What changed in this filing

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Item 1A. Risk Factors

2024-02-28 compared with 2023-02-27 · 43 added, 53 removed, 191 unchanged (33% of the section changed)

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Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates, national and international political circumstances and conflicts, public health issues and other conditions may impact the capital, equity and credit markets.

Employment rates, economic weakness and budgetary challenges in parts of the world, uncertainty regarding governmental regulations and international trade policies, conflicts such as in Ukraine, concern over prospects in China and emerging markets, and growing debt for certain countries all indicate that economic and political conditions remain

unpredictable.

Employment rates, economic weakness and budgetary challenges in parts of the world, uncertainty regarding governmental regulations and international trade policies, conflicts such as in Ukraine and the Middle East, concern over prospects in China and emerging markets, and growing debt for certain countries all indicate that economic and political conditions remain unpredictable.

The occurrence of public health issues such as a major epidemic or pandemic that affect public health and public perception of health risk, as well as local, state and/or national government restrictive measures implemented to control such issues, could adversely affect the global financial markets, our employees and the systems we rely on.

For example, the outbreak and spread of contagious diseases, such as the COVID-19 pandemic in early 2020, resulted in a widespread global public health crisis, which had, and may continue to have, negative impacts on global financial markets.

Any of the conditions listed herein, among others, may impact our assets under management.

The volatility in the markets in the past has highlighted the interconnection of the global economies and markets and has demonstrated how the deteriorating financial condition of one institution may adversely impact the performance of other institutions.

Past volatility in the markets has highlighted the interconnection of the global economies and markets and has demonstrated how deteriorating financial condition of one institution may adversely impact the performance of other institutions.

Our assets under management have exposure to many different industries and counterparties and may be exposed to credit, operational or other risk due to the default by a counterparty or client or in the event of a market failure or disruption.

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These assessments often influence the investment decisions of clients.

If the performance of our investment strategies is perceived to be underperforming relative to peers, it could result in increased withdrawals of assets by existing clients and the inability to attract additional investments from new and existing clients.

If the performance of our investment strategies is perceived to be underperforming relative to peers, it could result in

increased withdrawals of assets by existing clients and the inability to attract additional investments from new and existing clients.

We may engage in significant transactions that may not achieve the anticipated benefits or could expose us to additional or increased risks.

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In addition, any business we acquire may underperform relative to expectations or may lose customers or employees.

Our investment advisory agreements are subject to renegotiation or termination on short notice, which could negatively impact our business.

Our clients include our sponsored fund investors, represented by boards of trustees or directors (the "boards"), managed account program sponsors, individual private clients, and institutional clients.

Our investment management agreements are subject to renegotiation or termination on short notice, which could negatively impact our business.

Our clients include our sponsored fund investors, represented by boards of trustees or directors (the "fund boards"), managed account program sponsors, individual private clients, and institutional clients.

Our investment management agreements with these clients may be terminated on short notice and without penalty.

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and reputational, regulatory or compliance issues.

The boards of our sponsored funds may deem it to be in the best interests of a fund's shareholders to make decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund expenses over certain thresholds, or imposing restrictions on our management of the fund.

Under the Investment Company Act, investment advisory agreements automatically terminate in the event of an assignment, which may occur if, among other events, the Company undergoes a change in control, such as any person acquiring 25% of the voting rights of our common stock.

If an assignment were to occur, we cannot be certain that the funds' boards and shareholders would approve a new investment advisory agreement.

In addition, investment advisory agreements for the separate accounts we manage may not be assigned without the consent of the client.

The fund boards may deem it to be in the best interests of a fund's shareholders to make decisions adverse to us, such as reducing the compensation paid to us, requesting that we subsidize fund expenses over certain thresholds, or imposing restrictions on our management of the fund.

Under the Investment Company Act, investment management agreements automatically terminate in the event of an assignment, which may occur if, among other events, the Company undergoes a change in control, such as any person acquiring 25% of the voting rights of our common stock.

If an assignment were to occur, we cannot be certain that the funds' boards and shareholders would approve a new investment management agreement.

In addition, investment management agreements for the separate accounts we manage may not be assigned without the consent of the client.

If an assignment occurs, we cannot be certain that the Company will be able to obtain the necessary approvals or client consents.

The withdrawal, renegotiation or termination of any investment management contract relating to a material portion of assets under management would have an adverse impact on our results of operations and financial condition.

The withdrawal, renegotiation or termination of any investment management agreement relating to a material portion of assets under management would have an adverse impact on our results of operations and financial condition.

Our business could be harmed by any damage to our reputation and lead to a reduction in our revenues and profitability.

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The indebtedness we incur can take many forms including, but not limited to, term loans or revolving lines of credit that customarily contain covenants.

