Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
VRTS > SEC Filings for VRTS > Form 10-Q on 29-Jul-2014All Recent SEC Filings

Show all filings for VIRTUS INVESTMENT PARTNERS, INC.

Form 10-Q for VIRTUS INVESTMENT PARTNERS, INC.


29-Jul-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q 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. 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," "intend," "believe," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future," "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 our Company and the markets in which we operate, and are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net cash inflows and outflows, operating cash flows and future credit facilities, for all future periods. All of our forward-looking statements contained in this Quarterly Report are as of the date of this Quarterly Report 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 Quarterly Report, 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 which modify or impact any of the forward-looking statements contained in or accompanying this Quarterly Report, such statements or disclosures will be deemed to modify or supersede such statements in this Quarterly Report.

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 our Annual Report on Form 10-K for the year ended December 31, 2013, and in this Quarterly Report on Form 10-Q, as well as the following risks and uncertainties: (a) any reduction in our assets under management; (b) damage to our reputation; (c) our money market funds do not maintain stable net asset values; (d) our inability to attract and retain key personnel; (e) the competition we face in our business; (f) adverse regulatory and legal developments; (g) limitations on our deferred tax assets; (h) changes in key distribution or unaffiliated subadvisory relationships; (i) interruptions in service or failure to provide service by third-party service providers;
(j) impairment of our goodwill or intangible assets; (k) lack of availability of required and necessary capital on satisfactory terms; (l) liabilities and losses not covered by our insurance policies; and (m) certain other risks and uncertainties described in our 2013 Annual Report on Form 10-K or in any of our filings with the Securities and Exchange Commission ("SEC"). Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to in this Quarterly Report or included in our 2013 Annual Report on Form 10-K or 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 which may impact our continuing operations, prospects, financial results and liquidity or which 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.

Overview

We are a provider of investment management and related services to individuals and institutions. We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers and unaffiliated subadvisers, each having its own distinct investment style, autonomous investment process and individual brand. By offering a broad array of products, we believe we can appeal to a greater number of investors, which allows us to have offerings across market cycles through changes in investor preferences. Our earnings are primarily driven by asset-based fees charged for services relating to these various products including investment management, fund administration, distribution and shareholder services.


Table of Contents

We offer investment strategies for individual and institutional investors in different product structures and through multiple distribution channels. Our investment strategies are available in a diverse range of styles and disciplines, managed by a collection of boutique investment managers, both affiliated and unaffiliated. We have offerings in various asset classes (domestic and international equity, fixed income and alternative), in all market capitalizations (large, mid and small), in different styles (growth, blend and value) and with various investment approaches (fundamental, quantitative and thematic). Our retail products include open-end mutual funds, closed-end funds, variable insurance funds and separately managed accounts. We also offer certain of our investment strategies to institutional clients.

We distribute our open-end mutual funds through financial intermediaries. We have broad access in the retail market, with distribution partners that include national and regional broker-dealers, independent broker-dealers and independent financial advisory firms. In many of these firms, we have a number of products that are on firms' preferred "recommended" lists and on fee-based advisory programs. Our sales efforts are supported by regional sales professionals, a national account relationship group and separate teams for the retirement and insurance markets.

Our separately managed accounts are distributed through financial intermediaries and directly by teams at our affiliated managers. Our institutional distribution strategy is an affiliate-centric and coordinated model. Through relationships with consultants, our affiliates target key market segments, including foundations and endowments, corporate, and public and private pension plans.

Financial Highlights

Total revenues were $112.7 million in the second quarter of 2014, an increase of $16.6 million, or 17.3% from $96.1 million in the second quarter of 2013. Total revenues increased in the second quarter of 2014 compared to the same period in the prior year as a result of higher average assets under management and an increase in average fees earned.

Long-term open-end mutual fund sales in the second quarter of 2014 remained relatively balanced among asset strategies, with 28.8% of sales in domestic equity funds, 32.4% in fixed income strategies, 25.9% of sales in international equity funds, and 12.9% in alternative strategies.

In the second quarter of 2014, we launched the Duff & Phelps Select Energy MLP Fund Inc. (NYSE: DSE), a new closed-end fund managed by Duff & Phelps Investment Management Co., an affiliated manager. The fund added $463.3 million in assets under management.

Net income attributable to common stockholders in the second quarter of 2014 increased 27.0% to $19.5 million, from $15.4 million, in second quarter of 2013. Earnings per diluted common share increased 9.9% to $2.10 in the second quarter of 2014 from $1.91 in the second quarter of 2013.

