Virtus Newfleet ABS/MBS ETF

VABS

Market cap $112M

Virtus Newfleet Securitized Income ETF returned 0.75% at NAV for the quarter versus the ICE BofA 1-3 Year A-BBB US Corporate Index return of 0.31%. Subordinate auto and credit cards performed well for the quarter as spreads tightened to risk-free assets. Exposure to an airline enhanced equipment certificate (a specialized corporate debt security used primarily by airlines to finance aircraft purchases) lagged.

Short-term investment-grade bond strategies, with durations in the two-to-three-year range, are well positioned to capture a meaningful yield advantage without the rate sensitivity that has challenged longer duration strategies in recent months. The yield to worst on a diversified short-term bond portfolio currently sits between 4.5% and 5.0%, more than 100 basis points above what bank savings accounts and government money market funds are currently yielding. Although the path for rates is highly uncertain, the range of outcomes in which short-term bonds outperform cash is considerably wider than the range in which they don't.

Securitized products posted positive total and excess returns in 4Q, outperforming corporate bonds on both measures. Newfleet Asset Management increased our allocations to agency MBS this year, reaching the highest exposures in years. The Fund returned 1.13% at NAV for the quarter versus the ICE BofA 1-3 Year A-BBB US Corporate Index return of 1.21%.