceted
approach utilizing various systems, controls, and processes.
We maintain a layered security architecture as a key part of our infrastructure design and utilize our
employees and managed third-party service providers to help ensure ase cure environment and safeguard
against a variety of threats including malware, systems intrusions, unauthorized access, data loss and other
security risks. We have implemented various technology products and associated procedures, including,
among others, the following:
▪
▪
Firewall protection, operating system security patches, and multi-factor authentication;
System security agent software, which includes encryption, malware protection, patches and
virus definitions;
▪ Monitoring of computer systems for unauthorized use of or access to sensitive information;
▪ Web content filtering;
▪ Web and network vulnerability assessments and penetration testing;
▪ Monitoring emerging laws and regulations related to data protection and information security;
▪
Hosting in-house production systems in geographically dispersed locations that are backed up to
alternate locations; and
Employee cybersecurity awareness training that includes regular phishing simulations.
▪
As part of the above processes, we engage various professional services firms that use external third-
party tools to assess our internal cybersecurity programs and compliance with applicable practices and
18
standards. Our use of these third parties allows us to leverage specialized knowledge, insights and industry
best practices.
The Company’s processes to identify material risks from cybersecurity threats associated with our use
of third-party service providers are included within our service provider management policy. The policy
provides guidelines in performing cyber risk assessments on our critical and material third party service
providers during onboarding and periodically thereafter.
The assessment of cybersecurity incidents are integrated as part of the Company's business continuity
and disaster recovery program (“BCDR”). Our BCDR includes an incident response protocol that provides a
framework for the assessment, response, and recovery phases for any business disruption, including
cybersecurity incidents. It also incorporates various event, incident and response teams that comprise the
Company's information security, risk management, compliance, legal and other functions as needed in
response to any cybersecurity incidents. Our incident response protocol also provides for reporting
mechanisms to senior management and our Board of Directors in the event of a material cybersecurity
incident.
We have not had a cybersecurity incident that has materially affected, or was reasonably likely to,
materially affect, our business strategy, results of operations or financial condition. There are risks from
cybersecurity threats that if they were to occur could materially affect our business strategy, results of
operations or financial condition which are further discussed in Item 1A. “Risk Factors—Risks Related to our
Industry, Business and Operations—We and our third-party service providers rely on numerous technology
systems and any business interruption, security breach, or system failure could negatively impact our business
and profitability” of this Annual Report on Form 10-K, which should be read in conjunction with the
information inth is section.
Cybersecurity Governance
Our Board of Directors ("Board") oversees our risk management processes, including our risks from
cybersecurity threats. As part of its ongoing responsibilities, the Board receives recurring reports from
management on the Company’s cybersecurity risk environment and regularly meets with management to
review the risk landscape and discuss the steps taken by management to monitor and mitigate cyber
exposures. In addition, from time to time, our Chief Technology Officer and Chief Information Security Officer
(“CISO”) brief the Board onth e cyber-threat landscape, our information security program and other related
information technology topics.
The Company maintains an Enterprise Risk Committee (“ERC”), comprising the Company executives
who lead day-to-day risk management, and whose efforts are supplemented by specific risk-related
committees or teams. The ERC is a cross-functional committee that focuses on identifying and managing
operational risk throughout the organization, including cybersecurity threats. The ERC has integrated
cybersecurity into key elements of the Company’s ERM framework, including our BCDR planning program and
service provider management policy, and personnel from our information security, risk management,
compliance and legal groups are a part of the assessment and response team for cybersecurity incidents and
the evaluation of third-party cybersecurity risk.
Our cybersecurity systems, controls and processes are overseen by our cybersecurity information
technology team which is managed by our CISO. Our CISO has over 25 years of experience in the information
technology and cybersecurity field and is a Certified Information Systems Security Professional.
19
Item 2.
Properties.
We lease our principal offices, which are located at One Financial Plaza, Hartford, CT 06103. In addition,
we lease office space in California, Connecticut, Florida, Georgia, Illinois, Massachusetts, New Jersey, New
York, Texas, Singapore and the UK.
Item 3.
Legal Proceedings.
The information set forth in response to Item 103 of Regulation S-K under "Legal Proceedings" is
incorporated by reference from Part II, Item 8. "Financial Statements and Supplementary Data," Note 12
"Commitments and Contingencies" of this Annual Report on Form 10-K.
Item 4.
Mine Safety Disclosures.
Not applicable.
20
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Our common stock is traded on the New York Stock Exchange under the trading symbol "VRTS." As of
February 9, 2024, we had 7,087,728 shares of common stock outstanding that were held by approximately
39,000 holders of record.
In making decisions regarding our quarterly dividend, we consider general economic and business
conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial
condition and operating results, working capital requirements and anticipated cash needs, contractual
restrictions and obligations, legal, tax, regulatory and other restrictions that may have implications on the
payment of distributions by us to our common shareholders or by our subsidiaries to us, and such other
factors aswe may deem relevant. We cannot provide any assurances that any distributions, whether
quarterly or otherwise, will continue to be paid in the future.
On February 21, 2024, the Company declared a quarterly cash dividend of $1.90 per common share
to be paid on May 15, 2024 to shareholders of record at the close of business on April 30, 2024.
Issuer Purchases of Equity Securities
An aggregate of 5,680,045 shares of our common stock have been authorized to be repurchased
under ash are repurchase program since it was initially approved in 2010 by our Board of Directors. As of
December 31, 2023, 604,545 shares remained available for repurchase. Under the terms of the program, we
may repurchase shares of our common stock from time to time at our discretion through open market
repurchases, privately negotiated transactions and/or other mechanisms, depending on price, prevailing
market and business conditions, tax and other financial considerations. The program, which has no specified
term, may be suspended or terminated at any time.
During the year ended December 31, 2023, we repurchased a total of 223,807 common shares for
$45.2 million. The following table sets forth information regarding our share repurchases in each month
during the quarter ended December 31, 2023:
Period
October 1—31, 2023
November 1—30, 2023
December 1—31, 2023
Total
Total number of
shares purchased
2,256
54,427
Average price
paid per share (1)
183.27
$
196.51
$
41,269
$
215.37
97,952
Total number of
shares purchased as
part of publicly
announced plans or
programs (2)
2,256
54,427
41,269
97,952
Maximum number of
shares that may yet be
purchased under the
plans or programs (2)
700,241
645,814
604,545
(1) Average price paid per share is calculated on a settlement basis and excludes commissions and
taxes.
(2) The share repurchases were completed pursuant to a program announced in the fourth quarter
of 2010 and most recently increased in May 2022. This repurchase program is not subject to an
expiration date.
Unregistered Sales of Equity Securities
There were no unregistered sales of equity securities during the fourth quarter of fiscal 2023. Shares
of our common stock purchased by participants in our Employee Stock Purchase Plan were delivered to
21
participant accounts via open market purchases at fair value by the third-party administrator under the plan.
We do not reserve shares for this plan or discount the purchase price of the shares.
Stock Performance Graph
Cumulative Total Return Among Virtus, S&P 500 Index and Peer Companies
The following graph compares the cumulative total shareholder return of Virtus since its inception
with the performance of the Standard & Poor’s 500 ("S&P 500") Stock Index and a peer group index that
consists of several peer companies (referred to as the "Financial Peer Group") as defined below. This graph
assumes an equal investment in our common stock, the S&P 500 and the Financial Peer Group on January 2,
2009, reflects reinvested dividends, and is weighted on a market capitalization basis. Each reported data point
below represents the last trading day of each calendar year. The comparisons in the graph below are based
upon historical data and are not indicative of, nor intended to forecast, future performance.
4000%
3500%
3000%
2500%
2000%
1500%
1000%
500%
00%
2,709%
VRTS
589%
S&P 500
417%
Peer Group
-50%
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
12/31/14
12/31/15
12/31/16
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
Financial Peer Group: Affiliated Managers Group, Inc., AllianceBernstein Holding L.P., Artisan Partners Asset
Management Inc.*, BrightSphere Investment Group Inc.*, Cohen & Steers, Inc., Federated Hermes, Inc.,
Franklin Resources, Inc., Invesco Ltd., Janus Henderson Group Plc*, T. Rowe Price Group, Inc. and Victory
Capital Holdings, Inc.*
*Companies excluded from the cumulative total return table due to lack of comparative performance periods.
Item 6.
Reserved
22
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations.
Overview
Our Business
We provide investment management and related services to institutions and individuals. We use a
multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its
own distinct investment style, autonomous investment process and individual brand, as well as from select
unaffiliated managers for certain of our retail funds. By offering abroa d array of products, we believe we can
appeal to a greater number of investors and have offerings across market cycles and through changes in
investor preferences. Our earnings are primarily from asset-based fees charged for services relating to these
various products, including investment management, fund administration, distribution, and shareholder
services.
We offer investment strategies for institutional and individual investors in different investment
products and through multiple distribution channels. Our investment strategies are available in a diverse
range of styles and disciplines, managed by differentiated investment managers. We have offerings in various
asset classes (equity, fixed income, multi-asset and alternatives), geographies (domestic, global, international
and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment
approaches (fundamental and quantitative). Our institutional products are offered through institutional
separate accounts and commingled accounts, including structured products to a variety of institutional clients.
Our products include open-end funds, closed-end funds and retail separate accounts. We also provide
subadvisory services to other investment advisers.
Our institutional distribution resources include affiliate-specific sales teams primarily focused on the
U.S. market, supported by shared consultant relations and U.S. and non-U.S. institutional sales distribution.
Our institutional products are marketed through relationships with consultants as well as directly to clients.
We target key market segments, including foundations and endowments, corporations, public and private
pension plans, sovereign wealth funds and subadvisory relationships.
Our retail distribution resources in the U.S. consist of regional sales professionals, a national account
relationship group and specialized teams for retirement and ETFs. Our U.S. retail funds and retail separate
accounts are distributed through financial intermediaries. We have broad distribution access in the U.S. retail
market, with distribution partners that include national and regional broker-dealers, independent broker-
dealers and registered investment advisers, banks and insurance companies. In many of these firms, we have
a number of products that are on preferred "recommended" lists and on fee-based advisory programs. Our
private client business is marketed directly to individual clients by financial advisory teams at our affiliated
investment managers.
Market Developments
The financial markets have asi gnificant impact on the value of our assets under management and on
the level of our sales and net flows. The capital and financial markets experience fluctuation, volatility and
declines, which impact investment returns and asset flows of our investment offerings as well as in investor
choices and preferences among investment products. The changes in our assets under management may also
be affected by the factors discussed in Item 1A. "Risk Factors" of this Annual Report on Form 10-K.
23
The U.S. and global equity markets increased in value in 2023, as evidenced by increases in major
indices asnoted i n the following table:
Index
MSCI World Index
Standard & Poor's 500 Index
Russell 2000 Index
Morningstar /LSTA Leveraged Loan Index
Financial Highlights
December 31,
2023
2022
As of Change
%
3,169
4,770
2,027
2,721
2,603
3,840
1,761
2,406
21.7 %
24.2 %
15.1 %
13.1 %
▪ Net income per diluted share was $17.71 in 2023, an increase of $2.21, or 14.3%, compared to net
▪
income per diluted share of $15.50 in 2022.
Total sales were $25.9 billion in 2023, adecr ease of $4.4 billion, or 14.6%, from $30.3 billion in 2022.
Net flows were $(7.2) billion in 2023 compared to $(13.4) billion in 2022.
▪ Assets under management were $172.3 billion at December 31, 2023, an increase of $22.9 billion, or
15.3%, from $149.4 billion at December 31, 2022.
AlphaSimplex
On April 1, 2023, the Company completed the acquisition of AlphaSimplex Group, LLC ("AlphaSimplex")
for $113.4 million in cash at closing, including $50.0 million drawn from the Company's revolving credit facility,
that was repaid as of December 31, 2023.
Assets Under Management
At December 31, 2023, total assets under management were $172.3 billion, representing an increase
of $22.9 billion, or 15.3%, from December 31, 2022. The change in total assets under management from
December 31, 2022 included $24.8 billion from positive market performance and $7.8 billion from the
acquisition of AlphaSimplex, partially offset by $7.2 billion of net outflows.
Assets Under Management by Product
The following table summarizes our assets under management by product:
(in millions)
Open-End Funds (1)
Closed-End Funds
Retail Separate Accounts
Institutional Accounts (2)
Total
Average Assets Under Management (3)
As of December 31,
As of Change
2023
56,062
10,026
43,202
62,969
172,259
161,482
$
$
$
2022
53,000
10,361
35,352
50,663
149,376
166,795
$
$
$
$
$
$
2023 vs.
2022
3,062
(335)
7,850
12,306
22,883
(5,313)
%
5.8 %
(3.2)%
22.2 %
24.3 %
15.3 %
(3.2)%
(1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance
funds.
(2) Represents assets under management of institutional separate and commingled accounts including
structured products.
(3) Averages are calculated as follows:
Funds - average daily or weekly balances
–
– Retail Separate Accounts -prior-quarter ending balances
Institutional Accounts - average of month-end balances
–
24
Asset Flows by Product
The following table summarizes asset flows by product:
(in millions)
Open-End Funds (1)
Beginning balance
Inflows
Outflows
Net flows
Market performance
Other (2)
Ending balance
Closed-End Funds
Beginning balance
Inflows
Outflows
Net flows
Market performance
Other (2)
Ending balance
Retail Separate Accounts
Beginning balance
Inflows
Outflows
Net flows
Market performance
Other (2)
Ending balance
Institutional Accounts (3)
Beginning balance
Inflows
Outflows
Net flows
Market performance
Other (2)
Ending balance
Total
Beginning balance
Inflows
Outflows
Net flows
Market performance
Other (2)
Ending balance
Years Ended December 31,
2022
2023
53,000
11,188
(18,526)
(7,338)
8,160
2,240
56,062
10,361
24
—
24
453
(812)
10,026
35,352
6,680
(5,972)
708
7,141
1
43,202
50,663
7,965
(8,579)
(614)
9,077
3,843
62,969
149,376
25,857
(33,077)
(7,220)
24,831
5,272
172,259
$
$
$
$
$
$
$
$
$
$
78,706
13,985
(28,549)
(14,564)
(15,113)
3,971
53,000
12,068
191
—
191
(1,346)
(552)
10,361
44,538
5,710
(6,440)
(730)
(8,456)
—
35,352
51,874
10,407
(8,747)
1,660
(12,168)
9,297
50,663
187,186
30,293
(43,736)
(13,443)
(37,083)
12,716
149,376
$
$
$
$
$
$
$
$
$
$
(1) Represents assets under management of U.S. retail funds, global funds, ETFs and
variable insurance funds.
25
(2) Represents open-end and closed-end fund distributions net of reinvestments, the net
change in assets from cash management strategies, and the impact of non-sales related
activities such as asset acquisitions/(dispositions), seed capital investments/
(withdrawals), current income or capital returned by structured products and the use of
leverage.
(3) Represents assets under management of institutional separate and commingled
accounts including structured products.
Assets Under Management by Asset Class
The following table summarizes assets under management by asset class:
(in millions)
Asset Class
Equity
Fixed Income
Multi-Asset (1)
Alternatives (2)
Total
December 31,
Change
% of Total
2023
2022
2023 vs.
2022
%
2023
2022
$
96,703
$
81,894
$
14,809
37,192
21,411
16,953
172,259
$
36,903
19,937
10,642
149,376
$
$
289
1,474
6,311
22,883
18.1 %
0.8 %
7.4 %
59.3 %
15.3 %
56.2 %
21.6 %
12.4 %
9.8 %
100.0 %
54.9 %
24.7 %
13.3 %
7.1 %
100.0 %
(1) Consists of strategies and client accounts with substantial holdings in at least two of the following asset
classes: equity, fixed income, and alternatives.
(2) Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other
strategies.
Average Assets Under Management and Average Fees Earned
The following table summarizes the average management fees earned in basis points and average
assets under management:
Products
Open-End Funds (1)
Closed-End Funds
Retail Separate Accounts
Institutional Accounts (2)
All Products
Years Ended December 31,
Average Fee Earned
(expressed in basis points)
Average Assets Under
Management
(in millions) (3)
2023
2022
2023
2022
49.5
57.8
43.7
31.7
42.2
46.6
57.4
42.8
31.4
41.6
$
55,226
$
10,060
37,601
58,595
64,046
11,132
38,498
53,119
$
161,482
$
166,795
(1) Represents assets under management of U.S. retail funds, global funds, ETFs and variable insurance
funds.
(2) Represents assets under management of institutional separate and commingled accounts including
structured products.
(3) Averages are calculated as follows:
– Funds - average daily or weekly balances
– Retail Separate Accounts -prior-quarter ending balances
– Institutional Accounts - average of month-end balances
26
Average fees earned represent investment management fees, net of revenue-related adjustments,
divided by average net assets, excluding the impact of consolidated investment products ("CIP"). Revenue-
related adjustments are based on specific agreements and reflect the portion of investment management fees
passed-through to third-party client intermediaries for services to investors in sponsored investment products.
Fund fees are calculated based on average daily or weekly net assets. Retail separate account fees are
calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end
balances. Institutional account fees are calculated based on an average of month-end balances, an average of
current quarter’s asset values or on a combination of the underlying cash flows and the principal value of the
product. Average fees earned will vary based on several factors, including the asset mix and expense
reimbursements to the funds.
The average fee rate earned on all products for 2023 increased by 0.6 basis points compared to the
prior year primarily due to the addition of alternative strategies with higher fee rates from the AlphaSimplex
acquisition.
Investment Performance
The following table presents asu mmary of investment performance by asset class measured by the
percentage of assets under management exceeding their relevant benchmarks as of December 31, 2023:
Asset Class (1)
Equity
Fixed Income
Alternatives
Percentage of Assets Under Management
Beating Benchmark (2)
3-Year
42%
61%
59%
5-Year
70%
77%
94%
10-Year
69%
71%
98%
(1) Excludes closed-end funds, private client accounts, structured products and certain other multi-
asset strategies.
(2) Percentage beating benchmark is reported as the percentage of assets under management that
have outperformed benchmarks across the indicated periods and does not include assets without
benchmarks. Performance is presented on an average annual total return basis for products with a
three-, five-, and/or ten-year track record, is net of fees and is measured on a consistent basis
relative to the most appropriate benchmarks. Benchmark indices are unmanaged, their returns do
not reflect any fees, expenses or sales charges, and they are not available for direct investment.
Past performance is not indicative of future results.
As of December 31, 2023, 38 of 77, or 49%, of our rated U.S. retail funds received an overall rating of
4 or 5st ars representing 70% of our total U.S. retail fund assets under management (1). By comparison, 32.5%
of Morningstar's fund population is given a 4- or 5-star rating (2).
(1) Assets under management excludes non-rated funds. Based on institutional-class shares, except
for funds without Ish ares, for which shares were used, or if A share rating is higher than I shares.
Past performance is not indicative of future results.
(2) Morningstar ratings are based on risk-adjusted returns. Strong ratings are not indicative of positive
fund performance.
27
Results of Operations - December 31, 2023 compared to December 31, 2022
A discussion of our results of operations for the year ended December 31, 2022 compared to the year
ended December 31, 2021 may be found in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7 of our Form 10-K for the fiscal year ended December 31, 2022, which
specific discussion is incorporated herein by reference.
Summary Financial Data
Years Ended December 31,
Change
$
(in thousands)
Investment management fees
Other revenue
Total revenues
Total operating expenses
Operating income (loss)
Other income (expense), net
Interest income (expense), net
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Noncontrolling interests
Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $
$
Earnings (loss) per share-diluted
2023
711,475
133,793
845,268
693,784
151,484
3,681
31,399
186,564
45,088
141,476
(10,855)
130,621
17.71
$
$
$
2022
728,339
158,040
886,379
688,919
197,460
(51,938)
18,366
163,888
57,260
106,628
10,913
117,541
15.50
2023 vs.
2022
(16,864)
(24,247)
(41,111)
4,865
(45,976)
55,619
13,033
22,676
(12,172)
34,848
(21,768)
13,080
2.21
$
$
$
%
(2.3)%
(15.3)%
(4.6)%
0.7 %
(23.3)%
(107.1)%
71.0 %
13.8 %
(21.3)%
32.7 %
(199.5)%
11.1 %
14.3 %
In 2023, total revenues decreased $41.1 million, or 4.6%, to $845.3 million from $886.4 million in
2022, and operating income decreased by $46.0 million, or 23.3%, to $151.5 million in 2023 from $197.5
million in 2022, primarily as a result of lower average assets under management.
