The Merger Fund® Interactive Chart
See how The Merger Fund® can diversify traditional stock and bond portfolios in an interactive way.
June 2024: A Market Ripe for Accelerating Activity
- Merger and Acquisition (M&A) activity surpassed $1.6 trillion in June, a 19% increase since the same period last year.
- Mega-deals account for nearly two-thirds of the North American M&A volume year-to-date.
- Companies pursuing competitive growth are increasingly looking to buy-versus-build and to divest non-core assets.
- Private equity (PE) firms have had their strongest quarter since Q2 2022, with ~$170 billion in volume.
- The evolving PE landscape reflects a heightened urgency among firms to extract value from their investments, signaling an opportune moment for accelerating M&A activity.
Spreads
Spreads remain very attractive. As of June 30th, we were tracking 143 transactions, with a median annualized spread similar to last months of roughly 12.1%. Both The Merger Fund® and the Virtus Westchester Event-Driven Fund continue to hold arbitrage investments with a weighted median annualized spread in the mid-teens. As a reminder, the funds' net performance will typically be lower than the gross spreads, which would be net of fund expenses, trading and hedging costs, potential time slippage, and the occasional terminated transaction.
June 2024 Performance Review
The Merger Fund® (MERIX): +0.59%
- Five deals were completed, and capital was redeployed into seven new situations. There were no broken transactions. As of the end of June, we held 60 positions and were approximately 99% invested.
- Top contributors: DS Smith PLC/International Paper; Altaba/Alibaba; Olink Holding AB/Thermo Fisher Scientific, Inc.; Catalent, Inc./Novo Holdings A/S; Westrock Co./Smurfit Kappa Group PLC.
- Top detractors: Macro Portfolio Hedge; Capril Holdings Ltd/Tapestry Inc.; United States Steel Corp./Nippon Steel Corp.; Albertsons Cos. Inc./The Kroger Co.; Darktrace PLC/Thoma Bravo LLC.
Virtus Westchester Event Driven Fund (WCEIX): +0.47%
- Six deals were completed during the month, with capital redeployed into six new situations. There were no broken transactions. As of the end of June, the Fund held 80 positions and was approximately 117% invested.
- TTop contributors: DS Smith PLC/International Paper; Closed-End Funds; Altaba/Alibaba; Olink Holding AB/Thermo Fisher Scientific, Inc.; Catalent Inc./Novo Holdings A/S.
- Top detractors: Macro Portfolio Hedge; Capri Holdings Ltd./Tapestry Inc.; Vale SA; United States Steel Corp./Nippon Steel Corp.; Thyssenkrupp AG.
Virtus Westchester Credit Event Fund (WCFIX): +0.80%
- Six transactions were completed, with capital redeployed into two new transactions. There were no broken transactions. The Fund held 39 transactions and was 95% invested at the end of the month.
- Top contributors: Closed-End Funds; Everi Holdings Inc./Global Gaming & PlayDigital; Altaba/Alibaba; IEA Energy Services; Summit Midstream Holdings.
- Top detractors: Kronos Acquisition Holdings; NuStar Energy LP/Sunoco LP; IPOs-DCM; Claire’s Stores; La Financiere Atalian.
Performance and Risk/Reward Updates
Risk Metrics:
(as of
)
| 3 Year | MERIX | WCEIX | WCFIX | Benchmark 1: S&P 500 TR USD | Benchmark 2: Bloomberg US Agg Bond TR USD | Peer Group Average |
|---|---|---|---|---|---|---|
| Total Return | 1.53 | 0.31 | 2.63 | 10.01 | -3.02 | 0.71 |
| Standard Deviation | 2.94 | 4.65 | 3.98 | 17.86 | 7.43 | 4.79 |
| Alpha (vs. S&P 500®) | -2.04 | -4.14 | -1.88 | 0.00 | -8.42 | -3.54 |
| Sharpe Ratio | -0.62 | -0.65 | -0.19 | 0.36 | -0.84 | -0.49 |
| Sortino Ratio | -0.74 | -0.79 | -0.26 | 0.54 | -1.05 | -0.56 |
| Beta (vs. S&P 500®) | 0.03 | 0.15 | 0.15 | 1.00 | 0.29 | 0.13 |
