Virtus Investment Partners(US:VRTS)2021-05-01 01:53Financial Data and Key Metrics Changes - The company reported a significant increase in assets under management (AUM) to nearly $170 billion, marking a 28% sequential increase and reflecting the addition of AGI assets, market appreciation, and positive net flows [7][11][19] - Earnings per share (EPS), as adjusted, reached $6.78, a 32% sequential increase and the highest level for the third consecutive quarter [14][33] - Operating income, as adjusted, was $78 million, up 26% sequentially and 95% year-over-year, with an operating margin of 41.6%, an increase from 40.3% in the prior quarter [14][32] Business Line Data and Key Metrics Changes - Total sales for the quarter reached a new high of $10.6 billion, up 19% sequentially, with strong growth in open-end funds and retail separate accounts [11][24] - Positive net flows of $2.4 billion were recorded, with contributions across product categories and asset classes, including $600 million in open-end net inflows and $1.8 billion in retail separate accounts [12][22] - Institutional flows were modestly positive, achieving an organic growth rate of 6.1% over the past four quarters [12] Market Data and Key Metrics Changes - The company experienced broad-based sales strength across various asset classes, with net inflows in equity, fixed income, multi-asset, and alternatives [22][23] - Equity assets represented 63% of AUM, with fixed income at 21%, and multi-asset and alternatives at 13% and 3%, respectively [20] Company Strategy and Development Direction - The partnership with AllianzGI has enhanced the company's capabilities, bringing additional scale and complementary strategies to expand its investment options [10] - The company aims to leverage its differentiated distribution model and diverse product offerings to drive growth and create long-term shareholder value [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the continued positive trends in sales and net flows, indicating no significant changes in the first quarter's trends for April [13] - The company remains on track to close the transaction with Westchester Capital Management in the second half of the year, expecting it to be immediately accretive to EPS by approximately 6% [17] Other Important Information - The company repurchased approximately 78,000 common shares for $20.1 million during the quarter and ended in a net cash position [15][36] - The average fee rate on AUM for the quarter was 43.1 basis points, slightly down from the previous quarter, reflecting the inclusion of AGI assets [27] Q&A Session Summary Question: Clarification on Westchester accretion - Management confirmed that the accretion from Westchester would be based on normalized first-quarter EPS, but did not provide a specific number [41][42] Question: Early experience with Allianz funds - Management expressed satisfaction with the onboarding process from AllianzGI and noted positive flows in the first two months [44] Question: Context on AGI strategies offering - Management stated that the distribution of AGI strategies is already operational and has seen positive flows [49] Question: Impact of revenue participation liability on income statement - Management clarified that the $138 million liability would likely not impact the P&L but would be reflected in balance sheet items [50][51] Question: Capital allocation strategy and appetite for acquisitions - Management indicated that the capital allocation strategy remains flexible, allowing for investments in growth, shareholder returns, and potential acquisitions [56][57] Question: Distribution initiatives for AGI products - Management emphasized that the focus is on retail distribution and leveraging existing relationships to expand access to AGI products [61][62] Question: Strength in institutional mandates - Management noted a broader pipeline of institutional mandates and emphasized the potential for growth, particularly with non-U.S. clients [66][68]