28
Revenues
Revenues by source were as follows:
(in thousands)
Investment management fees
Open-end funds
Closed-end funds
Retail separate accounts
Institutional accounts
Total investment management fees
Distribution and service fees
Administration and shareholder service fees
Other income and fees
Total Revenues
Investment Management Fees
Years Ended December 31,
Change
2023
2022
2023 vs.
2022
$
$
305,238
58,136
171,357
176,744
711,475
56,153
73,857
3,783
845,268
$
$
335,585
63,841
171,509
157,404
728,339
67,518
85,862
4,660
886,379
$
$
(30,347)
(5,705)
(152)
19,340
(16,864)
(11,365)
(12,005)
(877)
(41,111)
%
(9.0)%
(8.9)%
(0.1)%
12.3 %
(2.3)%
(16.8)%
(14.0)%
(18.8)%
(4.6)%
Investment management fees are earned based on a percentage of assets under management and
are paid pursuant to the terms of the respective investment management agreements, which generally
require monthly or quarterly payments. Investment management fees decreased by $16.9 million, or 2.3%,
for the year ended December 31, 2023 compared to the prior year, primarily due to lower average assets
under management, partially offset by the addition of AlphaSimplex.
Distribution and Service Fees
Distribution and service fees are sales- and asset-based fees earned from open-end funds for
marketing and distribution services. Distribution and service fees decreased by $11.4 million, or 16.8%, for the
year ended December 31, 2023 compared to the prior year, primarily due to lower average assets for open-
end funds in share classes that have sales- and asset-based distribution and service fees.
Administration and Shareholder Service Fees
Administration and shareholder service fees represent fees earned for fund administration and
shareholder services from our U.S. retail funds, ETFs and certain closed-end funds. Fund administration and
shareholder service fees decreased by $12.0 million, or 14.0%, for the year ended December 31, 2023
compared to the prior year, primarily due to the decrease in average assets under management in open-end
funds during the period as a result of market performance and net outflows.
Other Income and Fees
Other income and fees primarily represent fees related to other fee-earning assets and contingent
sales charges earned from investor redemptions of certain shares sold without a front-end sales charge. Other
income and fees decreased $0.9 million, or 18.8%, for the year ended December 31, 2023 compared to the
prior year, primarily due to lower redemption income as well as the decline in average other fee-earning
assets in the current year.
29
Operating Expenses
Operating expenses by category were as follows:
(in thousands)
Operating expenses
Years Ended December 31,
Change
2023
2022
2023 vs.
2022
%
Employment expenses
Distribution and other asset-based expenses
Other operating expenses
Other operating expenses of CIP
Change in fair value of contingent consideration
Restructuring expense
Depreciation expense
Amortization expense
Total operating expenses
$
$
404,742
96,802
125,871
4,224
(5,510)
824
5,804
61,027
693,784
$
$
371,259
112,612
126,178
4,408
8,020
4,015
3,923
58,504
688,919
$
$
33,483
(15,810)
(307)
(184)
(13,530)
(3,191)
1,881
2,523
4,865
9.0 %
(14.0)%
(0.2)%
(4.2)%
(168.7)%
(79.5)%
47.9 %
4.3 %
0.7 %
Employment Expenses
Employment expenses consist of fixed and variable compensation and related employee benefit
costs. Employment expenses of $404.7 million increased $33.5 million, or 9.0%, from the prior year primarily
due to the addition of AlphaSimplex, which included retention payments to employees incurred as part of the
transaction consideration that were classified as employment expense.
Distribution and Other Asset-Based Expenses
Distribution and other asset-based expenses consist primarily of payments to third-party client
intermediaries for providing services to investors in sponsored investment products. These payments are
primarily based onasse ts under management. Distribution and other asset-based expenses also include the
amortization of deferred sales commissions related to up-front commissions on shares sold without a front-
end sales charge to shareholders. The deferred sales commissions are amortized on a straight-line basis over
the period commissions are recovered from distribution fee revenues and contingent sales charges received
upon redemption of shares. Distribution and other asset-based expenses decreased $15.8 million, or 14.0%,
compared to the prior year primarily due to a decrease in average assets under management in share classes
that have asset-based distribution and other asset-based expenses.
Other Operating Expenses
Other operating expenses primarily consist of investment research and technology costs, professional
fees, travel and distribution-related costs, rent and occupancy expenses, and other business costs. Other
operating expenses decreased modestly by $0.3 million, or 0.2%, for the year ended December 31, 2023 as
compared to the prior year primarily due to a decrease in other third-party support costs partially offset by the
addition of AlphaSimplex.
Other Operating Expenses of CIP
Other operating expenses of CIP remained consistent during the year ended December 31, 2023
compared to the prior year.
Change in Fair Value of Contingent Consideration
Contingent consideration related to the Company's acquisitions are fair valued on each reporting date
incorporating changes in various estimates, including underlying performance estimates, discount rates and
amount of time until the conditions of the contingent payments are achieved. The change in fair value is
30
recorded in the current period as a gain or loss. The $13.5 million change in fair value of contingent
consideration for the year ended December 31, 2023 as compared to the prior year was primarily attributable
to changes in underlying performance estimates and discount rates.
Depreciation Expense
Depreciation expense consists primarily of the straight-line depreciation of furniture, equipment and
leasehold improvements. Depreciation expense increased $1.9 million, or 47.9%, for the year ended
December 31, 2023 compared to the prior year primarily due to the addition of AlphaSimplex, as well as
leasehold improvements and equipment purchases made in the current year.
Amortization Expense
Amortization expense consists of the amortization of definite-lived intangible assets over their
estimated useful lives. Amortization expense increased $2.5 million, or 4.3%, for the year ended December
31, 2023 compared to the prior year, primarily due to the addition of AlphaSimplex.
Other Income (Expense), net
Other Income (Expense), net by category were as follows:
Years Ended December 31,
Change
(in thousands)
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net $
Realized and unrealized gain (loss) of CIP, net
Other income (expense), net
Total Other Income (Expense), net
$
2023
2022
2023 vs.
2022
%
6,525
(2,404)
(440)
3,681
$
$
(12,489) $
(39,296)
(153)
(51,938) $
19,014
36,892
(287)
55,619
(152.2)%
(93.9)%
187.6 %
(107.1)%
Realized and Unrealized Gain (Loss) on Investments, net
Realized and unrealized gain (loss) on investments, net changed during the year ended December 31,
2023 by $19.0 million as compared to the prior year. The realized and unrealized gains and losses reflect
changes in overall market conditions for the year.
Realized and Unrealized Gain (Loss) of CIP, net
Realized and unrealized gain (loss) of CIP, net changed $36.9 million compared to the prior year. The
change for the current year consisted primarily of net realized and unrealized gains of $145.8 million primarily
due to changes in market values of leveraged loans, partially offset by changes in net realized and unrealized
losses of $108.9 million related to the value of the notes payable.
Other Income (Expense), net
Other income (expense), net changed by $0.3 million during the year ended December 31, 2023
compared to the prior year primarily due to changes in the gains and losses on our equity method
investments.
31
Interest Income (Expense), net
Interest Income (Expense), net by category were as follows:
(in thousands)
Interest Income (Expense)
Interest expense
Interest and dividend income
Interest and dividend income of investments of CIP
Interest expense of CIP
Years Ended December 31,
Change
2023
2022
2023 vs.
2022
%
$
(23,431) $
(13,173) $
(10,258)
12,458
197,707
(155,335)
4,448
107,325
(80,234)
8,010
90,382
(75,101)
77.9 %
180.1 %
84.2 %
93.6 %
71.0 %
Total Interest Income (Expense), net
$
31,399
$
18,366
$
13,033
Interest Expense
Interest expense increased $10.3 million, or 77.9%, for the year ended December 31, 2023, compared
to the prior year primarily due to higher average interest rates and higher average debt balances during the
current year.
Interest and Dividend Income
Interest and dividend income is earned on cash equivalents and our marketable securities. Interest
and dividend income increased $8.0 million, or 180.1%, compared to the prior year due to higher average
investment balances and higher interest rates during the current year compared to the prior year.
Interest and Dividend Income of Investments of CIP
Interest and dividend income of investments of CIP increased $90.4 million, or 84.2%, compared to
the prior year primarily attributable to higher interest earned on cash balances.
Interest Expense of CIP
Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of
CIP increased by $75.1 million, or 93.6%, compared to the prior year primarily due to higher average interest
rates and the addition of aCL O during the third quarter of 2023 and fourth quarter of 2022.
Income Tax Expense (Benefit)
The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective
tax rate of 24.2% and 34.9% for 2023 and 2022, respectively. The lower estimated effective tax rate for 2023
was primarily due to excess tax benefits associated with stock-based compensation and the change in
valuation allowances in the current year related to the tax effects of unrealized gains on certain of our
investments. The higher effective tax rate in the prior year was due to valuation allowances recorded for the
tax effects of unrealized losses on certain of our investments.
Effects of Inflation
Inflationary pressures can result in increases to our costs, especially to the extent that large expense
components such as compensation are impacted. To the degree that these expense increases are not
recoverable or cannot be counterbalanced through pricing increases due to the competitive environment, our
profitability could be negatively impacted. In addition, the value of the assets that we manage may be
negatively impacted if inflationary expectations result in a rising interest rate environment. Declines in the
values of these assets under management could lead to reduced revenues as management fees are generally
earned as a percentage of assets under management.
32
Liquidity and Capital Resources
Certain Financial Data
The following tables summarize certain financial data relating to our liquidity and capital resources:
(in thousands)
Balance Sheet Data
Cash and cash equivalents
Investments
Contingent consideration
Debt
Redeemable noncontrolling interests
Total equity
(in thousands)
Cash Flow Data
Provided by (used in)
Operating activities
Investing activities
Financing activities
Overview
December 31,
Change
2023
2022
2023 vs.
2022
$
$
$
239,602
132,696
90,938
253,412
104,869
868,289
338,234
100,330
128,400
255,025
113,718
822,936
(98,632)
32,366
(37,462)
(1,613)
(8,849)
45,353
%
(29.2)%
32.3 %
(29.2)%
(0.6)%
(7.8)%
5.5 %
Years Ended December 31,
Change
2023
2022
2023 vs.
2022
%
$
237,157
$
132,670
$
104,487
(129,732)
(356,113)
(27,467)
(102,057)
(102,265)
(254,056)
78.8 %
372.3 %
248.9 %
At December 31, 2023, we had $239.6 million of cash and cash equivalents and $132.7 million of
investments, which included $97.3 million of investment securities, compared to $338.2 million of cash and
cash equivalents and $100.3 million of investments, which included $77.0 million of investment securities, at
December 31, 2022.
Uses of Capital
Our operating expenses consist of employee compensation and related benefit costs and, other
operating expenses, which primarily consist of investment research, technology costs, professional fees,
distribution and occupancy costs, as well as interest on our indebtedness and income taxes. Annual incentive
compensation, the largest annual operating cash expenditure, is paid in the first quarter of the year. In 2023
and 2022, we paid approximately $142.1 million and $151.6 million, respectively, in incentive compensation
earned during the years ended December 31, 2022 and 2021, respectively.
In addition to operating activities, other uses of cash could include: (i) investments in organic growth,
including seeding or launching new products and expanding distribution; (ii) debt principal payments through
scheduled amortization, excess cash flow payment requirements or additional paydowns; (iii) dividend
payments to common stockholders; (iv) repurchases of our common stock, or withholding obligations for the
net settlement of employee share transactions; (v) investments in our infrastructure; (vi) investments in
inorganic growth opportunities that may require upfront and/or future payments; (vii) integration costs,
including restructuring and severance, related to acquisitions, if any; and (viii) purchases of affiliate equity
interests.
33
Capital and Reserve Requirements
We operate an SEC-registered broker-dealer subsidiary that is subject to certain rules regarding
minimum net capital. Failure to meet these requirements could result in adverse consequences to us,
including additional reporting requirements, or interruption of our business. At December 31, 2023, our
broker-dealer net capital was significantly greater than the required minimum.
Balance Sheet
Cash and cash equivalents consist of cash in banks and money market fund investments. Investments
consist primarily of investments in our sponsored funds. CIP represent investment products for which we
provide investment management services and where we have either aco ntrolling financial interest or are
considered the primary beneficiary of an investment product that is considered a variable interest entity.
Operating Cash Flow
Net cash provided by operating activities of $237.2 million for 2023 increased by $104.5 million from
cash flows provided by operating activities of $132.7 million in 2022 primarily due to a decrease of $117.4
million in net purchases of investments by CIP.
Investing Cash Flow
Cash flows from investing activities consist primarily of capital expenditures and other investing
activities related to our business operations. Net cash used in investing activities was $129.7 million for 2023
compared to net cash used in investing activities of $27.5 million in 2022. The increase in cash used in
investing activities during 2023 compared to the prior year was primarily due to the cash used for the
acquisition of AlphaSimplex.
Financing Cash Flow
Cash flows from financing activities consist primarily of transactions related to our common shares,
issuance and repayment of debt by us and CIP, payments of contingent consideration and purchases and sales
of noncontrolling interests. Net cash used in financing activities increased by $254.1 million to $356.1 million
in 2023 from $102.1 million in the prior year. The increase in cash used in financing activities during 2023
compared to the prior year was primarily due to an increase of $315.1 million in net borrowings by CIP,
partially offset by a $45.0 million decrease in common share repurchases during the year ended December 31,
2023 as compared to the prior year.
Credit Agreement
The Company's credit agreement (the "Credit Agreement"), most recently amended on June 20, 2023
to change the base interest rate from LIBOR to SOFR, comprises (i) a$275.0 m illion term loan with a seven-
year term (the "Term Loan") expiring in September 2028, and (ii) a $175.0 million revolving credit facility with
a five-year term expiring in September 2026. On April 3, 2023, the Company borrowed $50.0 million under
the revolving credit facility to partially finance its acquisition of AlphaSimplex (see Note 4fo r further
information) and repaid the entire outstanding balance prior to December 31, 2023. In addition, the Company
repaid $2.8 million outstanding under the Term Loan. At December 31, 2023, $258.8 million was outstanding
under the Term Loan. In accordance with ASC 835, Interest, the amounts outstanding under the Company's
Term Loan are presented on the Consolidated Balance Sheet net of related debt issuance costs, which were
$5.4 million as of December 31, 2023.
Recently Issued Accounting Pronouncements
For adisc ussion of accounting standards, see Part II, Item 8, "Financial Statements and
Supplementary Data," Note 2 "Summary of Significant Accounting Policies."
34
Critical Accounting Policies and Estimates
Our consolidated financial statements and the accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of America, which requires the use of estimates.
Actual results will vary from these estimates. Management believes the following critical accounting policies
are important to understanding our results of operations and financial position.
Consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries and
investment products that are consolidated. Voting interest entities ("VOEs") are consolidated when we are
considered to have a controlling financial interest, which is typically present when we own a majority of the
voting interest in an entity or otherwise have the power to govern the financial and operating policies of the
entity.
We evaluate any variable interest entities ("VIEs") in which we have a variable interest for
consolidation. A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the
entity to finance its own activities without additional financial support or (ii) where as agroup, the holders of
the equity investment at risk do not possess: (x) the power through voting or similar rights to direct the
activities that most significantly impact the entity's economic performance; (y) the obligation to absorb
expected losses or the right to receive expected residual returns of the entity; or (z) proportionate voting and
economic interests and where substantially all of the entity's activities either involve or are conducted on
behalf of an investor with disproportionately fewer voting rights. If an entity has any of these characteristics,
it is considered a VIE and is consolidated by its primary beneficiary, which is the entity that has both the power
to direct the activities that most significantly impact the VIE's economic performance and has the obligation to
absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
CIP includes both VOEs, made up primarily of open-end funds in which we hold a controlling financial
interest, and VIEs, which primarily consist of CLOs of which we are considered the primary beneficiary. The
consolidation and deconsolidation of these investment products have no impact on net income (loss)
attributable to stockholders. Our risk with respect to these investment products is limited to our beneficial
interests in these products. We have no right to the benefits from, and do not bear the risks associated with,
these investment products beyond our investments in, and fees generated from, these products.
Noncontrolling Interests
Noncontrolling interests - CIP
Noncontrolling interests - CIP represent third-party investments in the Company's CIP and are
classified as redeemable noncontrolling interests on the Consolidated Balance Sheets because investors in
those products are able to request withdrawal at any time.
Noncontrolling interests - Affiliate
Noncontrolling interests - affiliate represent minority interests held in a consolidated affiliate.
Minority interests held in the affiliate are subject to holder put rights and Company call rights at established
multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered
redeemable at other than fair value. The rights are exercisable at pre-established intervals or upon certain
conditions, such as retirement. The put and call rights are not legally detachable or separately exercisable and
are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing affiliate
equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash
flow associated with any purchased equity. These minority interests in the affiliate are recorded at estimated
redemption value within redeemable noncontrolling interests on the Company's Consolidated Balance Sheets,
and any changes in the estimated redemption value are recorded on the Consolidated Statements of
35
Operations within noncontrolling interests.
Goodwill
As of December 31, 2023, the carrying value of goodwill was $397.1 million. Goodwill represents the
excess of the acquisition purchase price over the fair value of identified net assets and liabilities acquired. We
have one reporting unit for purposes of assessing the carrying value of goodwill. Goodwill impairment testing
is performed at least annually or whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. If we determine that the carrying value of the reporting unit is less than the
fair value, a second step of the goodwill impairment test is performed to measure the amount of impairment
loss, if any. We completed our annual goodwill impairment assessment as of October 31, 2023, and no
impairment was identified. For purposes of this assessment, we considered various qualitative factors
including, but not limited to, certain indicators of fair value (e.g., market capitalization and market multiplies
for asset managers) and determined that it was more likely than not that the fair value of our reporting unit
was greater than its carrying value. Only asi gnificant decline in the fair value of our reporting unit would
indicate that an impairment may exist.
Indefinite-Lived Intangible Assets
As of December 31, 2023, the carrying value of indefinite-lived intangible assets was $42.3 million.
Indefinite-lived intangible assets comprise certain fund investment management agreements and trade
names. We perform indefinite-lived intangible asset impairment tests annually, or more frequently, should
circumstances change, which could reduce the fair value of indefinite-lived intangible assets below their
carrying value. We completed our annual impairment assessment of these assets as of October 31, 2023, and
no impairments were identified. For purposes of this assessment, we considered various qualitative factors
for the investment management agreement intangible assets including, but not limited to, changes in (i) assets
under management, (ii) operating margins, and (iii) net cash flows generated, and we determined that it was
more likely than not that the fair value of indefinite-lived intangible assets was greater than their carrying
value. Only a significant decline in the fair value of the indefinite-lived intangible assets would indicate that an
impairment may exist.
Definite-Lived Intangible Assets
As of December 31, 2023, the carrying value of definite-lived intangible assets was $389.8 million.
Definite-lived intangible assets comprise certain investment management agreements, trade names and non-
competition agreements. We monitor the useful lives of definite-lived intangible assets and revise the useful
lives, if necessary, based on the circumstances. Significant judgment is required in estimating the period that
these assets will contribute to our cash flows and the pattern over which these assets will be consumed. A
change in the remaining useful life of any of these assets could have asi gnificant impact on amortization
expense. All amortization expense is calculated on a straight-line basis. Impairment testing is performed
whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If
we were to determine that the carrying value of the definite-lived intangible assets was less than the sum of
the undiscounted cash flows expected to result from the asset, we would quantify the impairment using a
discounted cash flow model.
Revenue Recognition
Our revenues are recognized when a performance obligation is satisfied, which occurs when control
of the services is transferred to customers. Investment management fees, distribution and service fees, and
administration and shareholder service fees are generally calculated as a percentage of average net assets of
the investment portfolios managed. The net asset values from which these fees are calculated are variable in
nature and subject to factors outside of the Company's control, such as additional investments, withdrawals
and market performance. Because of this, these fees are considered constrained until the end of the
contractual measurement period (monthly or quarterly), which is when asset values are generally
determinable.
36
Investment Management Fees
We provide investment management services pursuant to investment management agreements
through our investment advisers (each an "Adviser"). Investment management services represent a series of
distinct daily services that are performed over time. Fees earned on funds are based on each fund's average
daily or weekly net assets and are generally calculated and received on a monthly basis. For funds managed
by unaffiliated subadvisers, we record investment management fees net of the subadvisory fees since we are
deemed to be an agent of the fund as it relates to the services they perform, with our performance obligation
being to arrange for the provision of that service and not control the specified service before it is performed.
