Skip to content
    VRTS
    Earnings call· Jun 2026(Q2 FY26)

    VIRTUS INVESTMENT PARTNERS Q2 FY26 earnings call VRTS

    Jul 30, 2026 Source

    Executive summary

    Virtus Investment Partners Q2 FY26 — Improved Net Flows and Capital Returns

    Virtus Investment Partners reported improved Q2 FY26 results, driven by strong institutional sales and positive net flows across fixed income, alternatives, and multi-asset strategies, despite continued headwinds from quality-oriented equities. The company expanded its ETF platform and continued its capital return program through share repurchases and debt reduction, maintaining financial flexibility. Management noted early signs of outperformance in quality equity strategies since late June, suggesting potential for a market cycle shift.

    Highlights

    5

    • Generated over $1 billion of positive net flows, excluding quality equity strategies.

    • Achieved strongest quarter of institutional sales ($2.2 billion) and net flows in nearly 3 years.

    • Total sales increased 5% to $6.1 billion.

    • Operating margin, excluding a discrete item, was 28.2%.

    • Repurchased approximately 70,000 shares for $10 million and repaid $20 million of revolving credit facility.

    Concerns

    3

    • Experienced total net outflows of $5.6 billion, primarily driven by quality-oriented equity strategies.

    • Open-end net outflows were $1.8 billion, compared to $1.3 billion last quarter.

    • Incurred a $3.8 million discrete noncash expense related to investment professional stock awards.

    Guidance & targets

    6
    CategoryTargetConfidence
    Average fee rate
    43.1 basis points
    medium materiality
    Medium
    Employment expenses as % of revenue
    54%
    medium materiality
    Medium
    Other operating expenses as adjusted
    $30M-$32M
    medium materiality
    Medium
    Effective tax rate
    13%-14%
    medium materiality
    Medium
    Interest expense
    modest decline
    low materiality
    Medium
    CLO issuance
    new CLO
    medium materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Total Company
    AUM increased primarily due to market performance.
    Assets under management (June 30): $152.2 billionAverage assets: $153.3 billion (down 3% sequentially)
    		——2%—
    Institutional Accounts
    Highest level of institutional sales in 3 years and best quarter of institutional flows in nearly 3 years, driven by higher sales and lower redemptions.
    AUM share: 33%Sales: $2.2 billion (up from $1.2 billion in Q1 FY26)Net outflows: $0.7 billion (improved from $3.2 billion in Q1 FY26)
    		————
    U.S. Retail Funds
    Sales declined, contributing to open-end fund sales decline.
    AUM share: 27%Sales: Declined
    		————
    Retail Separate Accounts (incl. Wealth Management)
    Wealth management sales were at their highest level since Q4 2023, but lower intermediary-sold sales offset this. Outflows driven by intermediary-sold quality-oriented equities.
    AUM share: 24%Sales: $1.2 billion (down from $1.4 billion in Q1 FY26)Net outflows: $3.1 billion (improved from $3.9 billion in Q1 FY26)
    		————
    Closed-end and Tender Offer Funds, ETFs, Global Funds
    Reported essentially breakeven net flows for closed-end and tender offer funds.
    AUM share: 16%
    		————
    ETFs
    Continued positive net flows and strong double-digit organic growth rate. ETF business has grown significantly from $1 billion 5 years ago and generated $2 billion of net flows in the past year.
    AUM: $5.8 billion (up $0.4 billion sequentially)Net flows: $0.3 billion (positive)
    		—58%——
    Fixed Income (Asset Class)
    Consistently strong performance across diversified offerings, with positive net flows.
    AUM share: Nearly 27%Performance (3-year): 80% beating benchmarksPerformance (10-year): 73% beating benchmarks
    		————
    Alternatives and Multi-asset (Asset Class)
    Consistently strong performance, with positive net flows in alternatives and the addition of Keystone in Q1.
    AUM share: Over 28% (up from 21% a year ago)Performance (3-year): 67% beating benchmarksPerformance (10-year): 67% beating benchmarks
    		————

    Operational metrics

    30
    Investment management fees as adjusted
    $164.8Mup 1% sequentially
    Q2 FY26
    Average fee rate
    43.1up from 41.9 bps last quarter
    Q2 FY26
    Employment expenses as adjusted
    $102.1Mdeclined 4% sequentially
    Q2 FY26
    Employment expenses as % of revenue
    55.6
    Q2 FY26
    Discrete expense item (noncash)
    $3.8M
    Q2 FY26
    Other operating expenses as adjusted
    $31.9M
    Q2 FY26
    Operating income as adjusted
    $47.9Mincreased from $43.8M
    Q2 FY26
    Operating margin as adjusted
    26.1up from 24%
    Q2 FY26
    Interest expense
    increased by $0.4M
    Q2 FY26
    Effective tax rate
    13.3essentially unchanged from prior quarter
    Q2 FY26
    Net income as adjusted per diluted share
    $5.54increased from $5.38
    Q2 FY26
    Cash and equivalents
    $176Mup from prior quarter
    June 30
    Other investments (incl. seed capital)
    $273M
    June 30
    Undrawn capacity on revolving credit facility
    $220M
    June 30
    Shares repurchased
    70,097
    Q2 FY26
    Revolving credit facility repayment
    $20M
    Q2 FY26
    Gross debt
    $427Mdown from $448M at March 31
    June 30
    Net debt
    $251M
    June 30
    Total sales
    $6.1Bincreased 5% from $5.8B in Q1 FY26
    Q2 FY26
    Total net outflows
    $5.6Bimproved from $8.4B last quarter
    Q2 FY26
    Net flows excluding quality equity strategies
    over $1B
    Q2 FY26
    ETF net flows
    $2B
    LTM Q2 FY26

    Generated in the past year alone.