| Correlation | 0.18 | 0.59 | 0.72 | 1.00 | 0.70 | 0.41 |
| Beta (vs. Agg) | 0.04 | 0.24 | 0.27 | 1.70 | 1.00 | 0.19 |
| Correlation (vs. Agg) | 0.10 | 0.39 | 0.53 | 0.70 | 1.00 | 0.24 |
(as of
)
| 5 Year | MERIX | WCEIX | WCFIX | Benchmark 1: S&P 500 TR USD | Benchmark 2: Bloomberg US Agg Bond TR USD | Peer Group Average |
|---|---|---|---|---|---|---|
| Total Return | 3.00 | 3.22 | 6.72 | 15.05 | -0.23 | 3.72 |
| Standard Deviation | 3.03 | 7.73 | 10.59 | 18.08 | 6.23 | 6.90 |
| Alpha (vs. S&P 500®) | -0.30 | -2.74 | 0.16 | 0.00 | -4.78 | -1.50 |
| Sharpe Ratio | 0.22 | 0.11 | 0.41 | 0.69 | -0.40 | 0.22 |
| Sortino Ratio | 0.29 | 0.15 | 0.58 | 1.08 | -0.53 | 0.38 |
| Beta (vs. S&P 500®) | 0.08 | 0.29 | 0.35 | 1.00 | 0.18 | 0.24 |
| Correlation | 0.44 | 0.68 | 0.59 | 1.00 | 0.53 | 0.57 |
| Beta (vs. Agg) | 0.09 | 0.32 | 0.40 | 1.54 | 1.00 | 0.29 |
| Correlation (vs. Agg) | 0.19 | 0.26 | 0.23 | 0.53 | 1.00 | 0.25 |
(as of
)
| 10 Year | MERIX | WCEIX | WCFIX | Benchmark 1: S&P 500 TR USD | Benchmark 2: Bloomberg US Agg Bond TR USD | Peer Group Average |
|---|---|---|---|---|---|---|
| Total Return | 2.92 | 3.15 | NA | 12.86 | 1.35 | 2.78 |
| Standard Deviation | 3.00 | 6.18 | NA | 15.31 | 4.87 | 6.31 |
| Alpha (vs. S&P 500®) | 0.29 | -1.51 | NA | 0.00 | -1.53 | -1.41 |
| Sharpe Ratio | 0.43 | 0.24 | NA | 0.72 | -0.05 | 0.18 |
| Sortino Ratio | 0.62 | 0.33 | NA | 1.13 | -0.07 | 0.26 |
| Beta (vs. S&P 500®) | 0.09 | 0.27 | NA | 1.00 | 0.12 | 0.24 |
| Correlation | 0.45 | 0.68 | NA | 1.00 | 0.37 | 0.56 |
| Beta (vs. Agg) | 0.06 | 0.25 | NA | 1.17 | 1.00 | 0.21 |
| Correlation (vs. Agg) | 0.09 | 0.19 | NA | 0.37 | 1.00 | 0.17 |
Performance (%):
(as of )| Product / Market Indices | Ticker | MTD | YTD | 1 Year | 2 Year | 3 Year | 5 Year | 10 Year |
|---|---|---|---|---|---|---|---|---|
| Westchester Event-Driven | WCEIX* | 0.47 | 0.28 | 5.95 | 4.57 | 0.31 | 3.22 | 3.15 |
| Westchester Credit Event | WCFIX* | 0.80 | 3.38 | 7.89 | 8.38 | 2.63 | 6.72 | NA |
| The Merger Fund® | MERIX* | 0.59 | 0.65 | 6.21 | 3.86 | 1.53 | 3.00 | 2.92 |
| S&P 500® Index | 3.59 | 15.29 | 24.56 | 22.05 | 10.01 | 15.05 | 12.86 | |
| Bloomberg U.S. Aggregate Bond Index | 0.95 | -0.71 | 2.63 | 0.83 | -3.02 | -0.23 | 1.35 |
* MERIX inception date is 8/1/13 (The Merger Fund® A Shares inception date is 1/31/89), WCEIX inception date is 1/2/14, WCFIX inception date is 10/29/17.
Performance data quoted represents past results. Past performance is no guarantee of future results, and current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate, so your shares, when redeemed, may be worth more or less than their original cost.
Class I shares have no sales charges and are not available to all investors. Other share classes have sales charges. The Merger Fund® - The fund class gross expense ratio is 1.37%. The net expense ratio is 1.27%, which reflects a contractual expense reimbursement in effect through 04/30/2025. The net expense ratio minus dividend and interest expense on short sales and indirect expenses incurred by the underlying funds in which the Fund invests is 1.17%. Virtus Westchester Credit Event Fund - The fund class gross expense ratio is 1.61%. The gross expense ratio minus dividend and interest expenses on short sales and indirect expenses incurred by the underlying funds in which the Fund invests is 1.45%. Virtus Westchester Event Driven Fund - The fund class gross expense ratio is 1.67%. The net expense ratio is 1.57%, which reflects a contractual expense reimbursement in effect through 04/30/2025. The net expense ratio minus dividend and interest expenses on short sales is 1.53%.
Investment Partner
All investments carry a certain degree of risk, including possible loss of principal.