Amounts paid to unaffiliated subadvisers for the years ended December 31, 2023, 2022 and 2021 were $54.7
million, $77.0 million and $115.5 million, respectively.
Retail separate account fees are generally earned based on the end of the preceding or current
quarter's asset values. Institutional account fees are generally earned based on an average of month-end
balances. In certain instances, institutional fees may include performance related fees that are based on
investment returns relative to benchmarks. Fees for structured finance products consist of senior,
subordinated and, in certain instances, incentive management fees. Senior and subordinated management
fees are based on the end of the preceding quarter par value of the collateral managed with subordinated fees
being earned only after certain portfolio criteria are met. Incentive fees on CLOs are typically a percentage of
the excess cash flows available to holders of subordinated notes, above ath reshold level internal rate of
return.
We rely on service providers to provide information for the pricing of the underlying investment
securities for the asset values that drive our investment management fees and our assets under management.
Our service providers have formal valuation policies and procedures over the valuation of investments.
Distribution and Service Fees
Distribution and service fees are sales- and asset-based fees earned from open-end funds for
marketing and distribution services. These fees primarily consist of an asset-based fee that is paid by the fund
over a period of years to cover allowable sales and marketing expenses for the fund or front-end sales charges
that are based on a percentage of the offering price. Asset-based distribution and service fees are primarily
based on percentages of the average daily net asset value and are paid monthly pursuant to the terms of the
respective distribution and service fee contracts.
Distribution and service fees represent two performance obligations comprised of distribution and
related shareholder servicing activities. Distribution services are generally satisfied upon the sale of a fund
share. Shareholder servicing activities are generally services satisfied over time.
We distribute our open-end funds through third-party financial intermediaries that comprise national,
regional and independent broker-dealers. These third-party financial intermediaries provide distribution and
shareholder service activities on our behalf. We pay related distribution and service fees to these third-party
financial intermediaries for these services as we consider ourselves the principal in these arrangements since
we have control of the services prior to the services being transferred to the customer. These payments are
classified within distribution and other asset-based expenses.
Administration & Shareholder Service Fees
We provide administrative fund services to our U.S. retail funds, ETFs and the majority of our closed-
end funds and shareholder services to our U.S. retail funds. Administration and shareholder services are
performed over time. We earn fees for these services, which are calculated and paid monthly, based on each
fund's average daily or weekly net assets. Administrative fund services include: record keeping, preparing and
filing documents required to comply with securities laws, legal administration and compliance services,
37
customer service, supervision of the activities of the funds' service providers, tax services and treasury
services. We also provide office space, equipment and personnel that may be necessary for managing and
administering the business affairs of the funds. Shareholder services include maintaining shareholder
accounts, processing shareholder transactions, preparing filings and performing necessary reporting.
Other Income and Fees
Other income and fees primarily represent fees related to other fee-earning assets and contingent
sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.
Accounting for Income Taxes
We account for income taxes in accordance with ASC 740, Income Taxes, which requires recognition
of the amount of taxes payable or refundable for the current year, as well as deferred tax assets and liabilities
for temporary differences between the tax basis of assets and liabilities and the reported amounts on the
Consolidated Financial Statements. We recognize the tax benefit from an uncertain tax position only if it is
more likely than not that the tax position will be sustained, based on the technical merits of the position. The
tax benefits recognized are measured based on the largest benefit that has agreater t han 50% likelihood of
being realized upon ultimate settlement. We record interest and penalties related to income taxes as a
component of income tax expense.
Significant judgment is required in determining the provision for income taxes and, in particular, any
valuation allowance that is recorded against our deferred tax assets. The methodology for determining the
realizability of deferred tax assets includes consideration of taxable income in prior carryback year(s), if
carryback is permitted under the tax law, as well as consideration of the reversal of deferred tax liabilities that
are in the same period and jurisdiction and are of the same character as the temporary differences that gave
rise to the deferred tax assets. Our methodology also includes estimates of future taxable income from
operations, as well as the expiration dates and amounts of carryforwards related to net operating losses and
capital losses. These estimates are projected through the life of the related deferred tax assets based on
assumptions that we believe to be reasonable and consistent with demonstrated operating results. Changes
in future operating results not currently forecasted may have asi gnificant impact on the realization of
deferred tax assets. Valuation allowances are provided when it is determined that it is more likely than not
that the benefit of deferred tax assets will not be realized.
Contingent Consideration
We periodically enter into contingent payment arrangements in connection with our business
combinations or asset purchases. In contingent payment arrangements, we agree to pay additional
transaction consideration to the seller based on future performance. We estimate the value of future
payments of these potential future obligations at the time abusi ness combination or asset purchase is
consummated. Liabilities under contingent payment arrangements are recorded within contingent
consideration on the Consolidated Balance Sheets.
Contingent payment obligations related to business combinations are remeasured at fair value each
reporting date using a simulation model with the assistance of an independent valuation firm (level 3fair value
measurement). The change in fair value is recorded in the current period as a gain or loss. Gains and losses
resulting from changes in the fair value of contingent payment obligations are reflected within change in fair
value of contingent consideration on the Consolidated Statements of Operations.
Contingent payment obligations related to our asset purchases, if estimable and probable of
payment, are initially recorded at their estimated value and reviewed every reporting period for changes. Any
changes to the estimated value are recorded as an update of the initial acquisition cost of the asset with a
corresponding change to the estimated contingent payment obligation on the Consolidated Balance Sheets.
38
Loss Contingencies
The likelihood that a loss contingency exists is evaluated using the criteria of ASC 450, Contingencies,
and an accrued liability is recorded if the likelihood of a loss is considered both probable and reasonably
estimable at the date of the consolidated financial statements.
We believe that we have considered relevant circumstances that we may be currently subject to, and
the consolidated financial statements accurately reflect our reasonable estimate of the results of our
operations, financial condition and cash flows for the years presented.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
Market Risk
Substantially all of our revenues are derived from investment management, distribution and service,
and administration and shareholder service fees, which are based on the market value of assets under
management. Accordingly, a decline in the market value of assets under management would cause our
revenues and income to decline.
We are also subject to market risk due to a decline in the market value of our investments, which
consist of marketable securities and our net interests in CIP. The following table summarizes the impact of a
10% increase or decrease in the fair values of these financial instruments:
(in thousands)
Investment securities - fair value (1)
Our net interest in CIP (2)
Total Investments subject to Market Risk
December 31, 2023
Fair Value
10% Change
$
$
97,304
179,588
276,892
$
$
9,730
17,959
27,689
(1)
If a10% increase or decrease in fair values were to occur, it would result in a corresponding increase or
decrease in our pre-tax earnings.
(2) These represent our direct investments in investment products that are consolidated. Upon
consolidation, these direct investments are eliminated, and the assets and liabilities of CIP are
consolidated on the Consolidated Balance Sheet, together with a noncontrolling interest balance
representing the portion of the CIP owned by third parties. If a 10% increase or decrease in the fair
values of our direct investments in CIP were to occur, it would result in a corresponding increase or
decrease in our pre-tax earnings.
Interest Rate Risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates. At December 31, 2023, we were exposed to interest
rate risk as a result of approximately $184.0 million of investments in fixed- and floating-rate income products,
which include our net interests in CIP. We considered a hypothetical 100 basis point change in interest rates
and determined that the fair value of our fixed income investments could change by an estimated $2.5 million.
At December 31, 2023, we had $258.8 million outstanding under our Term Loan. The applicable
margin on amounts outstanding under the Credit Agreement is 2.25%, in the case of SOFR-based loans, and
1.25%, in the case of an alternate base rate loan. Given our borrowings are floating rate, we considered a
hypothetical 100 basis point change in the base rate of our outstanding borrowings and determined that
annual interest expense would change by an estimated $2.6 million, either an increase or decrease, depending
on the direction of the change in the base rate.
39
Item 8.
Financial Statements and Supplementary Data.
The audited consolidated financial statements, including the Report of Independent Registered Public
Accounting Firm required by this item are presented under Item 15 "Exhibits and Financial Statement
Schedules" beginning on page F-1 of this Annual Report on Form 10-K.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that information required to be
disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules
and forms and that such information is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure. Any controls and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control objectives.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer,
evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K. Based
on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023,
the end of the period covered by this Annual Report on Form 10-K.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rule
13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of fiscal 2023 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management's Report on Internal Control over Financial Reporting
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is
responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Rules 13a-15(f) or 15d-15(f) of the Exchange Act. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policy or procedures may deteriorate. Under the supervision and
with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we
have conducted anevalua tion of the effectiveness of our internal control over financial reporting as of
December 31, 2023 based upon the Internal Control-Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management, including our
Chief Executive Officer and Chief Financial Officer, has concluded that our internal control over financial
reporting was effective as of December 31, 2023.
40
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been
audited by Deloitte & Touche LLP, our independent registered public accounting firm, as stated in their report,
which is included inItem 15 "Exhibits and Financial Statement Schedules" of this Annual Report on Form 10-K.
Item 9B.
Other Information.
During the three months ended December 31, 2023, none of the Company's directors or officers (as
defined inRu le 16a-1(f) of the Securities Exchange Act of 1934, as amended), adopted, terminated or modified
a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in
Item 408 of Regulation S-K of the Securities Act of 1933, as amended).
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
41
PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
Information required by this Item 10 is incorporated herein by reference to our definitive proxy
statement for our 2024 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A under the
Exchange Act (the "2024 Proxy Statement").
Item 11.
Executive Compensation.
Information required by this Item 11 is incorporated herein by reference to the 2024 Proxy
Statement.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information required by Item 403 of Regulation S-K is incorporated herein by reference to the 2024
Proxy Statement.
The following table sets forth information as of December 31, 2023 with respect to compensation
plans under which shares of our common stock may be issued:
EQUITY COMPENSATION PLAN INFORMATION
Plan Category
Equity compensation plans approved by security holders (2)
Equity compensation plans not approved by security holders
Total
(a)
(b)
(c)
Number of
securities to be
issued
upon exercise of
outstanding
options,
warrants
and rights
Weighted-average
exercise price of
outstanding
options, warrants
and rights (1)
344,717
$
—
344,717
$
—
—
—
Number of
securities remaining
available for future
issuance
under equity
compensation plans
(excluding securities
reflected
in column (a))
478,216
—
478,216
(1) The weighted-average exercise price set forth in this column is calculated excluding outstanding restricted stock unit
awards ("RSUs") since recipients of such awards are not required to pay an exercise price to receive the shares
subject to these awards.
(2) Represents shares of our common stock issuable upon the vesting of RSUs outstanding under the Company's
Omnibus Incentive and Equity Plan (the "Omnibus Plan"). Of the 3,370,000 maximum number of shares of our
common stock authorized for issuance under the Omnibus Plan, 128,990 shares of common stock have been issued
on a cumulative basis in the form of direct grants to directors.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
Information required by this Item 13 is incorporated herein by reference to the 2024 Proxy
Statement.
42
Item 14.
Principal Accountant Fees and Services.
Information required by this Item 14 is incorporated herein by reference to the 2024 Proxy
Statement.
43
Item 15.
Exhibits and Financial Statement Schedules.
PART IV
(a)(1)
Financial Statements: The following Report of Independent Registered Public
Accounting Firm and Consolidated Financial Statements of Virtus are included in
this Annual Report:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations for the Years Ended December 31, 2023,
2022 and 2021
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 2023, 2022 and 2021
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023,
2022 and 2021
Notes to Consolidated Financial Statements
(a)(2)
Financial Statement Schedules:
All financial statement schedules have been omitted because the required information is either
presented on the consolidated financial statements or the notes thereto or is not applicable or required.
44
(a)(3)
Exhibits:
The following exhibits are filed herewith or incorporated herein by reference:
Exhibit
Number
Exhibit Description
(2)
2.1
(3)
3.1
3.2
3.3
3.4
3.5
3.6
(4)
4.1
(10)
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Membership Interest Purchase Agreement by and among the Registrant, Westchester Capital
Management, LLC, Westchester Capital Partners, LLC, LPC Westchester, LP, MTSWCM
Holdings, LLC, RDBWCM Holdings, LLC, and the Individual Equityholders (as defined therein),
dated February 1, 2021 (incorporated by reference to Exhibit 2.4 of the Registrant’s Annual
Report on Form 10-K, filed February 26, 2021).
Articles of Incorporation and Bylaws
Third Amended and Restated Certificate of Incorporation of the Registrant, dated May 17,
2023 (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K,
filed May 18, 2023).
Amended and Restated Bylaws of the Registrant, as amended on May 17, 2023 (incorporated
by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K, filed May 18,
2023).
Certificate of Designations of Series A Non-Voting Convertible Preferred Stock and Series B
Voting Convertible Preferred Stock of the Registrant, dated October 31, 2008 (incorporated by
reference to Exhibit 4.2 of the Registrant's Amendment No. 2 to Form 10, filed November 14,
2008).
Certificate of Amendment of the Certificate of Designations of Series A Non-Voting
Convertible Preferred Stock and Series B Voting Convertible Preferred Stock of the Registrant
(incorporated by reference to Exhibit 3.1 of the Registrant's Quarterly Report on Form 10-Q,
filed August 13, 2009).
Certificate of Designations of Series CJu nior Participating Preferred Stock of the Registrant,
dated December 29, 2008 (incorporated by reference to Exhibit 3.1 of the Registrant's Current
Report on Form 8-K, filed January 2, 2009).
Certificate of Designations of 7.25% Series D Mandatory Convertible Preferred Stock of the
Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on
Form 8-K, filed February 1, 2017).
Instruments Defining the Rights of Security Holders including Indentures
Description of the Registrant's Common Stock (incorporated by reference to Exhibit 4.1 of the
Registrant's Registration Statement on Form 8-A, filed January 12, 2024).
Material Contracts
Change in Control Agreement between George R. Aylward and the Registrant, effective as of
December 31, 2008 (incorporated by reference to Exhibit 10.4 of the Registrant's Amendment
No. 4 to Form 10, filed December 19, 2008).
Virtus Investment Partners, Inc. Amended and Restated Omnibus Incentive and Equity Plan
(incorporated by reference to Exhibit 10.1 of the Registrant's Form 8-K, filed May 17, 2021).
Virtus Investment Partners, Inc. Non-Qualified Excess Investment Plan, effective as of
November 1, 2008 (incorporated by reference to Exhibit 10.6 of the Registrant's Amendment
No. 2 to Form 10, filed November 14, 2008).
First Amendment to the Virtus Investment Partners, Inc. Non-Qualified Excess Investment
Plan, effective as of February 1, 2010 (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q, filed May 4, 2010).
Amendment Two to the Virtus Investment Partners, Inc. Non-Qualified Excess Investment
Plan, effective as of January 1, 2024.
Virtus Investment Partners, Inc. Amended and Restated Executive Severance Allowance Plan,
effective as of February 2, 2009 (incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K, filed February 4, 2009).
Form of Non-Qualified Stock Option Agreement under the Virtus Investment Partners, Inc.
Omnibus Incentive and Equity Plan (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q, filed May 13, 2009).
45
Exhibit
Number
Exhibit Description
10.8*
10.9*
10.10*
10.11*
10.12*
10.13
10.14
(21)
21.1
(23)
23.1
31.1
31.2
32.1
97.1
101
104
Form of Restricted Stock Unit Grant Agreement under the Virtus Investment Partners, Inc.
Amended and Restated Omnibus Incentive and Equity Plan (incorporated by reference to
Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q filed May 9, 2023).
Form of Performance Share Unit Grant Agreement under the Virtus Investment Partners, Inc.
Amended and Restated Omnibus Incentive and Equity Plan (incorporated by reference to
Exhibit 10.2 of the Registrant's Quarterly Report on Form 10-Q filed May 9, 2023).
Form of Indemnity Agreement (incorporated by reference to Exhibit 10.9 to the Registrant's
Annual Report on Form 10-K, filed February 27, 2023).
Offer Letter from the Registrant to Barry M. Mandinach dated April 4, 2014 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q, filed May 7,
2014).
Offer Letter from the Registrant to Richard W. Smirl dated April 7, 2021 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly Report on Form 10-Q filed May 6,
2021).
Amended and Restated Credit Agreement, dated as of September 28, 2021, by and among
Virtus Investment Partners, Inc. as borrower, Morgan Stanley Senior Funding, Inc. as
administrative agent, and the Lenders party thereto (incorporated by reference to Exhibit 10.1
to the Registrant's Current Report on Form 8-K, filed October 4, 2021).
Amendment No. 1, dated June 20, 2023, to the Amended and Restated Credit Agreement,
dated as of September 28, 2021, by and among Virtus Investment Partners, Inc. as borrower,
Morgan Stanley Senior Funding, Inc. as administrative agent, and the Lenders party thereto
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q
filed August 9, 2023).
Subsidiaries of the Registrant
Virtus Investment Partners, Inc. Subsidiaries List.
Consents of Experts and Counsel
Consent of Independent Registered Public Accounting Firm.
Certifications of Registrant's Chief Executive Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certifications of Registrant's Chief Financial Officer pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certifications of Registrant's Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Incentive Compensation Clawback Policy
The following information is formatted in iXBRL (Inline Extensible Business Reporting
Language): (i) Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022,
(ii) Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and
2021, (iii) Consolidated Statements of Comprehensive Income for the years ended December
31, 2023, 2022 and 2021, (iv) Consolidated Statements of Cash Flows for the years ended
December 31, 2023, 2022 and 2021, (v) Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31, 2023, 2022 and 2021 and (vi) Notes to Consolidated
Financial Statements.
Cover page Interactive Data File (embedded within the Inline XBRL document and included in
Exhibit 101)
* Management contract, compensatory plan or arrangement.
The agreements and other documents filed as exhibits to this report are not intended to provide
factual information or other disclosure other than the terms of the agreements or other documents
themselves, and you should not rely on them for that purpose. In particular, any representations and
warranties made by the Company in these agreements or other documents were made solely within the
specific context of the relevant agreement or document and may not describe the actual state of affairs at the
date they were made or at any other time.
46
Item 16.
Form 10-K Summary.
None.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIGNATURES
Dated: February 28, 2024
Virtus Investment Partners, Inc.
By:
/S/ MICHAEL A. ANGERTHAL
Michael A. Angerthal
Executive Vice President
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities indicated as of February 28, 2024.
/S/ TIMOTHY A. HOLT
Timothy A. Holt
Director and Non-Executive Chairman
/S/ GEORGE R. AYLWARD
George R. Aylward
President, Chief Executive Officer and Director
(Principal Executive Officer)
/S/ SUSAN S. FLEMING
Susan S. Fleming, Ph.D.
Director
/S/ MELODY L. JONES
Melody L. Jones
Director
/S/ STEPHEN T. ZARRILLI
Stephen T. Zarrilli
Director
/S/ PETER L. BAIN
Peter L. Bain
Director
/S/ PAUL G. GREIG
Paul G. Greig
Director
/S/ W. HOWARD MORRIS
W. Howard Morris
Director
/S/ MICHAEL A. ANGERTHAL
Michael A. Angerthal
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
47
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Audited Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022, and 2021
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 2023, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021
Notes to Consolidated Financial Statements
Page
F-2
F-7
F-8
F-9
F-10
F-11
F-13
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Virtus Investment Partners, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Virtus Investment Partners, Inc. and
subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of
operations, comprehensive income, changes in stockholders’ equity, and cash flow, for each of the three years
in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial
statements"). We also have audited the Company’s internal control over financial reporting as of December
31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2023, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2023, based on
criteria established inIn ternal Control —In tegrated Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting
appearing under Item 9A. Our responsibility is to express an opinion on these financial statements and an
opinion on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the financial statements are free
of material misstatement, whether due to error or fraud, and whether effective internal control over financial
reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures to
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits
also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audits provide areasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is aprocess d esigned to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
F-2
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have ama terial effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance with
the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the
financial statements that were communicated or required to be communicated to the audit committee and
that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not
alter in any way our opinion on the financial statements, taken as awh ole, and we are not, by communicating
the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or
disclosures to which they relate.
Valuation of Assets Acquired – Refer to Note 4 to the financial statements
Critical Audit Matter Description
During the year, the Company acquired AlphaSimplex Group, LLC (“ASG”), which was accounted for as a
business combination. Management estimated the fair value of the assets acquired using (1) adisc ounted cash
flow method for the investment management agreements and (2) a royalty savings method for the trade
names. The determination required management to make significant estimates and assumptions related to
future cash flows and the selection of the discount rates and long-term growth rates for these assets.
