![Virtus Private Credit Strategy ETF (VPC) Fact Sheet](https://www.virtus.com/files/assets/images/small/Virtus_Private_Credit_Strategy_ETF_Factsheet_1286.jpg)
Virtus Private Credit Strategy ETF (VPC) Fact Sheet
Access to capital substantively changed after the Global Financial Crisis, as banks were constrained by stricter regulation and capital requirements, making traditional bank borrowing for small- and mid-sized companies increasingly expensive and difficult to secure. Experienced private lenders stepped in to fill that gap, growing the private credit market 10x in the last decade.
The private credit market recently reached nearly $1.7 trillion, larger than the publicly traded leveraged loan ($1.4 trillion) or high yield bond ($1.3 trillion) markets, according to the U.S. Federal Reserve.
Business Development Companies (BDCs) allow individual non-accredited investors to participate in private placements. BDCs, like mutual funds and closed-end funds, are regulated by the Securities and Exchange Commission (SEC).
BDCs are typically managed by prominent third-party investment firms such as Blackstone, BlackRock, Apollo, Ares, Goldman Sachs, and KKR, which have experience working with companies in the specific sectors and industries being considered for loans. Regulatory requirements for BDCs include diversification, leverage limits, and the ability to hold corporate or physical assets as securities, which may provide risk mitigation while allowing for enhanced return potential.
Additionally, private credit can be accessed through select Closed-End Funds (CEFs) with significant exposure to private credit instruments such as collateralized loan obligations (CLOs), mezzanine loans, and bank loans.
Coupling investments in CEFs with BDCs may prove beneficial to investors as this combination could enhance diversification across structured debt strategies and securities in a portfolio.
OPEN THE DOOR TO PRIVATE ACCESS | | Access a traditionally closed private credit market in a cost-efficient and liquid vehicle |
SPREAD YOUR DEBT RISK | | Diversify with a private credit portfolio that has historically provided low correlation to traditional stocks and bonds. |
POTENTIALLY INCREASE INCOME | | Seek significantly higher yield with potentially attractive risk-adjusted returns in private credit. |
IMPORTANT RISK CONSIDERATIONS
Exchange-Traded Funds (ETF): The value of an ETF may be more volatile than the underlying portfolio of securities it is designed to track. The costs to the portfolio of owning shares of an ETF may exceed the cost of investing directly in the underlying securities. Private Credit Funds: Private credit funds that invest in closed-end funds and business development companies bear the risks of these underlying assets, including liquidity, industry, currency, valuation and credit risks. Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small, medium, or large-sized companies may enhance that risk. 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. High Yield Fixed Income Securities: There is a greater risk of issuer default, less liquidity, and increased price volatility related to high yield securities than investment grade securities. Fund of Funds: The risk that the fund's performance will be adversely affected by the assets owned by the other mutual funds and ETFs in which it invests, and that the layering of expenses associated with the fund's investment in such other funds will cost shareholders more than direct investments would have cost. Passive Strategy/Index Risk: A passive investment strategy seeking to track the performance of the underlying Index may result in the portfolio holding securities regardless of market conditions or their current or projected performance. This could cause the portfolio's returns to be lower than if the portfolio employed an active strategy. Correlation to Index: The performance of the portfolio and its index may vary due to factors such as flows, transaction costs, whether the portfolio obtains every security in the index, and timing differences associated with additions to and deletions from the index. Market Price/NAV: At the time of purchase and/or sale, an investor's shares may have a market price that is above or below the fund's NAV, which may increase the investor's risk of loss. Closed-End Funds: Closed-end funds may trade at a discount or premium from their net asset values, which may affect whether an investor will realize gains or losses. They may also employ leverage, which may increase volatility. 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. Prospectus: For additional information on risks, please see the fund's prospectus.
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.