The Virtus Greater European Opportunities Fund

According to its website, the Virtus Greater European Opportunities Fund – Class A (VGEAX) “seeks to offer investors exposure to European market economies through well-established companies. The securities selected for inclusion in the fund are, in the opinion of the subadviser, well-managed businesses with consistent operating histories and financial performance that have favorable long-term economic prospects, and in most cases, generate free cash flow. Over full market cycles, the investment style is designed with the dual objectives of capturing part of the up market cycles and protecting principal in down market cycles.”

Virtus Investment Advisers is the investment adviser to the fund. Vontobel Asset Management functions as its subadviser.

VGEAX’s assets were spread across 45 holdings as of September 2015 (the latest available data). It was managing assets worth $22.1 million as of the end of November. In November, its top ten equity holdings included British American Tobacco (BTI), Philip Morris International (PM), SAP SE (SAP), Priceline Group (PCLN), and SABMiller (SAB), comprising 21.1% of the fund’s portfolio.

A Look at VGEAX through November 2015

Historical portfolios

For this analysis, we’ll be considering holdings as of September 2015, the latest available sectoral breakdown. The holdings after September reflect valuation-driven changes to the portfolio, not the actual holding.

The portfolio of VGEAX is quite different from its peers. Unlike any other fund in this review, the fund has consumer staples as its largest sector. The sector forms more than 40% of the fund’s assets. Healthcare makes up more than a fifth of the assets, followed by the consumer discretionary sector. Fund managers exited the energy sector sometime in 2Q15. The fund isn’t invested in the telecom services and utilities sectors.

Both its top two sectors have seen increased portfolio space in the past one year until November 2015. Consumer discretionary stocks saw their exposure reduced in that period. Fund managers have sharply reduced exposure to the industrials sector. It’s nearly half the size it was a year ago.

Interestingly, financials used to form just 4% of the portfolio in November 2014. In 1Q15, after the ECB (European Central Bank) announced its stimulus measures, the fund started to load up on financial stocks. At one time during that period, they comprised 11.4% of the portfolio. They form less than 9% at present.

In the next part of this series, we’ll see how the fund has fared until November 2015.

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