Assets Under Management

At June 30, 2014, we managed $61.4 billion in total assets, representing an increase of $8.7 billion, or 16.6%, from the $52.7 billion managed at June 30, 2013 and an increase of $3.7 billion, or 6.3%, from December 31, 2013. Long-term assets under management, which exclude cash management products, were $59.9 billion at June 30, 2014, an increase of $9.0 billion, or 17.8%, from $50.9 billion in June 30, 2013 and an increase of $3.8 billion, or 6.8%, from December 31, 2013. Average assets under management, which generally correspond to our fee-earning asset levels, were $58.1 billion for the six months ended June 30, 2014, an increase of $7.4 billion, or 14.6%, from $50.7 billion for the six months ended June 30, 2013.

Operating Results

In the second quarter of 2014, total revenues increased 17.3% to $112.7 million from $96.1 million in the second quarter of 2013. This increase was primarily the result of an increase in average assets under management. Operating income decreased by 16.3% from $26.9 million in the second quarter of 2013 to $22.5 million in the second quarter of 2014, primarily due to $10.1 million of costs related to the launch of the new closed-end fund, DSE, which were partially offset by the increased revenues due to higher levels of average assets under management.


Table of Contents

Assets Under Management by Product

The following table summarizes our assets under management by product:



                                                 As of June 30,                       Change
                                              2014            2013          2014 vs. 2013          %
($ in millions)
Retail Assets
Mutual fund assets
Long-term open-end mutual funds            $ 39,819.1      $ 32,351.2      $       7,467.9         23.1 %
Closed-end funds                              7,530.6         6,422.3              1,108.3         17.3 %
Money market open-end funds                   1,311.7         1,707.7               (396.0 )      (23.2 )%

Total mutual fund assets                     48,661.4        40,481.2              8,180.2         20.2 %

Variable insurance funds                      1,305.5         1,250.8                 54.7          4.4 %
Separately managed accounts (1)               6,862.4         6,521.7                340.7          5.2 %

Total retail assets                          56,829.3        48,253.7              8,575.6         17.8 %

Total institutional assets (1)                4,565.0         4,399.3                165.7          3.8 %

Total Assets Under Management              $ 61,394.3      $ 52,653.0      $       8,741.3         16.6 %

Average Assets Under Management for the
Six Months Ended                           $ 58,094.4      $ 50,681.1      $       7,413.3         14.6 %

(1) Includes assets under management related to options strategies


Table of Contents

Asset Flows by Product

The following table summarizes our asset flows by product:



                                         Three Months Ended June 30,            Six Months Ended June 30,
($ in millions)                             2014                2013              2014               2013
Mutual Funds-Long-Term Open-End
Beginning balance                      $     37,347.0        $ 30,552.5       $    36,367.7       $ 25,827.1
Inflows                                       3,148.5           5,069.9             6,789.8         10,780.5
Outflows                                     (2,398.0 )        (2,462.0 )          (5,786.9 )       (4,617.0 )

Net flows                                       750.5           2,607.9             1,002.9          6,163.5
Market appreciation (depreciation)            1,651.5            (886.0 )           2,302.6            212.4
Other (1)                                        70.1              76.8               145.9            148.2

Ending balance                         $     39,819.1        $ 32,351.2       $    39,819.1       $ 32,351.2

Mutual Funds-Closed-End
Beginning balance                      $      6,690.7        $  6,621.0       $     6,499.6       $  6,231.6
Inflows                                         463.3                -                463.3               -
Outflows                                           -                 -                   -                -

Net flows                                       463.3                -                463.3               -
Market appreciation (depreciation)              475.6             (61.6 )             774.5            388.6
Other (1)                                       (99.0 )          (137.1 )            (206.8 )         (197.9 )

Ending balance                         $      7,530.6        $  6,422.3       $     7,530.6       $  6,422.3

Mutual Funds-Money Market Open-end
Beginning balance                      $      1,378.0        $  1,742.2       $     1,556.6       $  1,994.1
Other (1)                                       (66.3 )           (34.5 )            (244.9 )         (286.4 )

Ending balance                         $      1,311.7        $  1,707.7       $     1,311.7       $  1,707.7

Variable Insurance Funds
Beginning balance                      $      1,286.6        $  1,317.8       $     1,311.8       $  1,295.7
Inflows                                          20.9              12.3                32.5             22.1
Outflows                                        (53.3 )           (65.7 )            (108.8 )         (126.7 )

Net flows                                       (32.4 )           (53.4 )             (76.3 )         (104.6 )
Market appreciation (depreciation)               51.3             (14.1 )              70.0             59.2
Other (1)                                          -                0.5                  -               0.5

Ending balance                         $      1,305.5        $  1,250.8       $     1,305.5       $  1,250.8