The inputs used in estimating the fair value are in most cases unobservable and reflect management’s own
judgments about the assumptions market participants would use in pricing the assets. Auditing the valuations
of the assets acquired involved a high degree of judgment and an increased extent of effort, including
involving our internal fair value specialists in evaluating management’s judgments especially as it relates to
management’s assumptions of future cash flows, discount rates, and long-term growth rates.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of assets acquired for ASG included the following, among others:
• We tested the design and operating effectiveness of controls over valuation of the assets acquired
including controls over management’s projections of future cash flows, discount rates, and long-term
growth rates.
• We evaluated the reasonableness of significant business assumptions related to future cash flows by
comparing the projections to historical results and certain peer companies. We also held various
discussions with accounting personnel and management regarding the business assumptions utilized
in the valuation models and obtained audit evidence to substantiate the assumptions therein.
• With the assistance of our internal fair value specialists we evaluated certain valuation assumptions,
including discount rates and long-term growth rates.
– We evaluated the reasonableness of the valuation methodologies used by management to
determine whether they were consistent with generally accepted accounting policies.
F-3
– We evaluated the discount rates used by management to determine whether management's
discount rate estimates were within our independent range.
– We performed an analysis of inflation, economic, and industry growth statistics to determine
whether management's long-term growth rate used in the income approach fell within a
reasonable range of the market data.
– We evaluated the appropriateness of management’s selection of guideline public companies
used in developing the discount rates.
• We evaluated whether the assumptions used were consistent with evidence obtained in other areas
of the audit.
Valuation of Contingent Consideration – Refer to Notes 2 and 7 to the financial statements
Critical Audit Matter Description
The Company periodically enters into contingent payment arrangements in connection with its business
combinations or asset acquisitions.
Contingent payment obligations related to business combinations are recorded at fair value upon acquisition
and are remeasured at fair value each reporting date. During the year, the contingent payment obligations
associated with the 2021 acquisitions of NFJ Investment Group (“NFJ”) and Westchester Capital Management
(“Westchester”) were valued to reflect remeasurement and payments made, if applicable, and changes were
recorded in the current period as a change in fair value of contingent consideration on the consolidated
statement of operations. Management uses simulation models to determine the fair value of the Company's
estimated contingent liability given the variable nature of the arrangements and the significant management
judgments in estimating revenue projections,market rate assumptions, discount rates, and risk volatility
assumptions.
Contingent payment obligations related to asset acquisitions, if estimable and probable of payment, are
initially recorded at their estimated value and reviewed every reporting period for changes. During the year,
the contingent payment obligations associated with the 2021 asset acquisition as part of the strategic
partnership with Allianz Global Investors (“AllianzGI”) was valued to reflect remeasurement and payments
made, if applicable, and changes were recorded in the current period as adjustments to the initial acquisition
cost, recorded as intangible assets, on the consolidated balance sheet.
The valuations of the AllianzGI, NFJ and Westchester contingent payment obligations use unobservable inputs
and reflect management’s own judgments about the assumptions market participants would use in pricing the
liabilities. Auditing the estimates involved a high degree of auditor judgment and an increased extent of effort.
With the assistance of our internal fair value specialists, for the fair value of the business combination
contingent consideration, we evaluated management’s judgments utilized within the simulation model related
to revenue growth rates, discount rates, and market price of risk adjustment.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the valuation of the contingent consideration liability for the AllianzGI, NFJ
and Westchester acquisitions included the following, among others:
• We tested the design and operating effectiveness of controls over management’s valuation of the
contingent consideration liability.
F-4
• We held discussions with accounting personnel and management regarding the revenue projections
•
utilized in the valuation models. We evaluated whether the business assumptions used were
appropriate and reasonable and confirmed that the products included in the revenue projections
utilized in the valuation models agreed to those within the respective acquisition agreements.
For the AllianzGI acquisition, we evaluated the methodology used to calculate the estimated value of
the contingent payment obligations to confirm it was appropriate for an asset acquisition and
confirmed that the amounts recorded were based on the revenue projections and the contractual
payment rate. We further evaluated whether the business assumptions used were appropriate and
reasonable.
• With the assistance of our internal fair value specialists, we performed the below procedures related
to the NFJ and Westchester contingent consideration liability:
– We evaluated the valuation methodology used by management to determine whether they
were consistent with generally accepted accounting policies.
– We estimated the fair value of the contingent liability through the preparation of
independent simulation models developed from the underlying acquisition agreements and
using independently sourced input data. We compared the fair value estimate produced by
our independent model to the model prepared by management.
– We evaluated the appropriateness of management’s selection of guideline public companies
used for market rate and risk volatility assumptions and the discount rates used by
management in the simulation model.
• We evaluated whether the assumptions used were consistent with evidence obtained in other areas
of the audit.
Consolidation —Consolidation o f Investment Products –Re fer to Notes 2 and 20 to the financial statements
Critical Audit Matter Description
The Company is required to consolidate investment products to which it provides investment management
services when it (1) has a majority voting interest in an investment product that is avoti ng interest entity
(VOE) or otherwise has the power to govern the financial and operating policies of the entity; or (2) it is
considered the primary beneficiary of an investment product that is a variable interest entity (VIE).
Management is required to evaluate whether an investment product is aVO E or aVIE u pon its initial
involvement with the investment product, or the occurrence of a reconsideration event. This assessment
involves management’s judgment and is determined based on a variety of factors including the capital
structure of the investment product, the investment product’s activities, the equity investment at risk, and the
proportionate voting and economic interests of the investors in the investment product including the
Company.
For each investment product that is considered a VIE, management performs a primary beneficiary analysis to
determine if it holds a controlling financial interest in the investment product. A controlling financial interest is
defined as (a) the power to direct the activities of aVIE t hat most significantly impact the VIE's economic
performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE
or the right to receive benefits from the VIE that could potentially be significant to the VIE. Management’s
evaluation of these two criteria involves judgments to analyze the governing documents of the investment
product. The level of judgment required may vary in significance based on the complexity of the voting rights
and structure economic interests of the investment product and the facts and circumstances of the Company’s
investment. This required a high degree of auditor judgment and an increased extent of effort to evaluate
management’s conclusions related to the power criterion and the economics criterion, including characterizing
F-5
rights as protective or participating and evaluating all variable interests for the potential significance of
economic exposure in the entity.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to testing the consolidation assessment of VIEs included the following, among
others:
• We tested the design and operating effectiveness of controls over management’s review of the
consolidation analysis of new or modified investment products during the year.
• We read and analyzed the governing documents (including the collateral management agreement,
preference share subscription agreement and credit agreement, if applicable) of each investment
product to assess management’s conclusions. Our procedures included evaluating the following:
–
–
–
–
Key facts included in management’s consolidation analysis are consistent with the governing
documents and the Company’s interests in the investment products;
Relevant terms impacting the consolidation analysis under GAAP were considered including
the evaluation of whether the investment product is aVO E or VIE;
Judgments made by management based on the capital structure of the investment product,
the investment product’s activities, the equity investment at risk, and the proportionate
voting and economic interests of the investors in the investment product including the
Company were appropriate;
The determined primary beneficiary of those investment products possesses both (1) the
power to direct activities of the VIE and (2) the obligation to absorb losses or the right to
receive benefits from the VIE.
/s/ DELOITTE & TOUCHE LLP
Hartford, Connecticut
February 28, 2024
We have served as the Company's auditor since 2018.
F-6
Virtus Investment Partners, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
Assets:
Cash and cash equivalents
Investments
Accounts receivable, net
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP
Cash pledged or on deposit of CIP
Investments of CIP
Other assets of CIP
Furniture, equipment and leasehold improvements, net
Intangible assets, net
Goodwill
Deferred taxes, net
Other assets
Total assets
Liabilities and Equity
Liabilities:
Accrued compensation and benefits
Accounts payable and accrued liabilities
Dividends payable
Contingent consideration
Debt
Other liabilities
Liabilities of CIP
Notes payable of CIP
Securities purchased payable and other liabilities of CIP
Total liabilities
Commitments and Contingencies (Note 12)
Redeemable noncontrolling interests
Equity:
Equity attributable to Virtus Investment Partners, Inc.:
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,163,228 shares issued and 7,087,728 shares
outstanding at December 31, 2023 and 12,033,247 shares issued and 7,181,554 shares outstanding at December 31,
2022
Additional paid-in capital
Retained earnings (accumulated deficit)
Accumulated other comprehensive income (loss)
Treasury stock, at cost, 5,075,500 and 4,851,693 shares at December 31, 2023 and December 31, 2022, respectively
Total equity attributable to Virtus Investment Partners, Inc.
Noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2023
December 31,
2022
$
239,602
$
132,696
109,076
100,732
680
338,234
100,330
99,274
250,301
644
2,082,713
2,190,113
43,235
26,216
432,119
397,098
25,024
89,438
45,445
19,123
442,519
348,836
23,171
94,944
$
3,678,629
$
3,952,934
$
200,837
$
181,805
38,756
17,291
90,938
253,412
91,471
33,200
15,812
128,400
255,025
87,827
1,922,243
90,523
2,705,471
2,083,314
230,897
3,016,280
104,869
113,718
122
1,300,999
207,356
(87)
(644,464)
863,926
4,363
868,289
120
1,286,244
130,261
(358)
(599,248)
817,019
5,917
822,936
$
3,678,629
$
3,952,934
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Virtus Investment Partners, Inc.
Consolidated Statements of Operations
Years Ended December 31,
2023
2022
2021
$
711,475
$
728,339
$
781,585
(in thousands, except per share data)
Revenues
Investment management fees
Distribution and service fees
Administration and shareholder service fees
Other income and fees
Total revenues
Operating Expenses
Employment expenses
Distribution and other asset-based expenses
Other operating expenses
Other operating expenses of consolidated investment products ("CIP")
Change in fair value of contingent consideration
Restructuring expense
Depreciation expense
Amortization expense
Total operating expenses
Operating Income (Loss)
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net
Realized and unrealized gain (loss) of CIP, net
Other income (expense), net
Total other income (expense), net
Interest Income (Expense)
Interest expense
Interest and dividend income
Interest and dividend income of investments of CIP
Interest expense of CIP
Total interest income (expense), net
Income (Loss) Before Income Taxes
Income tax expense (benefit)
Net Income (Loss)
Noncontrolling interests
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.
Earnings (Loss) per Share-Basic
Earnings (Loss) per Share-Diluted
Weighted Average Shares Outstanding-Basic
Weighted Average Shares Outstanding-Diluted
$
$
$
56,153
73,857
3,783
67,518
85,862
4,660
845,268
886,379
404,742
96,802
125,871
4,224
(5,510)
824
5,804
61,027
693,784
151,484
6,525
(2,404)
(440)
3,681
(23,431)
12,458
197,707
(155,335)
31,399
186,564
45,088
141,476
(10,855)
130,621
18.02
17.71
7,249
7,375
$
$
$
371,259
112,612
126,178
4,408
8,020
4,015
3,923
58,504
688,919
197,460
(12,489)
(39,296)
(153)
(51,938)
(13,173)
4,448
107,325
(80,234)
18,366
163,888
57,260
106,628
10,913
117,541
15.90
15.50
7,391
7,582
$
$
$
90,555
102,531
4,563
979,234
358,230
141,039
90,134
3,562
12,400
—
3,900
44,481
653,746
325,488
3,907
(1,761)
4,230
6,376
(9,240)
1,364
90,080
(60,398)
21,806
353,670
90,835
262,835
(54,704)
208,131
27.13
26.01
7,672
8,003
The accompanying notes are an integral part of these consolidated financial statements.
F-8
Virtus Investment Partners, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)
Net Income (Loss)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $(96), $135 and $3 for the years
ended December 31, 2023, 2022 and 2021, respectively
Other comprehensive income (loss)
Comprehensive income (loss)
Comprehensive (income) loss attributable to noncontrolling interests
Years Ended December 31,
2022
2021
2023
$
141,476
$
106,628
$
262,835
271
271
141,747
(10,855)
(378)
(378)
106,250
10,913
(9)
(9)
262,826
(54,704)
Comprehensive income (loss) attributable to Virtus Investment Partners, Inc.
$
130,892
$
117,163
$
208,122
The accompanying notes are an integral part of these consolidated financial statements.
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Years Ended December 31,
2022
2021
2023
$ 141,476
$ 106,628
$
262,835
68,437
26,825
1,609
(1,434)
198
(6,132)
2,327
(5,510)
1,394
—
(16)
6,822
3,863
64,215
24,042
4,342
(2,065)
(187)
13,105
2,244
8,020
(1,960)
3,222
50,769
26,225
3,956
(5,963)
(4,403)
(2,721)
3,710
12,400
(9,664)
—
(9,309)
37,548
(47,379)
(7,952)
(30,057)
72,628
(4,664)
36,054
(4,264)
(1,264,708)
(939,017)
(1,176,936)
1,263,580
820,497
1,454,591
(261)
1,666
1,685
(13)
16,272
6,813
5,870
(856)
5,159
237,157
132,670
665,729
(8,821)
(11,645)
(267)
(6,582)
(5,838)
—
(308)
—
(13,559)
(108,999)
(20,577)
(155,636)
(129,732)
(27,467)
(175,033)
Virtus Investment Partners, Inc.
Consolidated Statements of Cash Flow
(in thousands)
Cash Flows from Operating Activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization
Stock-based compensation
Amortization of deferred commissions
Payments of deferred commissions
Equity in earnings of equity method investments
Realized and unrealized (gains) losses on investments, net
Distributions from equity method investments
Change in fair value of contingent consideration
Deferred taxes, net
Right of use asset
Changes in operating assets and liabilities:
Sales (purchases) of investments, net
Accounts receivable, net and other assets
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities
Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net
Purchases of investments by CIP
Sales of investments by CIP
Net proceeds (purchases) of short-term investments and securities sold short by CIP
Change in other assets and liabilities of CIP
Amortization of discount on notes payable of CIP
Net cash provided by (used in) operating activities
Cash Flows from Investing Activities:
Capital expenditures and other asset purchases
Purchase of equity method investment
Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net
Acquisition of business, net of cash acquired of $4,395 and $8,443 and $1,197 for the years ended
December 31, 2023, 2022 and 2021, respectively
Net cash provided by (used in) investing activities
F-11
(in thousands)
Cash Flows from Financing Activities:
Borrowings and refinancing of credit agreement
Repayments on credit agreement
Payment of deferred financing costs
Payment of contingent consideration
Repurchase of common shares
Common stock dividends paid
Taxes paid related to net share settlement of restricted stock units
Affiliate equity sales (purchases)
Net contributions from (distributions to) noncontrolling interests
Financing activities of CIP
Borrowings by CIP
Payments on borrowings by CIP
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash and cash equivalents
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of year
Supplemental Disclosure of Cash Flow Information
Interest paid
Income taxes paid, net
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Common stock dividends payable
Contingent consideration
Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net
(in thousands)
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents
Cash of consolidated investment products
Cash pledged or on deposit of consolidated investment products
Cash, cash equivalents and restricted cash at end of year
Years Ended December 31,
2022
2021
2023
50,000
—
(52,750)
(12,750)
—
(27,179)
(45,000)
(52,047)
(13,774)
(20,784)
6,080
—
(33,036)
(90,000)
(47,254)
(16,830)
(11,089)
(5,527)
81,155
(12,513)
(7,039)
—
(57,499)
(31,411)
(19,443)
—
(3,270)
269,260
306,296
363,539
(469,919)
(191,867)
(557,919)
(356,113)
(102,057)
(244,400)
523
(248,165)
(112)
3,034
589,179
586,145
—
246,296
339,849
$ 341,014
$ 589,179
$
586,145
$
22,307
$
11,134
$
6,478
31,160
74,313
95,411
13,467
—
11,850
1,200
11,261
150,164
(7,170)
(338)
(30,550)
December 31,
2023
2022
$
239,602
$
338,234
100,732
250,301
680
644
$
341,014
$
589,179
The accompanying notes are an integral part of these consolidated financial statements.
F-12
Virtus Investment Partners, Inc.
Notes to Consolidated Financial Statements
1. Organization and Business
Virtus Investment Partners, Inc. (the "Company," "we," "us," "our" or "Virtus"), a Delaware
corporation, operates in the investment management industry through its subsidiaries.
The Company provides investment management and related services to institutions and individuals.
The Company's investment strategies are offered to institutional clients through institutional separate and
commingled accounts, including structured products. The Company’s retail investment management services
are provided to individuals through products consisting of: mutual funds registered pursuant to the
Investment Company Act of 1940, as amended ("U.S. retail funds"); Undertaking for Collective Investment in
Transferable Securities and Qualifying Investor Funds (collectively, "global funds") and collectively with U.S.
retail funds, variable insurance funds, and exchange-traded funds ("ETFs"), (the "open-end funds"); closed-end
funds (collectively, with open-end funds, the "funds"); and retail separate accounts that include intermediary-
sold and private client accounts. The Company also provides subadvisory services to other investment
advisers.
2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). The consolidated financial statements include
the accounts of the Company, its subsidiaries and investment products that are consolidated. A voting
interest entity ("VOE") is consolidated when the Company is considered to have aco ntrolling financial interest,
which is typically present when the Company owns ama jority of the voting interest in an entity or otherwise
has the power to govern the financial and operating policies of the entity.
The Company evaluates any variable interest entity ("VIE") in which the Company has avariable
interest for consolidation. A VIE is an entity in which either (i) the equity investment at risk is not sufficient to
permit the entity to finance its own activities without additional financial support, or (ii) where as agroup, the
holders of the equity investment at risk do not possess any one of the following: (a) the power through voting
or similar rights to direct the activities that most significantly impact the entity's economic performance, (b)
the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (c)
proportionate voting and economic interests and where substantially all of the entity's activities either involve
or are conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of
these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary. The
primary beneficiary is the entity that has both the power to direct the activities that most significantly impact
the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits
from, the VIE that could potentially be significant to the VIE. See Note 20 for additional information related to
the consolidation of investment products. Intercompany accounts and transactions have been eliminated.
Noncontrolling Interests
Noncontrolling interests - CIP
Noncontrolling interests - CIP represent third-party investments in the Company's CIP and are
classified as redeemable noncontrolling interests on the Consolidated Balance Sheets because investors in
those products are able to request withdrawal at any time.
Noncontrolling interests - affiliate
Noncontrolling interests - affiliate represent minority interests held in a consolidated affiliate.
Minority interests held in the affiliate are subject to holder put rights and Company call rights at established
multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered
F-13
Notes to Consolidated Financial Statements—(Continued)
redeemable at other than fair value. The rights are exercisable at pre-established intervals or upon certain
conditions, such as retirement. The put and call rights are not legally detachable or separately exercisable and
are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing affiliate
equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash
flow associated with any purchased equity. These minority interests in the affiliate are recorded at estimated
redemption value within redeemable noncontrolling interests on the Company's Consolidated Balance Sheets,
and any changes in the estimated redemption value are recorded on the Consolidated Statements of
Operations within noncontrolling interests.
Use of Estimates
The preparation of the consolidated financial statements requires management to make certain
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of
contingent assets and liabilities at the dates of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting periods. Management believes the estimates used in
preparing the consolidated financial statements are reasonable and prudent. Actual results could differ from
those estimates.
Segment Information
Accounting Standards Codification ("ASC") 280, Segment Reporting, establishes disclosure
requirements relating to operating segments in annual and interim financial statements. Operating segments
are defined as components of an enterprise about which separate financial information is available that is
regularly evaluated by the chief operating decision maker in deciding how to allocate resources to the
segment and assess its performance. The Company's Chief Executive Officer is the Company's chief operating
decision maker. The Company operates in one business segment, namely as an asset manager providing
investment management and related services for individual and institutional clients. Although the Company
provides disclosures regarding assets under management and other asset flows by product, the Company's
determination that it operates in one business segment is based on the fact that the same investment
professionals manage both retail and institutional products, operational resources support multiple products,
such products have the same or similar regulatory framework and the Company's chief operating decision
maker reviews the Company's financial performance on a consolidated level. Investment managers within the
Company are generally not aligned with a specific product type.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks and money market fund investments.
Restricted Cash
The Company considers cash and cash equivalents of CIP and cash pledged or on deposit of CIP to be
restricted as it is not available to the Company for its general operations.