At December 31, 2022, the Company had $261.6 million of total debt outstanding under its credit agreement, excluding debt of consolidated investment products ("CIP"), and had no borrowings outstanding under its $175.0 million revolving credit facility.

Under our credit agreement, we are required to use a portion of our cash flow to service interest and make required annual principal payments, which will restrict our cash flow available for other purposes.

At December 31, 2023, we had $258.8 million of total debt outstanding under its credit agreement, excluding debt of consolidated investment products ("CIP"), and had no borrowings outstanding under our $175.0 million revolving credit facility.

Under our credit agreement, we are required to use a portion of our cash flow to service interest and make required annual principal payments, which may restrict our cash flow available for other purposes.

The credit agreement also contains covenants that may limit our ability to return capital to shareholders.

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Any or all of the above factors could adversely affect our financial condition or results of operations.

We may need to obtain additional capital in the future that may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business.

We may need to obtain additional capital that may not be available to us in sufficient amounts or on acceptable terms, which could have an adverse impact on our business.

Our ability to meet our future cash needs is dependent upon our ability to generate or have short-term access to cash.

Although we have generated sufficient cash in the past, we may not do so in the future.

The Company had unused capacity under its revolving credit facility of $175.0 million as of December 31, 2022.

We had unused capacity under our revolving credit facility of $175.0 million as of December 31, 2023.

Our ability to access capital markets efficiently depends on a number of factors, including the state of credit and equity markets, interest rates and credit spreads.

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We utilize unaffiliated subadvisers as investment managers for certain of our retail funds.

Because we typically have no ownership interests in these unaffiliated firms, we do not control their business activities.

Problems stemming from the business activities of these unaffiliated firms may negatively impact or disrupt their operations or expose them to disciplinary action or reputational harm.

Because we have no ownership interests in these firms, we do not control their business activities.

Problems stemming from the business activities of those firms may negatively impact or disrupt their operations or expose them to disciplinary action or reputational harm.

Furthermore, any such matters at these unaffiliated firms may have an adverse impact on our business or reputation or expose us to regulatory scrutiny, including with respect to our oversight of such firms.

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and registered investment advisers.

We are highly dependent on access to these various distribution systems to maintain and raise assets under management.

We are highly dependent on access to these distribution systems to raise and maintain assets under management.

These distributors are generally not contractually required to distribute our products and typically offer their clients various investment products and services, including proprietary products and services, in addition to, and in competition with, our products and services.

While we compensate these intermediaries pursuant to contractual agreements, we may not be able to retain access to these channels at all or at similar pricing.

Increasing competition for these distribution channels could cause our distribution costs to rise, which could have an adverse effect on our business,

revenues and profitability.

Increasing competition for these distribution channels could cause our distribution costs to rise, which could have an adverse effect on our business, revenues and profitability.

To the extent that existing or future intermediaries prefer to do business with our competitors, the sales of our products as well as our market share, revenues and profitability could decline.

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Our technology systems, and those of third-party service providers, are critical to our operations.

The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions, and provide reports and other customer service to clients is an essential part of our business.

Any delays or inaccuracies in obtaining pricing information, processing such transactions or reports, other breaches and errors, and any inadequacies in other customer service could result in reimbursement obligations or other liabilities or alienate clients and potentially give rise to claims against us.

Our business is highly dependent on third-party service providers' information systems, including for our ability to obtain prompt and accurate securities pricing information and to process transactions and reports.

Any failure or interruption of those systems, whether resulting from technology or infrastructure breakdowns, defects or external causes such as fire, natural disaster, computer viruses, acts of terrorism or power disruptions, or public health events could result in financial loss, negatively impact our reputation and negatively affect our ability to do business.

The ability to consistently and reliably obtain accurate securities pricing information, process client portfolio and fund shareholder transactions, and provide reports and other services to clients is an essential part of our business.

Any delays or inaccuracies in obtaining pricing information, processing such transactions or reports, other breaches and errors, and any inadequacies in other client service could result in reimbursement obligations or other liabilities or alienate clients and potentially give rise to claims against us.

Any failure or interruption of third-party systems, whether resulting from technology or infrastructure breakdowns, defects or external causes such as fire, natural disaster, computer viruses, acts of terrorism or power disruptions, or public health events could result in financial loss, negatively impact our reputation and negatively affect our ability to do business.

Although we and our third-party service providers have disaster recovery plans in place, we may nonetheless experience interruptions if a natural or man-made disaster or prolonged power outage were to occur, which could have an adverse impact on our business and profitability.

In addition, like many companies, our computer systems are regularly the target of computer viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations.