IMPORTANT RISK CONSIDERATIONS
The Merger® Fund: 3, 8, 12, 13, 4, 9, 1, 2, 5, 14, 11, 7, 10; Virtus Westchester Event-Driven Fund: 3, 8, 4, 12, 9, 1, 2, 5, 13, 7, 10; Virtus Westchester Credit Event Fund: 3, 8, 1, 12, 9, 2, 5, 6, 4, 13, 7, 10.
- Credit & Interest: Debt instruments are subject to various risks, including credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt instruments may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.
- Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.
- Fundamental Risk of Investing: There can be no assurance that the portfolio will achieve its investment objectives. An investment in the portfolio is subject to the risk of loss of principal; shares may decrease in value.
- Foreign Investing: Investing in foreign securities subjects the portfolio to additional risks such as increased volatility, currency fluctuations, less liquidity, and political, regulatory, economic, and market risk.
- Hedging: The portfolio’s hedging strategy will be subject to the portfolio’s investment adviser’s ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being hedged.
- Lower-rated Securities: Instruments in lower-rated and non-rated securities present a greater risk of loss to principal and interest than higher-rated securities.
- Market Volatility: The value of the securities in the portfolio may go up or down in response to the prospects of individual companies and/or general economic conditions. Local, regional, or global events such as war or military conflict, terrorism, pandemic, or recession could impact the portfolio, including hampering the ability of the portfolio's manager(s) to invest its assets as intended.
- Merger-arbitrage & Event-driven: Merger-arbitrage and event-driven investing involve the risk that the adviser’s evaluation of the outcome of a proposed event, whether it be a merger, reorganization, regulatory issue, or other event, will prove incorrect and that the fund’s return on the investment may be negative.
- Portfolio Turnover: The portfolio’s principal investment strategies may result in a consistently high portfolio turnover rate. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when the portfolio is held in a taxable account.
- Prospectus: For additional information on risks, please see the fund’s prospectus.
- Sector Focused Investing: Events negatively affecting a particular industry or market sector in which the portfolio focuses its investments may cause the value of the portfolio to decrease.
- Short Sales: The portfolio may engage in short sales and may incur a loss if the price of a borrowed security increases before the date on which the portfolio replaces the security.
- Special Purpose Acquisition Company (SPAC): The value of a SPAC's securities is particularly dependent on the ability of its management to identify and complete a profitable acquisition. There is no guarantee that the SPACs in which the Fund invests will complete an acquisition or that any acquisitions completed by the SPACs in which the fund invests will be profitable. The values of investments in SPACs may be highly volatile and these investments may also have little or no liquidity.
- Technology Concentration: Because the portfolio is presently heavily weighted in the technology sector, it will be impacted by that sector’s performance more than a portfolio with broader sector diversification.
GLOSSARY
Alpha: A risk-adjusted measure of an investment’s excess return relative to a benchmark. Beta: A quantitative measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Correlation: A measure that determines the degree to which two variables’ movements are associated. The correlation coefficient will vary from -1 to +1. A -1 indicates perfect negative correlation and +1 indicates perfect positive correlation. Long Position: Refers to the purchase of a security with the expectation that it will rise in value. Deal Spreads: The difference between what the buyer (acquirer) is offering in terms of price for the seller’s (target) stock, typically at a premium to the market price, the result of some risk of the transaction being delayed or terminated. Long Position: Refers to the purchase of a security with the expectation that it will rise in value. Maximum Drawdown: The peak-to-trough decline during a specific record period of an investment, fund, or commodity. A drawdown is usually quoted as the percentage between the peak and the trough. Sharpe Ratio: A risk-adjusted measure calculated using standard deviation and excess return to determine reward per unit of risk. Short Position: Refers to the sale of a borrowed security with the intention of buying it back later at a lower price. Standard Deviation: Measures variability of returns around the average return for an investment portfolio. Higher standard deviation suggests greater risk.
INDEX DEFINITIONS
The Bloomberg U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The Morningstar U.S. Fund Event Driven Category Average contains strategies that attempt to profit when security prices change in response to certain corporate actions, such as bankruptcies, mergers and acquisitions, emergence from bankruptcy, shifts in corporate strategy, and other atypical events. Activist shareholder and distressed investment strategies also fall into this category. These portfolios typically focus on equity securities but can invest across the capital structure. The category average is calculated on a total return basis with dividends reinvested. The category average is unmanaged and is not available for direct investment. The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. Indexes are calculated on a total return basis. Indexes are unmanaged, their returns do not reflect any fees, expenses, or sales charges, and are not available for direct investment.
Please consider a Fund’s investment objectives, risks, charges, and expenses carefully before investing. For this and other information about any Virtus Fund, contact your financial representative, call 800-243-4361, or visit virtus.com for a prospectus or summary prospectus. Read it carefully before investing.
Not insured by FDIC/NCUSIF or any federal government agency. No bank guarantee. Not a deposit. May lose value.
Distributed by VP Distributors, LLC member FINRA and subsidiary of Virtus Investment Partners, Inc.