Investments
Investment Securities - Fair Value
Investment securities - fair value consist of investments in the Company's sponsored funds and
separately managed accounts and are carried at fair value in accordance with ASC 320, Investments-Debt and
Equity Securities ("ASC 320"), and Topic 321, Investments-Equity Securities ("ASC 321"). These securities are
marked to market based on the respective publicly quoted net asset values of the funds or market prices of
the equity securities or bonds. Transactions in these securities are recorded on a trade date basis. Any
unrealized appreciation or depreciation on investment securities is reported on the Consolidated Statement of
Operations within realized and unrealized gain (loss) on investments.
Equity Method Investments
Equity method investments consist of Company investments in noncontrolled entities, where the
F-14
Notes to Consolidated Financial Statements—(Continued)
Company does not hold a controlling financial interest but has the ability to significantly influence operating
and financial matters. Equity method investments are accounted for in accordance with ASC 323,
Investments-Equity Method and Joint Ventures. Under the equity method of accounting, the Company's share
of the noncontrolled entities' net income or loss is recorded in other income (expense), net on the
Consolidated Statements of Operations. Distributions received reduce the Company's investment. The
investment is evaluated for impairment if events or changes indicate that the carrying amount exceeds its fair
value. If the carrying amount of an investment does exceed its fair value and the decline in fair value is
deemed to be other-than-temporary, an impairment charge will be recorded.
Non-qualified Retirement Plan Assets and Liabilities
The Company has anon-qualified r etirement plan (the "Excess Incentive Plan") that allows certain
employees to voluntarily defer compensation. Assets held in trust, which are considered investment
securities, are included ininvest ments at fair value in accordance with ASC 820, Fair Value Measurement ("ASC
820"); the associated obligations to participants, which approximate the fair value of the associated assets, are
included in other liabilities on the Consolidated Balance Sheets. (See Note 6 for additional information related
to the Excess Incentive Plan.)
Furniture, Equipment and Leasehold Improvements, Net
Furniture, equipment and leasehold improvements are recorded at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of three to seven years for furniture and office
equipment and three years for computer equipment and software. Leasehold improvements are depreciated
over the shorter of the remaining estimated lives of the related leases or useful lives of the improvements.
Major renewals or betterments are capitalized, and recurring repairs and maintenance are expensed as
incurred.
Leases
The Company leases office space and equipment under various leasing arrangements. In accordance
with ASC 842, Leases, the Company's leases are evaluated and classified as either financing leases or operating
leases, as appropriate. The Company recognizes a lease liability and a corresponding right of use ("ROU")
asset on the commencement date of any lease arrangement. The lease liability is initially measured at the
present value of the future lease payments over the lease term using the rate implicit in the arrangement or, if
not readily determinable, the Company's incremental borrowing rate. The Company determines its
incremental borrowing rate through market sources, including relevant industry rates. A ROU asset is
measured initially as the value of the lease liability plus initial direct costs and prepaid lease payments, and
less lease incentives received. Lease expense is recognized on a straight-line basis over the lease term and is
recorded within other operating expenses on the Consolidated Statement of Operations.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price of business combinations over the identified
assets and liabilities acquired. In accordance with ASC 350, Goodwill and Other Intangible Assets, goodwill is
not amortized. The Company has a single reporting unit for the purpose of assessing potential impairments of
goodwill. An impairment analysis of goodwill is performed annually or more frequently, if warranted by
events or changes in circumstances affecting the Company's business. The Company follows Accounting
Standards Update ("ASU") 2011-08, Testing Goodwill for Impairment, which provides the option to first assess
qualitative factors to determine whether the existence of events or circumstances leads to a determination
that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after
assessing the totality of events or circumstances, it is determined that it is not more likely than not that the
fair value of areport ing unit is less than its carrying amount, then performing the two-step impairment test is
unnecessary. The Company's 2023 and 2022 annual goodwill impairment analysis did not result in any
impairment charges.
F-15
Notes to Consolidated Financial Statements—(Continued)
Definite-lived intangible assets are comprised of certain investment management agreements, trade
names, non-competition agreements and software. These assets are amortized on a straight-line basis over
the estimated useful lives of such assets, which range from 4to 16 years. Definite-lived intangible assets are
evaluated for impairment on an ongoing basis whenever events or circumstances indicate that the carrying
value of the definite-lived intangible asset may not be recoverable. The Company determines if impairment
has occurred by comparing estimates of future undiscounted cash flows to the carrying value of assets. Assets
are considered impaired, and an impairment is recorded, if the carrying value exceeds the expected future
undiscounted cash flows.
Indefinite-lived intangible assets are comprised of certain trade names and fund investment
management agreements. These assets are tested for impairment annually or when events or changes in
circumstances indicate the assets might be impaired. The Company follows ASU 2012-02, Testing Indefinite-
Lived Intangible Assets for Impairment, which provides the option to perform a qualitative assessment of
indefinite-lived intangible assets other than goodwill for impairment to determine if additional impairment
testing is necessary. The Company's 2023 and 2022 annual indefinite-lived intangible assets impairment
analysis did not result in any impairment charges.
Contingent Consideration
The Company periodically enters into contingent payment arrangements in connection with its
business combinations or asset purchases. In contingent payment arrangements, the Company agrees to pay
additional transaction consideration to the seller based on future performance. The Company estimates the
value of estimated future payments of these potential future obligations at the time a business combination or
asset purchase is consummated. Liabilities under contingent payment arrangements are recorded within
contingent consideration on the Consolidated Balance Sheets.
Contingent payment obligations related to business combinations are remeasured at fair value each
reporting date using a simulation model with the assistance of an independent valuation firm and approved by
management (level 3 fair value measurement). The change in fair value is recorded in the current period as a
gain or loss. Gains and losses resulting from changes in the fair value of contingent payment obligations are
reflected within change in fair value of contingent consideration on the Consolidated Statements of
Operations.
Contingent payment obligations related to our asset purchases, if estimable and probable of
payment, are initially recorded at their estimated value and reviewed every reporting period for changes. Any
changes to the estimated value are recorded as an update of the initial acquisition cost of the asset with a
corresponding change to the estimated contingent payment obligation on the Consolidated Balance Sheets.
Treasury Stock
Treasury stock is accounted for under the cost method and is included as adeduc tion from equity on
the Stockholders' Equity section of the Consolidated Balance Sheets. Upon any subsequent resale, the
treasury stock account is reduced by the cost of such stock.
Revenue Recognition
The Company's revenues are recognized when a performance obligation is satisfied, which occurs
when control of the services is transferred to customers. Investment management fees, distribution and
service fees, and administration and shareholder service fees are generally calculated as a percentage of
average net assets of the investment portfolios managed. The net asset values from which these fees are
calculated are variable in nature and subject to factors outside of the Company's control, such as additional
investments, withdrawals and market performance. Because of this, these fees are considered constrained
until the end of the contractual measurement period (monthly or quarterly), which is when asset values are
generally determinable.
F-16
Notes to Consolidated Financial Statements—(Continued)
Investment Management Fees
The Company provides investment management services pursuant to investment management
agreements through its investment advisers (each an "Adviser"). Investment management services represent
a series of distinct daily services that are performed over time. Fees earned on funds are based on each fund's
average daily or weekly net assets and are generally calculated and received on a monthly basis. For funds
managed by unaffiliated subadvisors, the Company records fees net of the subadvisory fees, as the Company
is deemed to be the agent as it relates to the services performed by unaffiliated subadvisers, with the
Company's performance obligation being to arrange for the provision of that service and not control the
specified service before it is performed. Amounts paid to unaffiliated subadvisers for the years ended
December 31, 2023, 2022 and 2021 were $54.7 million, $77.0 million and $115.5 million, respectively.
Retail separate account fees are generally earned based on the end of the preceding or current
quarter's asset values. Institutional account fees are generally earned based on an average of daily or month-
end balances or the current quarter's asset values. Fees for structured finance products are generally earned
at a contractual fee rate applied against the end of the preceding quarter par value of the total collateral being
managed.
Distribution and Service Fees
Distribution and service fees are sales- and asset-based fees earned from open-end funds for
marketing and distribution services. Depending on the fund type or share class, these fees primarily consist of
an asset-based fee that is paid by the fund over a period of years to cover allowable sales and marketing
expenses, or front-end sales charges that are based on a percentage of the offering price. Asset-based
distribution and service fees are primarily earned as percentages of the average daily net assets value and are
paid monthly pursuant to the terms of the respective distribution and service fee contracts.
Distribution and service fees represent two performance obligations comprised of distribution and
related shareholder servicing activities. Distribution services are generally satisfied upon the sale of a fund
share. Shareholder servicing activities are generally services satisfied over time.
The Company distributes its open-end funds through unaffiliated financial intermediaries that
comprise national, regional and independent broker-dealers. These unaffiliated financial intermediaries
provide distribution and shareholder service activities on behalf of the Company. The Company passes related
distribution and service fees to these unaffiliated financial intermediaries for these services and considers
itself the principal in these arrangements since it has control of the services prior to the services being
transferred to the customer. These payments are classified within distribution and other asset-based
expenses.
Administration and Shareholder Service Fees
The Company provides administrative fund services to its U.S. retail funds, and certain of its closed-
end funds and shareholder services to its open-end funds. Administration and shareholder services are
performed over time. The Company earns fees for these services, which are calculated and paid monthly,
based on each fund's average daily or weekly net assets. Administrative fund services include: record keeping,
preparing and filing documents required to comply with securities laws, legal administration and compliance
services, customer service, supervision of the activities of the funds' service providers, tax services and
treasury services. The Company also provides office space, equipment and personnel that may be necessary
for managing and administering the business affairs of the funds. Shareholder services include maintaining
shareholder accounts, processing shareholder transactions, preparing filings and performing necessary
reporting.
F-17
Notes to Consolidated Financial Statements—(Continued)
Other Income and Fees
Other income and fees primarily represent fees related to other fee earning assets and contingent
sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.
Stock-based Compensation
The Company accounts for stock-based compensation expense in accordance with ASC 718,
Compensation—Stock Compensation ("ASC 718"), which requires the measurement and recognition of
compensation expense for share-based awards based on the estimated fair value on the date of grant.
Restricted stock units ("RSUs") are stock awards that entitle the holder to receive shares of the
Company's common stock as the award vests over time or when certain performance metrics are achieved.
The fair value of each RSU award is based on the fair market value price on the date of grant unless it contains
a performance metric that is considered a "market condition." Compensation expense for RSU awards is
recognized ratably over the vesting period on a straight-line basis. The value of RSUs that contain a
performance metric ("PSUs") is determined based on (i) the fair market value price on the date of grant, for
awards that contain a performance metric that represents a"p erformance condition" in accordance with ASC
718 or (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition"
performance metric under ASC 718. Compensation expense for PSU awards with a performance condition is
recorded each period based upon a probability assessment of the expected outcome of the performance
metric with a final adjustment upon measurement at the end of the performance period. Compensation
expense for PSU awards that contain a market condition is fixed at the date of grant and is not adjusted in
future periods based upon the achievement of the market condition.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Income Taxes ("ASC 740"),
which requires recognition of the amount of taxes payable or refundable for the current year as well as
deferred tax assets and liabilities for temporary differences between the tax basis of assets and liabilities and
the reported amounts on the Consolidated Financial Statements.
The Company's methodology for determining the realizability of deferred tax assets includes
consideration of taxable income in prior carryback year(s), if carryback is permitted under the tax law, as well
as consideration of the reversal of deferred tax liabilities that are in the same period and jurisdiction and are
of the same character as the temporary differences that gave rise to the deferred tax assets. The Company's
methodology also includes estimates of future taxable income from its operations as well as the expiration
dates and amounts of carry-forwards related to net operating losses and capital losses. These estimates are
projected through the life of the related deferred tax assets based on assumptions that the Company believes
to be reasonable and consistent with demonstrated operating results. Unanticipated changes in future
operating results may have asi gnificant impact on the realization of deferred tax assets. Valuation allowances
are provided when it is determined that it is more likely than not that the benefit of deferred tax assets will
not be realized.
Comprehensive Income
The Company reports all changes in comprehensive income on the Consolidated Statements of
Changes in Stockholders' Equity and the Consolidated Statements of Comprehensive Income. Comprehensive
income includes net income (loss) and foreign currency translation adjustments (net of tax).
Earnings (Loss) per Share
Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share. Basic
EPS is computed by dividing net income (loss) attributable to Virtus Investment Partners, Inc. by the weighted-
average number of common shares outstanding for the period, excluding dilution for potential common stock
issuances. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
F-18
Notes to Consolidated Financial Statements—(Continued)
common stock were exercised or converted into common stock, including shares issuable upon the vesting of
RSUs and stock option exercises using the treasury stock method, as determined under the if-converted
method.
Fair Value Measurements and Fair Value of Financial Instruments
ASC 820, Fair Value Measurement, establishes afr amework for measuring fair value and a valuation
hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. The Financial
Accounting Standards Board (the "FASB") defines fair value as the price that would be received to sell an asset,
or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.
Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The valuation hierarchy contains three levels as follows:
Level 1—Unadjusted quoted prices for identical instruments in active markets. Level 1asse ts and
liabilities may include debt securities and equity securities that are traded in an active exchange market.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar
instruments in markets that are not active; and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets. Level 2input s may include observable market data
such as closing market prices provided by independent pricing services after considering factors such as the
yields or prices of comparable investments of comparable quality, coupon, maturity, call rights and other
potential prepayments, terms and type, reported transactions, indications as to values from dealers and
general market conditions. In addition, pricing services may determine the fair value of equity securities
traded principally in foreign markets when it has been determined that there has been a significant trend in
the U.S. equity markets or in index futures trading. Level 2asse ts and liabilities may include debt and equity
securities, purchased loans and over-the-counter derivative contracts whose fair value is determined using a
pricing model without significant unobservable market data inputs.
Level 3—Valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable in active exchange markets.
Recent Accounting Pronouncements
New Accounting Standards Not Yet Implemented
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280). This standard
updates reportable segment disclosure requirements, clarifies circumstances in which an entity can disclose
multiple segment measures of profit or loss and provides new segment disclosure requirements for entities
with a single reportable segment. This standard is effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2023 and interim periods within fiscal years beginning after
December 15, 2024. Early adoption is permitted, with the amendments to be applied retrospectively to all
prior periods presented in the financial statements. The Company is in the process of evaluating the impact of
adopting this standard and, at this time, does not anticipate it will have a material impact on its consolidated
financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740). This standard updates
income tax disclosure requirements by requiring disaggregated information about a reporting entity's effective
tax rate reconciliation as well as information on income taxes paid. This standard is effective for fiscal years
beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of evaluating
the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its
consolidated financial statements.
F-19
Notes to Consolidated Financial Statements—(Continued)
3. Revenues
Investment Management Fees by Source
The following table summarizes investment management fees by source:
Years Ended December 31,
2023
2022
2021
$
$
305,238
$
335,585
$
58,136
171,357
176,744
63,841
171,509
157,404
711,475
$
728,339
$
395,152
63,301
174,919
148,213
781,585
(in thousands)
Investment management fees
Open-end funds
Closed-end funds
Retail separate accounts
Institutional accounts
Total investment management fees
4. Acquisitions
AlphaSimplex Group, LLC
On April 1, 2023, the Company completed the acquisition of AlphaSimplex Group, LLC
("AlphaSimplex"), which was accounted for in accordance with ASC 805, Business Combinations ("ASC 805").
The total purchase price paid of $113.4 million was allocated to the assets acquired and liabilities assumed
based upon their estimated fair values at the date of the acquisition. Goodwill of $48.3 million and intangible
assets of $55.4 million were recorded for the acquisition. The Company expects $103.7 million of the
purchase price, related to goodwill and intangibles, to be tax deductible over 15 years. The revenues and
operating income of AlphaSimplex were not material to the Company's results of operations for the year
ended December 31, 2023.
The following table summarizes the identified acquired assets and liabilities assumed as of the
AlphaSimplex acquisition date:
Assets:
Cash and cash equivalents
Investments
Accounts receivable
Furniture, equipment and leasehold improvements
Intangible assets
Goodwill
Other assets
Total Assets
Liabilities:
Accounts payable and accrued liabilities
Total Liabilities
Total Net Assets Acquired
$
$
April 1, 2023
(in thousands)
4,395
8,567
5,422
4,161
55,400
48,262
9,126
135,333
21,939
21,939
113,394
F-20
Notes to Consolidated Financial Statements—(Continued)
Identifiable Intangible Assets Acquired
In connection with the allocation of the AlphaSimplex purchase price, the Company identified the
following intangible assets:
Definite-lived intangible assets:
Investment management agreements
Trade names
Total definite-lived intangible assets
April 1, 2023
Approximate Fair
Value
(in thousands)
Weighted Average of
Useful Life
(in years)
$
$
52,000
3,400
55,400
10.5
9.0
The fair value of investment management agreements was estimated using amu lti-period excess
earnings method and the fair value of the trade names was estimated using arelie f-from-royalty method, each
of which was prepared with the assistance of an independent valuation firm.
Stone Harbor Investment Partners
On January 1, 2022, the Company acquired Stone Harbor Investment Partners, LLC ("Stone Harbor"),
which was accounted for in accordance with ASC 805. The total purchase price of $30.1 million was allocated
to the assets acquired and liabilities assumed, based upon their estimated fair values at the date of the
acquisition, as well as goodwill of $10.3 million and definite-lived intangible assets of $10.8 million.
5. Goodwill and Other Intangible Assets
Activity in goodwill was as follows:
(in thousands)
Balance, beginning of period
Acquisitions
Balance, end of period
Years Ended December 31,
2023
2022
$
$
348,836
48,262
397,098
$
$
338,406
10,430
348,836
Below is asu mmary of intangible assets, net:
(in thousands)
Balances of December 31, 2021
Additions
Adjustments
Intangible amortization
Balances of December 31, 2022
Additions
Adjustments
Intangible amortization
Balances of December 31, 2023
Definite-Lived
Accumulated
Amortization
$
(297,303) $
—
—
(58,504)
(355,807)
—
—
(61,027)
Indefinite-
Lived
Net Book
Value
42,298
—
—
—
42,298
—
—
—
$
Net Book
Value
458,273
10,800
(10,348)
(58,504)
400,221
55,400
(4,773)
(61,027)
$
Total
Net Book
Value
500,571
10,800
(10,348)
(58,504)
442,519
55,400
(4,773)
(61,027)
$
Gross Book
Value
755,576
10,800
(10,348)
—
756,028
55,400
(4,773)
—
$
806,655
$
(416,834) $
389,821
$
42,298
$
432,119
F-21
Notes to Consolidated Financial Statements—(Continued)
Definite-lived intangible asset amortization for the next five and succeeding fiscal years is estimated
as follows:
Fiscal Year
2024
2025
2026
2027
2028
2029 and thereafter
Total
Amount
(in thousands)
56,299
51,532
50,552
47,450
41,787
142,201
389,821
$
$
At December 31, 2023, the weighted average estimated remaining amortization period for definite-
lived intangible assets was 8.2 years.
6. Investments
Investments consist primarily of investments in the Company's sponsored products. The Company's
investments, excluding the assets of CIP discussed in Note 20, at December 31, 2023 and 2022, were as
follows:
(in thousands)
Investment securities - fair value
Equity method investments (1)
Nonqualified retirement plan assets
Other investments
Total investments
December 31,
2023
2022
$
97,304
$
22,710
12,682
—
76,999
11,448
10,154
1,729
$
132,696 $
100,330
(1) The Company's equity method investments are valued on a three-month lag
based upon the availability of financial information. On January 1, 2023, the
Company made an additional investment in an existing minority interest in an
affiliated manager for $11.6 million including transaction costs.
Investment Securities - Fair Value
Investment securities - fair value consist of investments in the Company's sponsored funds and
separately managed accounts. The composition of the Company's investment securities - fair value was as
follows:
(in thousands)
Investment Securities - fair value:
Sponsored funds
Equity securities
Total investment securities - fair value
December 31, 2023
December 31, 2022
Cost
Fair
Value
Cost
Fair
Value
$
$
80,794
16,353
97,147
$
$
77,433 $
67,472 $
19,871
13,440
97,304 $
80,912 $
62,744
14,255
76,999
F-22
Notes to Consolidated Financial Statements—(Continued)
For the years ended December 31, 2023, 2022 and 2021, the Company recognized a net realized gain
of $2.1 million, a net realized loss of $1.4 million, and a net realized gain of $5.0 million, respectively, related
to its investment securities -fair value.