Separately Managed Accounts (2)
Beginning balance                      $      6,778.4        $  6,435.5       $     7,433.1       $  5,829.0
Inflows                                         278.8             324.6               750.7            691.6
Outflows                                       (461.0 )          (295.3 )          (1,489.0 )         (529.3 )

Net flows                                      (182.2 )            29.3              (738.3 )          162.3
Market appreciation                             238.5              87.5               138.4            561.4
Other (1)                                        27.7             (30.6 )              29.2            (31.0 )

Ending balance                         $      6,862.4        $  6,521.7       $     6,862.4       $  6,521.7

Institutional Accounts (2)
Beginning balance                      $      4,530.5        $  4,538.7       $     4,570.8       $  4,359.5
Inflows                                         106.8             189.0               231.2            343.6
Outflows                                       (137.9 )          (260.6 )            (374.4 )         (326.6 )

Net flows                                       (31.1 )           (71.6 )            (143.2 )           17.0
Market appreciation (depreciation)              131.1             (13.7 )             218.0             96.0
Other (1)                                       (65.5 )           (54.1 )             (80.6 )          (73.2 )

Ending balance                         $      4,565.0        $  4,399.3       $     4,565.0       $  4,399.3

Total
Beginning balance                      $     58,011.2        $ 51,207.7       $    57,739.6       $ 45,537.0
Inflows                                       4,018.3           5,595.8             8,267.5         11,837.8
Outflows                                     (3,050.2 )        (3,083.6 )          (7,759.1 )       (5,599.6 )

Net flows                                       968.1           2,512.2               508.4          6,238.2
Market appreciation (depreciation)            2,548.0            (887.9 )           3,503.5          1,317.6
Other (1)                                      (133.0 )          (179.0 )            (357.2 )         (439.8 )

Ending balance                         $     61,394.3        $ 52,653.0       $    61,394.3       $ 52,653.0


Table of Contents

(1) Comprises open-end and closed-end mutual fund distributions, net flows of cash management strategies, net flows and market appreciation (depreciation) on structured products, and net flows from non-sales related activities such as asset acquisitions/(dispositions) and marketable securities investments/(withdrawals) and the impact on assets from the use of leverage.

(2) Includes assets under management related to options strategies.

The following table summarizes our assets under management by asset class:

                         As of June 30,                   Change                     % of Total
                                                   2014 vs.
                       2014           2013           2013            %           2014         2013
 ($ in millions)
 Asset Class
 Equity             $ 35,842.5     $ 29,611.7     $  6,230.8         21.0 %        58.3 %       56.3 %
 Fixed income         16,750.2       16,170.9          579.3          3.6 %        27.3 %       30.7 %
 Alternatives (1)      6,744.8        3,705.9        3,038.9         82.0 %        11.0 %        7.0 %
 Other (2)             2,056.8        3,164.5       (1,107.7 )      (35.0 %)        3.4 %        6.0 %

 Total              $ 61,394.3     $ 52,653.0     $  8,741.3         16.6 %       100.0 %      100.0 %

(1) Consists of non-traditional investment categories such as long-short, real estate, natural resources and other.

(2) Consists of cash management and options strategies. Options strategies were $0.6 million and $1.4 million at June 30, 2014 and 2013, respectively.

Average Assets Under Management and Average Basis Points

The following table summarizes the average assets under management and the
average management fee basis points:



                                                                     Three Months Ended June 30,
                                                  Average Fees Earned                  Average Assets Under Management
                                              (expressed in basis points)                      ($ in millions)
                                                2014                   2013              2014                   2013
Products
Mutual Funds-Long-Term Open-End (1)(2)                 52                 51       $       38,367.2       $       32,447.6
Mutual Funds-Closed-End                                64                 61                6,805.1                6,614.4
Mutual Funds-Money Market Open-End (1)                 -                   2                1,317.1                1,700.6
Variable Insurance Funds (1)                           51                 57                1,287.6                1,303.1
Separately Managed Accounts (3)                        52                 49                6,700.0                6,505.7
Institutional Accounts (3)                             36                 33                4,538.4                4,503.3

All Products                                           51                 49       $       59,015.4       $       53,074.7

                                                                      Six Months Ended June 30,
                                                  Average Fees Earned                  Average Assets Under Management
                                              (expressed in basis points)                      ($ in millions)
                                                2014                   2013              2014                   2013
Products
Mutual Funds-Long-Term Open-End (1)(2)                 52                 51       $       37,360.8       $       30,418.7
Mutual Funds-Closed-End                                64                 60                6,664.2                6,508.5
Mutual Funds-Money Market Open-End (1)                 -                   3                1,377.0                1,769.5
Variable Insurance Funds (1)                           52                 56                1,284.9                1,309.5
Separately Managed Accounts (3)                        52                 49                6,841.4                6,200.7
Institutional Accounts (3)                             36                 33                4,566.1                4,474.2

All Products                                           51                 49       $       58,094.4       $       50,681.1


Table of Contents

(1) Average fees earned are net of non-affiliated subadvisory fees.