    ETF AUM growth
    58
    YoY Q2 FY26
    Open-end fund sales
    $2.6Bdeclined 14%
    Q2 FY26
    Open-end net outflows
    $1.8Bcompared with $1.3B last quarter
    Q2 FY26
    Fixed income strategies beating benchmarks
    80
    3-year
    Alternative strategies beating benchmarks
    67
    3-year
    Fixed income strategies beating benchmarks
    73
    10-year
    Alternative strategies beating benchmarks
    67
    10-year
    Alternatives and multi-asset AUM share
    28up from 21% a year ago
    Q2 FY26

    Industry KPIs

    1
    MetricValueDetails
    Fee rate43.1bps

    Product announcements

    1
    ProductTypeDetails
    New actively managed ETFs from Duff & Phelps and Silvantlaunch

    Risks & headwinds

    3
    Challenging environment for quality-oriented equity strategiesPast 2 years

    Continued net outflows, overshadowing positive flows in other areas.

    Mitigation: Diversification into different types of strategies; expectation of market cycle change.

    Concentration of redemptions in quality-oriented equity strategiesQ2 FY26

    Drove total net outflows of $5.6 billion.

    Mitigation: Believed to be a cyclical market matter, not structural; recent short-term outperformance noted.

    Known institutional redemptions exceeding known winsNear-term

    Known redemptions exceed known wins

    Mitigation: Sales pipeline is stronger than it has been in a year, diversified across 5 managers and 6 strategies.

    What to watch in Q3 FY26

    5

    Quality equity strategy outperformance

    Next quarter
    CurrentNearly every quality strategy has been outperforming its benchmarks quarter-to-date since late June
    TargetContinued outperformance, indicating a market cycle shift

    Why it matters

    A sustained shift in market favor towards quality equities would significantly improve overall net flows and AUM.

    While it is still early in the quarter and a very short time frame, nearly every quality strategy has been outperforming its benchmarks quarter-to-date and some meaningfully so.

    Q&A highlights

    5

    What is driving strength in fixed income and alternatives, and what is the potential for an upturn in equities?

    Management highlighted diversified capabilities in fixed income and alternatives, noting strong performance and positive flows. For quality equities, they emphasized the cyclical nature of underperformance and recent short-term outperformance since late June as an indicator of potential reversal, advocating for diversified strategies.

    “So I think all of those areas on their own are actually in a very competitive opportunity and we would ultimately expect them hopefully to continue to grow. But again, the overshadowing of the quality is obviously there.”

    asked by Bradley Hays · answered by George Aylward

    2 min read5 chapters

    Detailed Narrative

    01

    Market Environment and Strategy Performance

    The quarter reflected a challenging environment for quality-oriented equity strategies, which continued to experience outflows. However, management noted strong performance in fixed income and alternative strategies, with 80% and 67% beating benchmarks over 3 years, respectively. Since late June, nearly every quality strategy has been outperforming its benchmarks, suggesting a potential shift in market dynamics more favorable to fundamentally driven active security selection.

    02

    Product Expansion and ETF Growth

    Virtus expanded its product offerings by introducing new actively managed ETFs from Duff & Phelps and Silvant. The ETF business has grown significantly, generating $2 billion of net flows in the past year and reaching $5.8 billion in AUM, up 58% year-over-year. This expansion aligns with growing client demand and opportunities for long-term growth.

    03

    Capital Allocation and Balance Sheet

    The company ended the quarter with $176 million in cash and equivalents and $273 million in other investments. It repurchased approximately 70,000 shares for $10 million and repaid $20 million of its revolving credit facility, reducing gross debt to $427 million and net debt to $251 million (0.9x EBITDA). Management emphasized financial flexibility for investments, shareholder returns, and maintaining appropriate leverage.

    04

    Institutional and Wealth Management Momentum

    Institutional sales reached $2.2 billion, the highest level in 3 years, driven by alternatives, equities, and fixed income, including a large global listed real estate inflow. Wealth management sales were also at their highest level since Q4 2023. These areas contributed to a meaningful improvement in total net flows, excluding quality equity strategies.

    05

    Keystone Fund Exposure Discussion

    An analyst inquired about Keystone fund exposures to loans self-identified as being in default or tied to bankruptcy but marked at par. Management stated that the structure has not had implications and there should not be any further impacts, noting that standard methodologies for mark-to-market are used.

    AI-generated summary of the company’s earnings call. Not investment advice.