Equity Method Investments
The Company's equity method investments primarily consist of ami nority investment in an affiliated
manager and an investment in a limited partnership. For the years ended December 31, 2023, 2022 and 2021,
distributions from equity method investments were $2.3 million, $2.2 million and $3.7 million, respectively.
The remaining capital commitment for one of the Company's equity method investments at December 31,
2023 was $0.2 million.
Nonqualified Retirement Plan Assets
The Company's Excess Incentive Plan allows certain employees to voluntarily defer compensation. The
Company holds the Excess Incentive Plan assets in a rabbi trust, which is subject to the claims of the
Company's creditors in the event of the Company's bankruptcy or insolvency. Each participant is responsible
for designating investment options for their contributions, and the ultimate distribution paid to each
participant reflects any gains or losses on the assets realized while in the trust. Assets held in trust are
included in investments and are carried at fair value utilizing Level 1 valuation techniques in accordance with
ASC 320, Investments -De bt Securities; the associated obligations to participants are included in other
liabilities on the Consolidated Balance Sheets.
Other Investments
Other investments represent interests in entities not accounted for under the equity method such as
those accounted for under the cost method.
7. Fair Value Measurements
The Company's assets and liabilities measured at fair value on a recurring basis, excluding the assets
and liabilities of CIP discussed in Note 20, as of December 31, 2023 and 2022 by fair value hierarchy level were
as follows:
December 31, 2023
(in thousands)
Assets
Cash equivalents
Level 1
Level 2
Level 3
Total
$
197,240 $
— $
— $
197,240
Investment securities - fair value
Sponsored funds
Equity securities
Nonqualified retirement plan assets
Total assets measured at fair value
Liabilities
Contingent consideration
Total liabilities measured at fair value
$
$
$
77,433
19,871
12,682
307,226
—
—
—
— $
—
—
—
— $
77,433
19,871
12,682
307,226
— $
— $
— $
— $
56,200
56,200
$
$
56,200
56,200
F-23
Notes to Consolidated Financial Statements—(Continued)
December 31, 2022
(in thousands)
Assets
Cash equivalents
Level 1
Level 2
Level 3
Total
$
287,126 $
— $
— $
287,126
Investment securities - fair value
Sponsored funds
Equity securities
Nonqualified retirement plan assets
Total assets measured at fair value
Liabilities
Contingent consideration
Total liabilities measured at fair value
$
$
$
62,744
14,255
10,154
—
—
—
—
—
—
62,744
14,255
10,154
374,279 $
— $
— $
374,279
— $
— $
— $
— $
78,100
78,100
$
$
78,100
78,100
The following is a discussion of the valuation methodologies used for the Company's assets and
liabilities measured at fair value.
Cash equivalents represent investments in money market funds. Cash investments in money market
funds are valued using published net asset values and are classified as Level 1.
Sponsored funds represent investments in open-end funds, closed-end funds and ETFs for which the
Company acts as the investment manager. The fair value of open-end funds is determined based on their
published net asset values and are categorized as Level 1. The fair value of closed-end funds and ETFs is
determined based on the official closing price on the exchange on which they are traded and are categorized
as Level 1.
Equity securities represent securities traded on active markets, are valued at the official closing price
(typically the last sale or bid) on the exchange on which the securities are primarily traded and are categorized
as Level 1.
Nonqualified retirement plan assets represent mutual funds within the Company's nonqualified
retirement plan whose fair value is determined based on their published net asset value and are categorized
as Level 1.
Contingent consideration represents liabilities associated with the Company's business combinations
with NFJ Investment Group ("NFJ") and Westchester Capital Management ("WCM"). The continent
consideration related to the WCM transaction as of December 31, 2023 was $11.1 million and represents the
fair value of future potential earn-out payments based on pre-established performance metrics related to
revenue growth rates. The estimated fair value of the WCM liability is measured using an options pricing
model valuation technique utilizing unobservable market data inputs prepared with the assistance of an
independent valuation firm. The most significant unobservable inputs used relate to the aforementioned
revenue growth rates, discount rate (range of 6%-7%) and the market price of risk adjustment (9%). The NFJ
contingent consideration liability as of December 31, 2023 was $45.1 million and represents the fair value of
the projected future revenue participation payments. The NFJ revenue participation payments consist of
variable payments based on a percentage of the investment management fees earned on certain NFJ managed
open-end, closed-end and retail separate account assets. The estimated fair value of the NFJ liability is
measured using an options pricing model valuation technique utilizing unobservable market data inputs
prepared with the assistance of an independent valuation firm. The most significant unobservable inputs used
F-24
Notes to Consolidated Financial Statements—(Continued)
relate to the revenue growth rates, discount rates (range of 6% - 7%) and the market price of risk adjustment
(7%). These liabilities are categorized as Level 3.
The following table presents areco nciliation of beginning and ending balances of the Company's
contingent consideration liabilities:
(in thousands)
Contingent consideration, beginning of year
Additions for acquisitions
Reduction for payments made
Increase (reduction) of liability related to re-measurement of fair value
Contingent consideration, end of year
2023
2022
$
78,100
$
—
(16,390)
(5,510)
$
56,200
$
88,400
1,200
(19,520)
8,020
78,100
Cash, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value
based on the short-term nature of these instruments.
8. Furniture, Equipment and Leasehold Improvements, Net
Furniture, equipment and leasehold improvements, net were as follows:
(in thousands)
Leasehold improvements
Furniture and office equipment
Computer equipment and software
Subtotal
Accumulated depreciation and amortization
December 31,
2023
2022
$
26,710
$
15,459
6,671
48,840
(22,624)
22,657
12,389
5,764
40,810
(21,687)
19,123
Furniture, equipment and leasehold improvements, net
$
26,216
$
9. Leases
All of the Company's leases qualify as operating leases and consist primarily of leases for office
facilities, which have remaining initial lease terms ranging from 0.7 to 9.8 years and a weighted average
remaining lease term of 5.7 years. The Company has options to renew certain of its leases for periods ranging
from 3.0 to 10.0 years, depending on the lease. None of the Company's renewal options were considered
reasonably assured of being exercised and, therefore, were excluded from the initial lease term used to
determine the Company's right-of-use asset and lease liability. The Company's right-of-use asset, recorded in
other assets, and lease liability, recorded in other liabilities on the Consolidated Balance Sheets, at December
31, 2023 were $63.2 million and $78.1 million, respectively. The weighted average discount rate used to
measure the Company's lease liability was 3.7% at December 31, 2023.
Lease expense totaled $14.7 million, $14.0 million and $5.6 million for fiscal years 2023, 2022 and
2021, respectively. Cash payments relating to operating leases during 2023 were $16.4 million.
F-25
Notes to Consolidated Financial Statements—(Continued)
Lease liability maturities as of December 31, 2023 were as follows:
Fiscal Year
Amount
(in thousands)
$
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: Imputed interest
Present value of lease liabilities
$
17,168
16,758
14,909
14,216
12,033
12,984
88,068
9,926
78,142
10. Income Taxes
The components of the provision for income taxes were as follows:
(in thousands)
Current
Federal
State
$
Total current tax expense (benefit)
Deferred
Federal
State
Total deferred tax expense (benefit)
Total expense (benefit) for income taxes
$
Years Ended December 31,
2023
2022
2021
33,523
10,171
43,694
789
605
1,394
45,088
$
$
40,113
19,107
59,220
(1,506)
(454)
(1,960)
57,260
$
$
75,525
24,974
100,499
(6,241)
(3,423)
(9,664)
90,835
The following presents a reconciliation of the provision (benefit) for income taxes computed at the
federal statutory rate to the provision (benefit) for income taxes recognized on the Consolidated Statements
of Operations for the years indicated:
(in thousands)
Tax at statutory rate
State taxes, net of federal benefit
Excess tax benefits related to share-based
compensation
Nondeductible compensation
Effect of net (income) loss attributable to
noncontrolling interests
Change in valuation allowance
Other, net
Years Ended December 31,
2023
2022
2021
$
39,178
9,240
21 % $
5 %
34,416
14,736
21 % $
9 %
74,271
17,283
(1,767)
2,106
(2,299)
(1,547)
177
(1)%
1 %
(1)%
(1)%
— %
(2,792)
2,356
(1,435)
9,596
383
(1)%
1 %
(1)%
6 %
— %
(4,095)
3,461
(2,637)
1,941
611
Income tax expense (benefit)
$
45,088
24 % $
57,260
35 % $
90,835
21 %
5 %
(1)%
1 %
(1)%
1 %
— %
26 %
F-26
Notes to Consolidated Financial Statements—(Continued)
The provision for income taxes reflects U.S. federal, state and local taxes at an effective tax rate of
24%, 35% and 26% for the years ended December 31, 2023, 2022 and 2021, respectively. The Company's tax
position for the years ended December 31, 2023, 2022 and 2021 was impacted by changes in the valuation
allowance related to the unrealized and realized gains and losses on the Company's investments.
Deferred taxes resulted from temporary differences between the amounts reported on the
consolidated financial statements and the tax basis of assets and liabilities. The tax effects of temporary
differences were as follows:
(in thousands)
Deferred tax assets:
Intangible assets
Net operating losses
Compensation accruals
Lease liability
Investments
Capital losses
Other
Gross deferred tax assets
Valuation allowance
Gross deferred tax assets after valuation allowance
Deferred tax liabilities:
Intangible assets
Right of use asset
Fixed assets
Other investments
Gross deferred tax liabilities
Deferred tax assets, net
December 31,
2023
2022
$
19,206
$
10,754
19,614
19,009
11,643
6,139
2,188
88,553
(16,539)
72,014
(26,746)
(15,677)
(4,197)
(370)
(46,990)
$
25,024
$
17,773
11,881
16,813
10,026
18,283
2,197
94
77,067
(19,480)
57,587
(24,163)
(7,672)
(1,869)
(712)
(34,416)
23,171
At each reporting date, the Company evaluates the positive and negative evidence used to determine
the likelihood of realization of its deferred tax assets. The Company maintained a valuation allowance in the
amount of $16.5 million and $19.5 million at December 31, 2023 and 2022, respectively, relating to deferred
tax assets on items of aca pital nature as well as certain state deferred tax assets.
As of December 31, 2023, the Company had net operating loss carry-forwards for federal income tax
purposes represented by a $6.1 million deferred tax asset. The related federal net operating loss carry-
forwards are scheduled to begin to expire in the year 2031. As of December 31, 2023, the Company had state
net operating loss carry-forwards, varying by subsidiary and jurisdiction, represented by a$4.6 m illion
deferred tax asset. Certain state net operating loss carry-forwards are scheduled to begin to expire in 2024.
Internal Revenue Code Section 382 ("Section 382") limits tax deductions for net operating losses,
capital losses and net unrealized built-in losses after there is asu bstantial change in ownership in a
corporation's stock involving a50-p ercentage point increase in ownership by 5% or larger stockholders. At
December 31, 2023, the Company had pre-change losses represented by deferred tax assets totaling $7.0
million that are subject to Section 382 limits. The utilization of these assets is subject to an annual limitation
of $1.1 million.
F-27
Notes to Consolidated Financial Statements—(Continued)
Activity in unrecognized tax benefits were as follows:
(in thousands)
Balance, beginning of year
Decrease related to tax positions taken in prior years
Increase related to positions taken in the current year
Balance, end of year
Years Ended December 31,
2023
2022
2021
$
$
856
$
(214)
214
856
$
1,235
$
(593)
214
856
$
1,021
—
214
1,235
If recognized, $0.7 million of the $0.9 million gross unrecognized tax benefit balance at December 31,
2023 would favorably impact the Company's effective income tax rate. The Company does not expect any
significant changes to its liability for unrecognized tax benefits during the next 12 months.
The Company recognizes interest and penalties related to income tax matters within income tax
expense. The Company recorded no interest or penalties related to unrecognized tax benefits at December
31, 2023, 2022 and 2021.
The earliest federal tax year that remains open for examination is 2020. The earliest open years in
the Company's major state tax jurisdictions are 2010 for Connecticut and 2020 for all of the Company's
remaining state tax jurisdictions.
11. Debt
Credit Agreement
The Company's credit agreement (the "Credit Agreement"), most recently amended on June 20, 2023
to change the base interest rate from LIBOR to SOFR, comprises (i) a$275.0 m illion term loan with a seven-
year term (the "Term Loan") expiring in September 2028, and (ii) a$175.0 m illion revolving credit facility with
a five-year term expiring in September 2026. On April 3, 2023, the Company borrowed $50.0 million under
the revolving credit facility to partially finance its acquisition of AlphaSimplex (see Note 4fo r further
information) and repaid the entire $50.0 million prior to December 31, 2023. In addition, the Company repaid
$2.8 million outstanding under the Term Loan in 2023 and had $258.8 million outstanding at December 31,
2023 under the Term Loan. In accordance with ASC 835, Interest, the amounts outstanding under the
Company's Term Loan are presented on the Consolidated Balance Sheet net of related debt issuance costs,
which were $5.4 million as of December 31, 2023.
Amounts outstanding under the Credit Agreement bear interest at an annual rate equal to, at the
option of the Company, either SOFR (adjusted for reserves) for interest periods of one, three or six months (or,
solely in the case of the revolving credit facility, if agreed to by each relevant Lender, 12 months) or an
alternate base rate, in either case plus an applicable margin. The applicable margins are 2.25%, in the case of
SOFR-based loans, and 1.25%, in the case of alternate base rate loans. Interest is payable quarterly in arrears
with respect to alternate base rate loans and on the last day of each interest period with respect to SOFR-
based loans (but, in the case of any SOFR-based loan with an interest period of more than three months, at
three-month intervals). The Credit Agreement contains SOFR and other subsequent benchmark successor
provisions.
The terms of the Credit Agreement require the Company to pay aquart erly commitment fee on the
average unused amount of the revolving credit facility. The fee is initially set at 0.50% and following the first
delivery of certain financial reports, will range from 0.375% to 0.50%, based on the secured net leverage ratio
of the Company as of the last day of the preceding fiscal quarter, as reflected in such financial reports.
F-28
Notes to Consolidated Financial Statements—(Continued)
The Term Loan amortizes at the rate of 1.00% per annum payable in equal quarterly installments on
the last day of each calendar quarter, commencing on December 31, 2021. In addition, the Credit Agreement
requires that the Term Loan be mandatorily prepaid with (i) 50% of the Company’s excess cash flow on an
annual basis, stepping down to 25% if the Company’s secured net leverage ratio declines to 2:1 or below and
stepping down to 0% if the Company’s secured net leverage ratio declines below 1.5:1; (ii) 50% of the net
proceeds of certain asset sales, casualty or condemnation events, subject to customary reinvestment rights;
and (iii) 100% of the proceeds of any indebtedness incurred to refinance the term loans or other refinancing
indebtedness as well as indebtedness incurred other than indebtedness permitted to be incurred by the Credit
Agreement. At any time, upon timely notice, the Company may terminate the Credit Agreement in full, reduce
the commitment under the facility in minimum specified increments or prepay loans in whole or in part,
subject to the payment of breakage fees with respect to SOFR-based loans and, in the case of any term loans
that are prepaid in connection with a "repricing transaction" occurring within the six-month period following
the closing date of the Credit Agreement, a 1.00% premium.
The Credit Agreement contains customary affirmative and negative covenants, including covenants
that affect, among other things, the ability of the Company and its subsidiaries to incur additional
indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and
leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in
transactions with affiliates, enter into restrictive agreements, amend documentation governing junior
indebtedness, modify its fiscal year and modify its organizational documents, subject to customary exceptions,
thresholds, qualifications and "baskets." In addition, the Credit Agreement contains afi nancial performance
covenant that is only applicable when greater than 35% of the revolving credit facility is outstanding, requiring
a maximum leverage ratio, as of the last day of each of the four fiscal quarter periods, of no greater than the
levels set forth in the Credit Agreement.
Future minimum Term Loan payments (exclusive of any mandatory excess cash flow repayments) as
of December 31, 2023 were as follows:
Fiscal Year
2024
2025
2026
2027
2028
Amount
(in thousands)
2,750
2,750
2,750
2,750
247,813
258,813
$
$
12. Commitments and Contingencies
Legal Matters
The Company is involved from time to time in litigation and arbitration, as well as examinations,
inquiries and investigations by various regulatory bodies, involving its compliance with, among other things,
securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and
regulations affecting its products and other activities.
The Company records aliabilit y when it is both probable that a liability has been incurred and the
amount of the liability can be reasonably estimated. Significant judgment is required in both the
determination of probability and the determination as to whether aloss is reasonably estimable. Based on
information currently available, available insurance coverage, indemnities and established reserves, the
Company believes that the outcomes of its legal and regulatory proceedings are not likely, either individually
F-29
Notes to Consolidated Financial Statements—(Continued)
or in the aggregate, to have ama terial adverse effect on the Company's results of operations, cash flows or its
consolidated financial condition. However, in the event of unexpected subsequent developments, and given
the inherent unpredictability of these legal and regulatory matters, the Company can provide no assurance
that its assessment of any legal matter will reflect the ultimate outcome, and an adverse outcome in certain
matters could have ama terial adverse effect on the Company's results of operations or cash flows in particular
quarterly or annual periods.
13. Equity Transactions
Dividends
During the first and second quarters of the year ended December 31, 2023, the Board of Directors
declared quarterly cash dividends on the Company's common stock of $1.65 each. During the third and fourth
quarters of the year ended December 31, 2023, the Board of Directors declared quarterly cash dividends on
the Company's common stock of $1.90 each. Total dividends declared on the Company's common stock were
$53.5 million for the year ended December 31, 2023.
At December 31, 2023, $17.3 million was included as dividends payable in liabilities on the
Consolidated Balance Sheet representing the fourth quarter dividends to be paid on February 15, 2024 for
common stock shareholders of record as of January 31, 2024.
Common Stock Repurchases
During the year ended December 31, 2023, the Company repurchased 223,807 common shares at a
weighted average price of $200.73 per share, for ato tal cost, including fees and expenses, of $45.2 million
under its share repurchase program. As of December 31, 2023, 604,545 shares remain available for
repurchase. Under the terms of the program, the Company may repurchase shares of its common stock from
time to time at its discretion through open market repurchases, privately negotiated transactions and/or other
mechanisms, depending on price and prevailing market and business conditions. The program, which has no
specified term, may be suspended or terminated at any time.
14. Accumulated Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) were as follows:
(in thousands)
Balance at beginning of period
Net current-period other comprehensive income (loss) (1)
Balance at end of period
Years Ended December 31,
2023
2022
$
$
(358) $
271
(87) $
20
(378)
(358)
(1)
Consists of foreign currency translation adjustments, net of tax of $(96) and $135 for the years
ended December 31, 2023 and 2022, respectively.
15. Retirement Savings Plan
The Company sponsors a defined contribution 401(k) retirement plan (the "401(k) Plan") covering all
employees who meet certain age and service requirements. Employees may contribute apercenta ge of their
eligible compensation into the 401(k) Plan, subject to certain limitations imposed by the Internal Revenue
Code. The Company matches employees' contributions at a rate of 100% of employees' contributions up to
the first 5.0% of the employees' compensation contributed to the 401(k) Plan. The Company's matching
contributions were $8.3 million, $7.4 million and $5.9 million in 2023, 2022 and 2021, respectively.
F-30
Notes to Consolidated Financial Statements—(Continued)
16. Stock-Based Compensation
Equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"),
stock options and unrestricted shares of common stock, may be granted to officers, employees and directors
of the Company pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan"). At
December 31, 2023, 478,216 shares of common stock remain available for issuance of the 3,370,000 shares
that are authorized for issuance under the Omnibus Plan.
Stock-based compensation expense is summarized as follows:
(in thousands)
Stock-based compensation expense
Restricted Stock Units
Years Ended December 31,
2023
26,825
$
2022
24,042
$
2021
26,225
$
Each RSU entitles the holder to one share of common stock when the restriction expires. RSUs may
be time-vested or performance-contingent PSUs that convert into RSUs after performance measurement is
complete and generally vest in one to three years. Shares that are issued upon vesting are newly issued
shares from the Omnibus Plan and are not issued from treasury stock.