(2) Excludes the impact of consolidated sponsored investment products.

(3) Includes assets under management related to options strategies.

Long-term and money market open-end mutual fund and variable insurance fund fees are calculated based on average daily net assets. Closed-end fund fees are calculated based on either average weekly or daily net assets. Average fees earned will vary based on several factors, including the asset mix and reimbursements to funds. Separately managed 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 or current quarter's asset values. Structured finance product fees, which are included in institutional accounts, are calculated based on a combination of the underlying cash flows and the principal value of the product.

The average fee rate earned for the three and six months ended June 30, 2014 increased as compared to the same periods in the prior year as equity and alternative products, which generally have higher fees, represented a higher percentage of our assets under management due to strong sales, positive flows and market appreciation. The average fee rate earned on closed-end funds increased for the three and six months ended June 30, 2014 as compared to the same periods in 2013 due to decreased fee waivers. The average fee rate earned on separately managed accounts increased in the three and six month periods ended June 30, 2014 as compared to same periods in 2013 due to the redemption of low fee earning accounts.

Results of Operations

Summary Financial Data



                                                             Three Months Ended June 30,                                  Six Months Ended June 30,
                                                                              2014 vs.                                                    2014 vs.
                                                   2014           2013          2013            %             2014           2013           2013            %
($ in thousands)
Results of Operations
Investment management fees                       $  74,537      $ 64,475      $  10,062          15.6 %     $ 146,329      $ 122,252      $  24,077          19.7 %
Other revenue                                       38,212        31,665          6,547          20.7 %        74,291         60,056         14,235          23.7 %

Total revenues                                     112,749        96,140         16,609          17.3 %       220,620        182,308         38,312          21.0 %

Operating expenses                                  89,300        68,142         21,158          31.0 %       163,588        132,100         31,488          23.8 %
Amortization expense                                   947         1,116           (169 )       (15.1 )%        1,904          2,226           (322 )       (14.5 )%

Total operating expenses                            90,247        69,258         20,989          30.3 %       165,492        134,326         31,166          23.2 %

Operating income                                    22,502        26,882         (4,380 )       (16.3 )%       55,128         47,982          7,146          14.9 %
Other income (expense), net                          7,538        (3,390 )       10,928        (322.4 )%        9,571         (2,211 )       11,782        (532.9 )%
Interest income, net                                 1,858           609          1,249         205.1 %         2,976            965          2,011         208.4 %

Income before income taxes                          31,898        24,101          7,797          32.4 %        67,675         46,736         20,939          44.8 %
Income tax expense                                  12,106         9,318          2,788          29.9 %        26,116         17,768          8,348          47.0 %

Net income                                          19,792        14,783          5,009          33.9 %        41,559         28,968         12,591          43.5 %
Noncontrolling interests                              (249 )         602           (851 )      (141.4 )%          (78 )          377           (455 )      (120.7 )%

Net income attributable to common stockholders   $  19,543      $ 15,385      $   4,158          27.0 %     $  41,481      $  29,345      $  12,136          41.4 %


Table of Contents

Revenues

Revenues by source are as follows:



                                                    Three Months Ended June 30,                              Six Months Ended June 30,
                                                                    2014 vs.                                                 2014 vs.
                                           2014          2013         2013            %            2014          2013          2013           %
($ in thousands)
Investment management fees
Mutual funds                             $  60,118     $ 51,020     $   9,098         17.8 %     $ 117,138     $  96,248     $  20,890        21.7 %
Separately managed accounts                  8,746        7,910           836         10.6 %        17,741        15,154         2,587        17.1 %
Institutional accounts                       4,036        3,706           330          8.9 %         8,138         7,212           926        12.8 %
Variable products                            1,637        1,839          (202 )      (11.0 )%        3,312         3,638          (326 )      (9.0 )%

Total investment management fees            74,537       64,475        10,062         15.6 %       146,329       122,252        24,077        19.7 %
Distribution and service fees               23,940       19,324         4,616         23.9 %        46,378        36,685         9,693        26.4 %
Administration and transfer agent fees      13,942       12,061         1,881         15.6 %        27,015        22,756         4,259        18.7 %
Other income and fees                          330          280            50         17.9 %           898           615           283        46.0 %

Total revenues                           $ 112,749     $ 96,140     $  16,609         17.3 %     $ 220,620     $ 182,308     $  38,312        21.0 %

. . .

  Add VRTS to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for VRTS - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.