RSU activity, inclusive of PSUs, for the year ended December 31, 2023 is summarized as follows:
Outstanding at December 31, 2022
Granted
Forfeited
Settled
Outstanding at December 31, 2023
Number
of shares
Weighted Average
Grant Date
Fair Value
377,087 $
210,420 $
(38,060) $
(204,730) $
344,717 $
178.21
160.74
150.13
121.26
204.48
The grant-date intrinsic value of RSUs granted during the year ended December 31, 2023 was $33.8 million.
(in millions, except per share values)
Weighted-average grant-date fair value per share
Fair value of RSUs vested
Years Ended December 31,
2023
160.74
24.8
$
$
2022
194.46
23.8
$
$
2021
268.65
22.8
$
$
For the years ended December 31, 2023, 2022 and 2021, ato tal of 79,516, 79,471 and 73,069 RSUs,
respectively, were withheld by the Company as a result of net share settlements to settle minimum employee
tax withholding obligations and for which the Company paid $13.8 million, $16.8 million and $19.5 million,
respectively, in minimum employee tax withholding obligations. These net share settlements had the effect of
share repurchases by the Company as they reduced the number of shares that would have otherwise been
issued as a result of the vesting.
During the years ended December 31, 2023 and 2022, the Company granted 44,583 and 30,516 PSUs,
respectively, that contain performance-based metrics in addition to a service condition. Compensation
expense for PSUs is generally recognized over a three-year service period based upon the value determined
using aco mbination of (i) the intrinsic value method, for awards that contain a performance metric that
represents a "performance condition" in accordance with ASC 718, Stock Compensation ("ASC 718") and (ii)
F-31
Notes to Consolidated Financial Statements—(Continued)
the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric
under ASC 718. Compensation expense for PSU awards that contain a market condition is fixed at the date of
grant and will not be adjusted in future periods based upon the achievement of the market condition.
Compensation expense for PSU awards with a performance condition is recorded each period based upon a
probability assessment of the expected outcome of the performance metric with a final adjustment upon
measurement at the end of the performance period.
As of December 31, 2023 and 2022, unamortized stock-based compensation expense for unvested
RSUs and PSUs was $30.3 million and $27.7 million, respectively, with a weighted average remaining
contractual life of 1.1 years and 1.0 years, respectively. The Company did not capitalize any stock-based
compensation expenses during the years ended December 31, 2023, 2022 and 2021.
Employee Stock Purchase Plan
The Company offers an employee stock purchase plan that allows employees to purchase shares of
common stock on the open market at market price through after-tax payroll deductions. The initial
transaction fees are paid for by the Company and shares of common stock are purchased on a quarterly basis.
The Company does not reserve shares for this plan or discount the purchase price of the shares.
17. Earnings (Loss) Per Share
The computation of basic and diluted EPS is as follows:
(in thousands, except per share amounts)
Net Income (Loss)
Noncontrolling interests
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.
Shares (in thousands):
Basic: Weighted-average number of shares outstanding
Plus: Incremental shares from assumed conversion of dilutive instruments
Diluted: Weighted-average number of shares outstanding
Earnings (Loss) per Share—Basic
Earnings (Loss) per Share—Diluted
Years Ended December 31,
2023
141,476
(10,855)
130,621
7,249
126
7,375
18.02
17.71
2022
106,628
10,913
117,541
7,391
191
7,582
15.90
15.50
$
$
$
$
$
$
$
$
$
$
$
$
2021
262,835
(54,704)
208,131
7,672
331
8,003
27.13
26.01
The following table details the securities that have been excluded from the above computation of
weighted-average number of shares for diluted EPS, because the effect would be anti-dilutive.
(in thousands)
Restricted stock units and stock options
Total anti-dilutive securities
Years Ended Years Ended December 31,
2023
2022
2021
2
2
33
33
3
3
18. Concentration of Credit Risk
No Company clients or sponsored funds provided 10 percent or more of the Company's investment
management, administration and shareholder service fee revenues in the preceding three years.
F-32
Notes to Consolidated Financial Statements—(Continued)
19. Redeemable Noncontrolling Interests
Redeemable noncontrolling interests for the year ended December 31, 2023 included the following
amounts:
(in thousands)
Balance at December 31, 2022
Net income (loss) attributable to noncontrolling interests
Changes in redemption value (1)
Total net income (loss) attributable to noncontrolling interests
Affiliate equity sales (purchases)
Net subscriptions (redemptions) and other
Balance at December 31, 2023
Affiliate
Noncontrolling
Interests
CIP
Total
$
18,268
$
95,450
$
113,718
2,805
—
2,805
—
9,570
6,298
1,682
7,980
(20,784)
(8,420)
9,103
1,682
10,785
(20,784)
1,150
$
30,643
$
74,226
$
104,869
(1) Relates to noncontrolling interests redeemable at other than fair value.
20. Consolidation
The consolidated financial statements include the accounts of the Company, its subsidiaries and
investment products that are consolidated. A VOE is consolidated when the Company is considered to have a
controlling financial interest, which is typically present when the Company owns ama jority of the voting
interest in an entity or otherwise has the power to govern the financial and operating policies of the entity.
The Company evaluates any VIE in which the Company has avariable interest for consolidation. A VIE
is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its
own activities without additional financial support, or (ii) where as agroup, the holders of the equity
investment at risk do not possess any one of the following: (a) the power through voting or similar rights to
direct the activities that most significantly impact the entity's economic performance, (b) the obligation to
absorb expected losses or the right to receive expected residual returns of the entity, or (c) proportionate
voting and economic interests and where substantially all of the entity's activities either involve or are
conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of these
characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary. The primary
beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's
economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE
that could potentially be significant to the VIE.
In the normal course of its business, the Company sponsors various investment products, some of
which are consolidated by the Company. CIP includes both VOEs, made up primarily of U.S. retail funds and
ETFs in which the Company holds a controlling financial interest, and VIEs, which consist of collateralized loan
obligations ("CLO") and certain global and private funds ("GF") of which the Company is considered the
primary beneficiary. The consolidation and deconsolidation of these investment products have no impact on
the Company's net income (loss). The Company's risk with respect to these investment products is limited to
its beneficial interests in these products. The Company has no right to the benefits from, and does not bear
the risks associated with, these investment products beyond the Company's investments in, and fees
generated from, these products.
The following table presents the balances of CIP that, after intercompany eliminations, were reflected
F-33
Notes to Consolidated Financial Statements—(Continued)
on the Consolidated Balance Sheets as of December 31, 2023 and 2022:
As of December 31,
2023
2022
VOEs
VIEs
VOEs
VIEs
(in thousands)
Cash and cash equivalents
Investments
Other assets
Notes payable
Securities purchased payable and other
liabilities
Noncontrolling interests
Net interests in CIP
$
$
Consolidated CLOs
1,223
30,985
174
$
CLOs
98,101
1,972,342
41,985
— (1,922,243)
$
$
GFs
2,088
79,386
1,076
—
1,153
24,669
295
CLOs
$ 249,003
2,106,764
43,993
— (2,083,314)
(740)
(7,316)
24,326
$
(89,167)
(4,363)
96,655
$
(616)
(23,327)
58,607
$
(573)
(7,879)
17,665
(230,141)
(5,917)
80,388
$
GFs
789
58,680
1,157
—
(183)
(10,389)
50,054
$
$
The majority of the Company's CIP that are VIEs are CLOs. The financial information of certain CLOs is
included onth e Company's consolidated financial statements on a one-month lag based upon the availability
of their financial information. A majority-owned consolidated private fund, whose primary purpose is to
invest in CLOs for which the Company serves as the collateral manager, is also included. At December 31,
2023, the Company consolidated eight CLOs.
Investments of CLOs
The CLOs held investments of $2.0 billion at December 31, 2023, consisting of bank loan investments
that comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across
a variety of industries. These bank loan investments mature at various dates between 2024 and 2032 and
generally pay interest at SOFR plus asp read. The CLOs have a reinvestment period where any prepayments
received on bank loan investments may be reinvested. Generally, subsequent prepayments received after the
reinvestment period must be used to pay down the note payable obligations. The reinvestment periods end
between October 2021 and September 2028, depending on the CLO. At December 31, 2023, the fair value of
the senior bank loans was less than the unpaid principal (par) balance by $104.4 million. At December 31,
2023, there were no material collateral assets in default.
Notes Payable of CLOs
The CLOs held notes payable with a total value, at par, of $2.1 billion at December 31, 2023,
consisting of senior secured floating rate notes payable with a par value of $1.9 billion and subordinated notes
with a par value of $215.1 million. These note obligations bear interest at variable rates based on SOFR plus a
pre-defined spread ranging from 0.8% to 9.1%. The principal amounts outstanding of these note obligations
mature on dates ranging from October 2029 to September 2036.
The Company's beneficial interests and maximum exposure to loss related to these consolidated CLOs
is limited to (i) ownership in the subordinated notes and (ii) accrued management fees. The secured notes of
the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as
financial liabilities. Although these beneficial interests are eliminated upon consolidation, the application of
the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13"), results in
the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by
the Company at December 31, 2023, as shown in the table below:
F-34
Notes to Consolidated Financial Statements—(Continued)
Subordinated notes
Accrued investment management fees
Total Beneficial Interests
(in thousands)
$
$
95,490
1,165
96,655
The following table represents income and expenses of the consolidated CLOs included on the
Company's Consolidated Statements of Operations for the period indicated:
Income:
Realized and unrealized gain (loss), net
Interest income
Total Income
Expenses:
Other operating expenses
Interest expense
Total Expense
Noncontrolling interests
Net Income (loss) attributable to CLOs
Year Ended
December 31, 2023
(in thousands)
$
$
$
$
(9,083)
191,755
182,672
3,704
155,335
159,039
(70)
23,563
The following table represents the Company's own economic interests in the consolidated CLOs,
which are eliminated upon consolidation:
Distributions received and unrealized gains (losses) on the
subordinated notes held by the Company
Investment management fees
Total Economic Interests
Year Ended
December 31, 2023
(in thousands)
$
$
14,831
8,732
23,563
F-35
Notes to Consolidated Financial Statements—(Continued)
Fair Value Measurements of CIP
The assets and liabilities of CIP measured at fair value on a recurring basis as of December 31, 2023
and 2022 by fair value hierarchy level were as follows:
As of December 31, 2023
(in thousands)
Assets
Cash equivalents
Debt investments
Equity investments
Total assets measured at fair value
Liabilities
Notes payable
Short sales
Total liabilities measured at fair value
As of December 31, 2022
(in thousands)
Assets
Cash equivalents
Debt investments
Equity investments
Total assets measured at fair value
Liabilities
Notes payable
Short sales
Total liabilities measured at fair value
$
$
$
$
$
$
$
$
Level 1
Level 2
Level 3
Total
$
— $
— $
98,101
241
32,642
2,012,760
8
130,984 $
2,012,768 $
36,616
446
37,062
$
98,101
2,049,617
33,096
2,180,814
— $
1,922,243 $
518
518
—
$
1,922,243 $
— $
—
— $
1,922,243
518
1,922,761
Level 1
Level 2
Level 3
Total
249,003 $
243
25,003
274,249 $
— $
— $
2,119,082
2,204
2,121,286 $
42,246
1,335
43,581
$
249,003
2,161,571
28,542
2,439,116
— $
2,083,314 $
414
414
—
$
2,083,314 $
— $
—
— $
2,083,314
414
2,083,728
The following is a discussion of the valuation methodologies used for the assets and liabilities of the
Company's CIP measured at fair value.
Level 1asse ts represent cash investments in money market funds and debt and equity investments
that are valued using published net asset values or the official closing price on the exchange on which the
securities are traded.
Level 2asse ts represent most debt securities (including bank loans) and certain equity securities
(including non-U.S. securities), for which closing prices are not readily available or are deemed to not reflect
readily available market prices, and are valued using an independent pricing service. Debt investments, other
than bank loans, are valued based on quotations received from independent pricing services or from dealers
who make markets in such securities. Bank loan investments, which are included as debt investments, are
generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service.
Fair value may also be based upon valuations obtained from independent third-party brokers or dealers
utilizing matrix pricing models that consider information regarding securities with similar characteristics.
Level 3asse ts include debt and equity securities that are not widely traded, are illiquid or are priced
by dealers based on pricing models used by market makers in the security. These securities are valued using
unadjusted prices from an independent pricing service.
F-36
Notes to Consolidated Financial Statements—(Continued)
Level 1liabilities c onsist of short sales transactions in which a security is sold that is not owned or is
owned but there is no intention to deliver, in anticipation that the price of the security will decline. Short sales
are recorded on the Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as
Level 1ba sed on the underlying equity security.
Level 2liabilities c onsists of notes payables issued by CLOs and are measured using the measurement
alternative in ASU 2014-13. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO
assets less the sum of (i) the fair value of the beneficial interests held by the Company, and (ii) the carrying
value of any beneficial interests that represent compensation for services. The fair value of the beneficial
interests held by the Company is based on third-party pricing information without adjustment.
The securities purchased payable at December 31, 2023 and 2022 approximated fair value due to the
short-term nature of the instruments.
The following table is areco nciliation of assets of CIP for Level 3invest ments for which significant
unobservable inputs were used to determine fair value.
(in thousands)
Level 3Inve stments of CIP (1)
Balance at beginning of period
Purchases
Sales
Amortization
Change in unrealized gains (losses), net
Realized gains (loss), net
Transfers to Level 2
Transfers from Level 2
Balance at end of period
Year Ended December 31,
2023
2022
$
43,581
$
6,213
3,157
4,118
(21,784)
(18,076)
327
8,768
(9,886)
107
(958)
(585)
(120,536)
(87,458)
130,379
37,062
$
143,276
43,581
$
(1) The investments that are categorized as Level 3 were valued utilizing third-party pricing
information without adjustment. Transfers in and/or out of levels are reflected when
significant inputs, including market inputs or performance attributes, used for the fair value
measurement become observable/unobservable at period end.
Nonconsolidated VIEs
The Company serves as the collateral manager for other CLOs that are not consolidated. The assets
and liabilities of these CLOs reside in bankruptcy remote, special purpose entities in which the Company has
no ownership of, nor holds any notes issued by, the CLOs, and provides neither recourse nor guarantees. The
Company has determined that the investment management fees it receives for serving as collateral manager
for these CLOs did not represent a variable interest as (i) the fees the Company earns are compensation for
services provided and are commensurate with the level of effort required to provide the investment
management services, (ii) the Company does not hold other interests in the CLOs that individually, or in the
aggregate, would absorb more than an insignificant amount of the CLOs' expected losses or receive more than
an insignificant amount of the CLOs' expected residual return, and (iii) the investment management
arrangement only includes terms, conditions and amounts that are customarily present in arrangements for
similar services negotiated at arm's length.
F-37
Notes to Consolidated Financial Statements—(Continued)
The Company has interests in certain other VIEs that the Company does not consolidate as it is not
the primary beneficiary since its interest in these entities does not provide the Company with the power to
direct the activities that most significantly impact the entities' economic performance. At December 31, 2023,
the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $25.7 million.
21. Subsequent Events
Dividends Declared
On February 21, 2024, the Company declared a quarterly cash dividend of $1.90 per common share
to be paid on May 15, 2024 to shareholders of record at the close of business on April 30, 2024.
F-38
Exhibit 31.1
I, George R. Aylward, certify that:
CERTIFICATION UNDER SECTION 302
1. I have reviewed this Annual Report on Form 10-K of Virtus Investment Partners, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of ama terial fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and Iar e responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and Iha ve disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have asi gnificant role
in the registrant’s internal control over financial reporting.
Date: February 28, 2024
/S/ GEORGE R. AYLWARD
George R. Aylward
President, Chief Executive Officer and Director
(Principal Executive Officer)
Exhibit 31.2
I, Michael A. Angerthal, certify that:
CERTIFICATION UNDER SECTION 302
1. I have reviewed this Annual Report on Form 10-K of Virtus Investment Partners, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of ama terial fact or omit to state a
material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly
present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer(s) and Iar e responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being
prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and Iha ve disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have asi gnificant role
in the registrant’s internal control over financial reporting.
Date: February 28, 2024
/S/ MICHAEL A. ANGERTHAL
Michael A. Angerthal
Executive Vice President, Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with this Annual Report on Form 10-K of Virtus Investment Partners, Inc. (the “Company”) for the period
ended December 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of
the undersigned officers of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1)
(2)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: February 28, 2024
/S/ GEORGE R. AYLWARD
George R. Aylward
President, Chief Executive Officer and Director
(Principal Executive Officer)
/S/ MICHAEL A. ANGERTHAL
Michael A. Angerthal
Executive Vice President, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
[THIS PAGE INTENTIONALLY LEFT BLANK]
Non-GAAP Information and Reconciliations
(Dollars in thousands except per share data)
The following are reconciliations and related notes of the most comparable U.S. GAAP measure to each non-GAAP
measure.
Non-GAAP financial information differs from financial information determined in accordance with U.S. GAAP as a
result of the reclassification of certain income statement items, as well as the exclusion of certain expenses and
other items that are not reflective of the earnings generated from providing investment management and related
services. Non-GAAP financial information has material limitations and should not be viewed in isolation or as a
substitute for U.S. GAAP measures.
Reconciliation of Total Revenues, GAAP to Total Revenues, as Adjusted:
Total revenues, GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated investment products revenues (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and other asset-based fees (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$845,268
9,824
(96,802)
$886,379 $979,234
9,685
(141,039)
9,162
(112,612)
Total revenues, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$758,290
782,929
847,880
Twelve Months Ended
12/31/2023
12/31/2022
12/31/2021
Reconciliation of Total Operating Expenses, GAAP to Operating Expenses, as Adjusted:
Twelve Months Ended
12/31/2023
12/31/2022
12/31/2021
Total operating expenses, GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated investment products expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution and other asset-based expenses (3) . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring expense (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and related investments (6) . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration expenses (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 693,784 $ 688,919 $ 653,746
(3,562)
(141,039)
(44,481)
—
—
(22,039)
(2,578)
(4,224)
(96,802)
(61,027)
(824)
(1,966)
(10,193)
(210)
(4,408)
(112,612)
(58,504)
(4,015)
—
(16,603)
1,001
Total operating expenses, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 518,538
$ 493,778
$ 440,047
S-1
Reconciliation of Operating Income, GAAP to Operating Income, as Adjusted:
Twelve Months Ended
12/31/2023
12/31/2022
12/31/2021
Operating income, GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated investment products operating income (1) . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring expense (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and related investments (6) . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration expenses, net of tax (7) . . . . . . . . . . . . . . . . . . . . . . . .
Other (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 151,484 $197,460 $325,488
13,247
13,570
44,481
58,504
—
4,015
—
—
22,039
16,603
2,578
(1,001)
14,048
61,027
824
1,966
10,193
210
Operating income, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$239,752
$ 289,151
$407,833
Operating margin, GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17.9%
31.6%
22.3%
36.9%
33.2%
48.1%
Reconciliation of Net Income Attributable to Common Stockholders, GAAP to Net Income Attributable to Common
Stockholders, as Adjusted:
Twelve Months Ended
12/31/2023
12/31/2022
12/31/2021
Net income attributable to Virtus Investment Partners, Inc., GAAP . . . . . . . . . . . . .
Amortization of intangible assets, net of tax (4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring expense, net of tax (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Seed capital and CLO investments, net of tax (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred compensation and related investments (6) . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition and integration expenses, net of tax (7) . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net of tax (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$130,621
41,829
599
(16,842)
(1,097)
7,401
(744)
$ 117,541
39,764
2,933
39,662
—
12,089
(16,827)
$ 208,131
29,660
—
(8,096)
—
16,126
41,103
Net income attributable to Virtus Investment Partners, Inc., as adjusted . . . . . . . . .
$161,767
$195,162
$286,924
Weighted Average Shares Outstanding—Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Shares Outstanding—Diluted, as adjustedA . . . . . . . . . . . . . . . . .
Earnings Per Share—Diluted, GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings Per Share—Diluted, as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,375
7,375
$
17.71
$ 21.93
7,582
7,582
$ 15.50 $
$
$ 25.74
8,003
8,003
26.01
35.85
A
Reflects dilutive impact to shares in all periods; differs from GAAP basis in periods of a GAAP earnings loss, if any
Notes to Reconciliations:
Reclassifications:
1.
Consolidated investment products - Revenues and expenses generated by operating activities of mutual
funds and CLOs that are consolidated in the financial statements. Management believes that excluding
these operating activities to reflect net revenues and expenses of the company prior to the consolidation
of these products is consistent with the approach of reflecting its operating results from managing third-
party client assets.
Other Adjustments:
Revenue Related
2.
Investment management/Distribution and service fees -Each of these revenue line items is reduced to
exclude fees passed through to third-party client intermediaries who own the retail client relationship
and are responsible for distributing company sponsored investment products and servicing the client.
S-2
The amount of fees fluctuates each period, based on a predetermined percentage of the value of assets
under management, and varies based on the type of investment product. The specific adjustments are as
follows:
Investment management fees - Based on specific agreements, the portion of investment
management fees passed-through to third-party intermediaries for services to investors in sponsored
investment products.
Distribution and service fees - Based on distinct arrangements, fees collected by the company then
passed-through to third-party client intermediaries for services to investors in sponsored investment
products. The adjustment represents all of the company’s distribution and service fees that are recorded
as a separate line item on the condensed consolidated statements of operations.
Management believes that making these adjustments aids in comparing the company’s operating results
with other asset management firms that do not utilize third-party client intermediaries.
Expense Related
3.
4.
5.
6.
7.
Distribution and other asset-based expenses - Primarily payments to third-party client intermediaries for
providing services to investors in sponsored investment products. Management believes that making
this adjustment aids in comparing the company’s operating results with other asset management firms
that do not utilize third-party client intermediaries.
Amortization of intangible assets - Non-cash amortization expense or impairment expense, if any,
attributable to acquisition-related intangible assets, including any portion that is allocated to
noncontrolling interests. Management believes that making this adjustment aids in comparing the
company’s operating results with other asset management firms that have not engaged in acquisitions.
Restructuring expense - Certain non-recurring expenses associated with restructuring the business,
including lease abandonment-related expenses and severance costs associated with staff reductions that
are not reflective of ongoing earnings generation of the business. Management believes that making this
adjustment aids in comparing the company’s operating results with prior periods.
Deferred compensation and related investments - Compensation expense, gains and losses (realized and
unrealized), and interest and dividend income related to market performance of deferred compensation
and related balance sheet investments. Market performance of deferred compensation plans and related
investments can vary significantly from period to period. Management believes that making this
adjustment aids in comparing the Company’s operating results with prior periods.
Acquisition and integration expenses - Expenses that are directly related to acquisition and integration
activities. Acquisition expenses include certain transaction related employment expenses, transaction
closing costs, change in fair value of contingent consideration, certain professional fees, and financing
fees. Integration expenses include costs incurred that are directly attributable to combining businesses,
including compensation, restructuring and severance charges, professional fees, consulting fees, and
other expenses. Management believes that making these adjustments aids in comparing the company’s
operating results with other asset management firms that have not engaged in acquisitions.
Components of Acquisition and Integration Expenses for the respective periods are shown below:
Twelve Months Ended
12/31/2023
12/31/2022
12/31/2021
Acquisition and Integration Expenses
Employment expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of contingent consideration . . . . . . . . .
$12,585
3,118
(5,510)
$ 4,542
4,041
8,020
$ 1,065
8,574
12,400
Total Acquisition and Integration Expenses . . . . . . . . . . . . .
$10,193
$16,603
$22,039
S-3
8.
Other - Certain expenses that are not reflective of the ongoing earnings generation of the business.
Employment expenses and noncontrolling interests are adjusted for fair value measurements of affiliate
minority interests. Other operating expenses are adjusted for non-capitalized debt issuance costs.
Interest expense is adjusted to remove gains on early extinguishment of debt and the write-off of
previously capitalized costs associated with the modification of debt. Income tax expense (benefit) items
are adjusted for uncertain tax positions, changes in tax law, valuation allowances, and other unusual or
infrequent items not related to current operating results to reflect a normalized effective rate.
Management believes that making these adjustments aids in comparing the company’s operating results
with prior periods.
Components of Other for the respective periods are shown below:
Other
Non-capitalized debt issuance costs . . . . . . . . . . . . . . . . . . .
Employment expense fair value adjustments . . . . . . . . . . . .
(Gain)/loss on extinguishment of debt
. . . . . . . . . . . . . . . . .
Tax impact of adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other discrete tax adjustments . . . . . . . . . . . . . . . . . . . . . . .
Affiliate minority interest fair value adjustments . . . . . . . . .
Twelve Months Ended
12/31/2023
12/31/2022
12/31/2021
$ —
210
—
(53)
(2,585)
1,684
$ —
$
(1,001)
—
272
92
(16,190)
813
1,765
180
(733)
(4,116)
43,194
Total Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (744)
$(16,827)
$ 41,103
Seed Capital and CLO Related
9.
Seed capital and CLO investments (gains) losses - Gains and losses (realized and unrealized) of seed
capital and CLO investments. Gains and losses (realized and unrealized) generated by investments in
seed capital and CLO investments can vary significantly from period to period and do not reflect the
company’s operating results from providing investment management and related services. Management
believes that making this adjustment aids in comparing the company’s operating results with prior
periods and with other asset management firms that do not have meaningful seed capital and CLO
investments.
Definitions:
Revenues, as adjusted, comprise the fee revenues paid by clients for investment management and related services.
Revenues, as adjusted, for purposes of calculating net income attributable to Virtus Investment Partners, Inc., as
adjusted, differ from U.S. GAAP, namely in excluding the impact of operating activities of consolidated investment
products and reduced to exclude fees passed through to third-party client intermediaries who own the retail client
relationship and are responsible for distributing the product and servicing the client.
Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations. Operating
expenses, as adjusted, for purposes of calculating net income attributable to Virtus Investment Partners, Inc., as
adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible
assets, restructuring and severance, the effect of consolidated investment products, acquisition and integration-
related expenses and certain other expenses that do not reflect the ongoing earnings generation of the business.
Operating margin, as adjusted, is a metric used to evaluate efficiency represented by operating income, as
adjusted, divided by revenues, as adjusted.
Earnings (loss) per share, as adjusted, represent net income (loss) attributable to Virtus Investment Partners, Inc.,
as adjusted, divided by weighted average shares outstanding, as adjusted, on either a basic or diluted basis.
S-4
Additional Information Regarding Mutual Fund Investment Performance
Additional information on Virtus Funds rated by Morningstar for the period ending December 31, 2023:
Description
Number of 3/4/5 Star Funds
Percentage of Assets
Number of 4/5 Star Funds
Percentage of Assets
Total Funds
Overall
63
90%
38
70%
77
3 yr.
46
63%
23
32%
77
5 yr.
57
85%
33
59%
74
10 yr.
55
89%
35
75%
67
Data quoted represents past performance. Past performance does not guarantee future results. Current
performance may be lower or higher than the performance data quoted. Investing involves risk, including the
possible loss of principal. The value of your investment will fluctuate over time and you may gain or lose money.
Morningstar Ratings:
The Morningstar RatingTM 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.
© 2024 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.
Strong ratings are not indicative of positive fund performance. Absolute performance for some funds was negative.
For complete investment performance, please visit www.virtus.com.
Please carefully consider a fund’s investment objectives, risks, charges, and expenses before investing. For this and
other information about the Virtus Mutual Funds, call 1-800-243-4361 or visit www.virtus.com for a prospectus.
Read it carefully before you invest or send money.
Virtus Mutual Funds are distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment
Partners, Inc.
S-5
Peer Companies Utilized for Comparative Financial Results
Affiliated Managers Group, Inc., AllianceBernstein Holding L.P., Artisan Partners Asset Management Inc.,
BrightSphere Investment Group Inc., Cohen & Steers, Inc., Federated Hermes, Inc., Franklin Resources, Inc., Invesco
Ltd., Janus Henderson Group plc, T. Rowe Price Group, Inc., and Victory Capital Holdings, Inc.
S-6
Message to Shareholders
To Our Fellow Shareholders:
For 15 years as an independent
public company, Virtus Investment
Partners has been guided by a
singular mission: to be a distinctive
and trusted provider of asset
management solutions for individual
and institutional investors.
Today we are a company with more
than 800 employees, over $170
billion in assets under management,
and clients across the globe. We
provide clients with attractive
investment solutions to meet their
current and future investment
needs; we are a meaningful
and collaborative partner with
distributors and consultants for
institutional and retail clients;
and we manage the company’s
resources for profitability, growth,
risk mitigation, and the creation of
long-term shareholder value.
Our growth over these past 15
years is the result of a sharp focus
on our business priorities, strategic
investments in affiliated managers
and shared support services, a team
of dedicated professionals, and
a vision to position the company
to deliver long-term results for
shareholders.
In 2023, we executed across each
primary strategic objective to deliver
these results:
Total Shareholder Return
January 1, 2009 – December 31, 2023
4000%
3500%
3000%
2500%
2000%
1500%
1000%
500%
00%
-50%
1 2/3 1/0 8
1 2/3 1/0 9
1 2/3 1/1 0
1 2/3 1/1 1
1 2/3 1/1 2
1 2/3 1/1 3
1 2/3 1/1 4
1 2/3 1/1 5
1 2/3 1/1 6
1 2/3 1/1 7
1 2/3 1/1 8
1 2/3 1/1 9
1 2/3 1/2 0
1 2/3 1/2 1
1 2/3 1/2 2
1 2/3 1/2 3
Companies comprising Peer Group average: Affiliated Managers Group, AllianceBernstein, Cohen & Steers,
Federated Hermes, Franklin Resources, Invesco, T. Rowe Price
VRTS
Peer Group Average
S&P 500
2,709%
589%
417%
Key Accomplishments
AlphaSimplex Group, a leading manager of systematic, quantitative
alternative investment solutions, joined as an affiliated investment
partner, further diversifying offerings of differentiated, non-
correlated strategies for institutional and individual clients. We
also increased our minority ownership of Zevenbergen Capital
Investments, a subadviser of high-growth equity portfolios, including
several mutual funds.
We have continued to diversify our business by asset class, client
type, and location as a result of a long-term focus on expanding
alternative investment capabilities and adding global and
institutional distribution resources. In 2023, 12% of all sales were in
alternative products compared with 5% of sales in 2021. Strategies
for institutional investors grew to 37% of assets under management
at December 31, 2023, compared with 28% two years earlier, and
strategies for international clients represented 18% of year-end
AUM, compared with 10% two years prior.
Efforts to leverage our expanded institutional distribution resources
and our proprietary operating and analytical platform have
increased opportunities to grow and generate operating efficiencies.
We have expanded the presence of our strategies in the institutional
market, particularly outside the U.S. We continued to transition
affiliated managers onto a common operating platform and build-out
additional capabilities.
Long-term investment performance of our investment
strategies is of critical importance to clients and we
are proud of our relative long-term performance across
products and asset classes. This includes 86% of retail
separate account assets and 67% of institutional assets
that outperformed their benchmarks on a five-year
basis as of year-end. In addition, 38 of 77 rated funds,
representing 70% of fund AUM, had a 5- or 4-star
Morningstar Rating™ at December 31, 20231, including
11 funds with $1 billion or more AUM, representing a
diverse set of strategies from seven different managers.
With our balanced and prudent approach to capital
management, we have returned meaningful capital to
shareholders, maintained appropriate levels of working
capital and leverage, and invested in growth initiatives,
such as the acquisition of AlphaSimplex. For the sixth
consecutive year we increased the quarterly common
stock dividend – in 2023 by 15% to $1.90 a share –
and also repurchased $45 million of common shares,
reducing the outstanding share count at December 31,
2023 by 1.3% from the prior year-end.
Financial and Operating Results
Financial results were challenged by lower sales, net
outflows, and lower average assets under management as a
result of conservative investor behavior, particularly during
the first half of the year, that carried over from the difficult
market conditions of 2022.
Assets under management were $172.3 billion as of
December 31, 2023, a 15% increase over 2022 ending
AUM of $149.4 billion, as positive market performance
across asset classes and the addition of AlphaSimplex’s
assets offset total net outflows.
Total sales of $25.9 billion for 2023 compared with
$30.3 billion for 2022 and included a 17% increase in
retail separate account sales to $6.7 billion. Sales of
other products included $9.9 billion in U.S. retail funds;
$8.0 billion in institutional accounts, including a new
affiliate-managed collateralized loan obligation (CLO)
that closed during the year; $0.8 billion in global funds;
1 Additional information regarding mutual fund investment performance is included as an attachment to
this annual report after the Form 10-K.
2 The referenced non-GAAP measures are described and reconciled to GAAP reported amounts in an
attachment to this annual report after the Form 10-K.
3 The companies that comprise our peer companies for TSR comparison are listed in an attachment to
this annual report after the Form 10-K.
and $0.4 billion in exchange-traded funds (ETFs). Total
net flows of ($7.2) billion improved from the prior year,
even as negative net flows in open-end mutual funds and
institutional offset positive net flows in retail separate
accounts, global funds, and ETFs.
Net income attributable to Virtus Investment Partners, Inc.
increased by 11% to $130.6 million, with a related margin
of 18%. Net income, attributable to Virtus Investment
Partners, Inc., as adjusted, was $161.8 million with a
related margin of 32%. Diluted earnings per share (EPS)
of $17.71 increased 14% from 2022 and diluted EPS, as
adjusted, was $21.93, compared with $25.74 in 2022. 2
Ultimately, the success of our long-term focus will be
measured by the value we provide shareholders. We have
delivered substantial results to shareholders based on the
total shareholder return (TSR) of our stock. One-, three-, and
five-year TSRs have significantly exceeded the median of our
peer companies3, and our five-year TSR of 245% is more than
twice that of the S&P 500 during the period.
These accomplishments would not have been possible
without the hard work and determination of our employees
who are dedicated to deliver on our commitments to clients,
business partners, and shareholders. We have employees who
have demonstrated they can effectively execute on a focused
business strategy, respond to the challenges of a dynamic
market environment, and address the evolving needs of our
clients.
As we build toward the future we are well prepared to take
advantage of the opportunities ahead. We have confidence in
our team, our strategy, and the investments we have made in
our company.
On behalf of the staff, management, and your board of
directors, we thank you for the trust you have placed in us and
for your investment in Virtus.
Sincerely,
George R. Aylward
Timothy A. Holt
President and Chief Executive Officer
Chairman
Directors and Officers
Board of Directors
Principal Corporate Officers
George R. Aylward
President and Chief Executive Officer
Virtus Investment Partners
Peter L. Bain2
President, Chief Executive Officer and Director (Retired)
BrightSphere Investment Group
(Formerly OM Asset Management)
Susan S. Fleming, Ph.D.1,3
Keynote Speaker and Executive Educator
Paul G. Greig1
Chairman of the Board (Retired)
Opus Bank
Timothy A. Holt 2,3
Non-Executive Chairman of the Board of Directors
Senior Vice President and Chief Investment Officer
(Retired) Aetna, Inc.
Melody L. Jones 2,3
Founder
32-80 Advisors
W. Howard Morris1
President and Chief Investment Officer
The Prairie & Tireman Group
Stephen T. Zarrilli1
President and Chief Executive Officer (Retired)
The University City Science Center
1 Audit Committee
2 Compensation Committee
3 Governance Committee
George R. Aylward
President, Chief Executive Officer and Director
Michael A. Angerthal
Executive Vice President
Chief Financial Officer and Treasurer
Barry M. Mandinach
Executive Vice President
Head of Distribution
Mardelle W. Peña
Executive Vice President
Chief Human Resources Officer
Andra C. Purkalitis
Executive Vice President
Chief Legal Officer, General Counsel and Corporate Secretary
Richard W. Smirl
Executive Vice President
Chief Operating Officer
Affiliated Companies
AlphaSimplex Group, LLC
alphasimplex.com
Ceredex Value Advisors LLC
ceredexvalue.com
Duff & Phelps Investment Management Co.
dpimc.com
Kayne Anderson Rudnick Investment Management, LLC
kayne.com
Newfleet Asset Management
newfleet.com
NFJ Investment Group, LLC
nfjinv.com
Seix Investment Advisors
seixadvisors.com
Silvant Capital Management LLC
silvantcapital.com
Stone Harbor Investment Partners
shipemd.com
Sustainable Growth Advisers, LP
sgadvisers.com
Virtus ETF Solutions
virtus.com/investment-partners/virtus-etf-solutions
Virtus Multi-Asset
virtus.com/investment-partners/virtus-multi-asset
Virtus Systematic
virtus.com/investment-partners/virtus-systematic
Westchester Capital Management, LLC
westchestercapitalmanagement.com
Shareholder Information
Summary of Operations1
Security Listing
For More Information
To receive additional information about Virtus
Investment Partners and access to other
shareholder services, visit Investor Relations in the
“Our Story” section of our website at virtus.com, or
contact us at:
Virtus Investment Partners, Inc.
Investor Relations
One Financial Plaza
Hartford, CT 06103
Telephone: 800-248-7971 (Option 2)
Fax: 413-774-1714
Email: investor.relations@virtus.com
For more information on Virtus Mutual Funds or
other products, call your financial representative or
visit us at virtus.com.
The common stock of Virtus Investment Partners, Inc.
is traded on the New York Stock Exchange under the
symbol “VRTS.”
Transfer Agent and Registrar
For information or assistance regarding your account,
please contact our transfer agent and registrar:
Virtus Investment Partners
c/o Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
Toll-free (within U.S.): 866-205-7273
Foreign Shareowners: 413-775-6091
Website:
shareholder.broadridge.com/VRTS
Email:
Virtus.Investment.Partners@virtus.com
Annual Meeting of Shareholders
Shareholders are invited to attend the 2024 Annual
Meeting of Shareholders on Wednesday, May 15,
2024 at 9:00 a.m. EDT at the company’s offices, One
Financial Plaza, 19th Floor, Hartford, Connecticut.
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2023
ANNUAL
REPORT
(Dollars in millions,
except per share data)
Revenues
Revenues, as Adjusted
Operating Expenses
Operating Expenses, as Adjusted
Operating Income
2023
2022
Change
$845.3
$886.4
$758.3
$782.9
$693.8
$688.9
$518.5
$493.8
(5%)
(3%)
1%
5%
$151.5
$197.5
(23%)
Operating Income, as Adjusted
$239.8
$289.2
(17%)
Net Income attributable to Virtus Investment Partners, Inc. $130.6
$117.5
11%
Net Income attributable to Virtus Investment Partners, Inc.,
as Adjusted
$161.8
$195.2
(17%)
Operating Margin
Operating Margin, as Adjusted
18%
32%
22%
37%
Earnings per Share – Diluted
$17.71
$15.50
14%
Earnings per Share – Diluted, as Adjusted
$21.93
$25.74
(15%)
Weighted Average Shares Outstanding –
7,375
7,582
(3%)
Diluted (in thousands)
Ending Assets Under Management
$172,259 $149,376
15%
Per Share Data
Assets Under Management
(in millions)
By Product
(12/31/2023)
By Asset Class
(12/31/2023)
• U.S. Retail Funds
• Global Funds
• Exchange-Traded Funds
• Variable Insurance Funds
• Closed-End Funds
• Retail Separate Accounts
• Institutional Accounts
• Structured Products
$49,064
4,560
1,545
893
10,026
43,202
59,548
3,421
28.5%
2.6%
0.5%
0.9%
5.8%
25.1%
34.6%
2.0%
TOTAL
$172,259
100%
• Equity
• Fixed Income
• Multi-Asset 2
• Alternatives3
TOTAL
$96,703
37,192
21,411
16,953
56.1%
21.6%
12.4%
9.8%
$172,259
100%
1 Certain supplemental performance measures are provided in addition to, but not as a substitute for, performance measures determined in accordance with GAAP. These supplemental measures
may not be comparable to non-GAAP performance measures of other companies. “Operating Income, as Adjusted,” “Net Income attributable to Virtus Investment Partners, Inc., as Adjusted,”
“Operating Margin, as Adjusted,” and “Earnings per Share - Diluted, as Adjusted” are supplemental non-GAAP measures that net the distribution and administration expenses against the related
revenue and remove certain non-cash and other identified amounts. For our definition of these terms, as well as a reconciliation to GAAP measures, see “Non-GAAP Information and Reconciliations”
in the Supplemental Financial Information, included as an attachment to this annual report after the Form 10-K.
2 Consists of strategies and client accounts with substantial holdings in at least two of the following asset classes: equity, fixed income, and alternatives.
3 Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other strategies.
This report may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which, by their nature, are subject to significant risks and uncertainties.
Virtus Investment Partners, Inc. intends for these forward-looking statements to be covered by the safe harbor provisions of the federal securities laws relating to forward-looking statements. For a
further discussion, see “Special Note About Forward-Looking Statements” on page 17 of the attached Form 10-K.