The sophistication of cyber threats continues to increase, including through the use of "ransomware" and phishing attacks, and our controls and the preventative actions we take to reduce the risk of cyber incidents and protect our information systems may be insufficient to detect or prevent unauthorized access, cyber-attacks or other security breaches to our computer systems or those of third parties with whom we do business.

In addition, our computer systems are regularly the target of viruses or other malicious codes, unauthorized access, cyber-attacks or other computer-related penetrations.

The sophistication of cyber threats continues to increase, including through the use of "ransomware" and phishing attacks, and our controls and the preventative actions we take to reduce the risk of cyber incidents and protect our information systems may be insufficient to detect or prevent unauthorized access, cyber-attacks or other security breaches to our systems or those of third parties with whom we do business.

Our third-party service providers' systems may also be affected by, or fail, as a result of, catastrophic events, such as fires, floods, hurricanes and tornadoes.

A breach of our technology systems, or of those of third-party service providers, through cyber-attacks or failure to manage and sufficiently secure our technology environment could result in interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by a breach or to recover access to our systems, additional costs to mitigate against future incidents, and litigation costs resulting from an incident.

A breach of our systems, or of those of third-party service providers, through cyber-attacks or failure to manage and sufficiently secure our technology environment could result in interruptions or malfunctions in the operations of our business, loss of valuable information, liability for stolen assets or information, remediation costs to repair damage caused by a breach or to recover access to our systems, additional costs to mitigate against future incidents, and litigation

costs resulting from an incident.

Any of these conditions could have an adverse impact on our business and profitability.

We and certain of our third-party vendors receive and store personal information as well as non-public business information.

Although we and our third-party vendors take precautions, we may still be vulnerable to hacking or other unauthorized use.

We and certain of our third-party service providers receive and store personal information as well as non-public business information.

Although we and our third-party service providers take precautions, we may still be vulnerable to hacking or other unauthorized use.

A breach of the systems or hardware could result in unauthorized access to our proprietary business or client data or release of this type of data, which could subject us to legal liability or regulatory action under data protection and privacy laws, which may result in fines or penalties, the termination of existing client contracts, costly mitigation activities and harm to our reputation.

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We use capital to incubate new investment strategies, introduce new products or to enhance distribution access of existing products.

At December 31, 2022, the Company had $223.5 million of such investments, comprising $144.6 million of marketable securities and $78.9 million of net investments in CLOs.

These investments are in a variety of asset classes, including alternative, fixed income and equity strategies and first-loss tranches of CLO equity.

At December 31, 2023, we had $275.6 million of such investments, comprising $180.1 million of marketable securities and $95.5 million of net investments in CLOs.

These investments are in a variety of asset classes, including alternatives, fixed income and equity strategies and first-loss tranches of CLO equity.

Many of these investments employ a long-term investment strategy with an optimal investment period spanning several years.

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The investment management industry in which we operate is subject to extensive and frequently changing regulation.

We are subject to regulation by the SEC and other federal and state agencies, as well as FINRA and other self-regulatory organizations.

We are subject to regulation by the SEC, other federal and state agencies, certain international regulators, as well as FINRA and other self-regulatory organizations.

Each of our affiliated investment managers and unaffiliated subadvisers is registered with the SEC under the Investment Advisers Act.

Our affiliated investment managers operating outside of the U.S.

are also subject to regulation by various regulatory authorities and exchanges in the relevant jurisdictions, including, for those active in the UK, the Financial Conduct Authority ("FCA").

We have distribution teams that operate offices in the UK and Singapore and are subject to regulation by the FCA and the Monetary Authority of Singapore, respectively.

Each of our U.S.-sponsored funds is registered with the SEC under the Investment Company Act.

Our global funds are registered with and subject to regulation by the Central Bank of Ireland.

New regulations or interpretations of existing laws may result in enhanced disclosure obligations, including with respect to climate change or other environmental, social and governance ("ESG") matters, which could negatively affect us or materially increase our regulatory burden.

There are various regulatory reform initiatives in the U.S.

and other jurisdictions and new regulations or interpretations of existing laws may result in enhanced disclosure obligations which could negatively affect us or materially increase our regulatory burden.

Increased regulations generally increase our costs, and we could continue to experience higher costs if new laws require us to spend more time, hire additional personnel, or purchase new technology to comply effectively.

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Many aspects of our business involve substantial risks of liability, and there have been substantial incidences of litigation and regulatory investigations in the financial services industry in recent years, including customer claims as well as class action suits seeking substantial damages.

From time to time, we and/or our sponsored funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that involve the threat of lawsuits seeking substantial damages.

From time to time, we and/or our sponsored funds may be named as defendants or co-defendants in lawsuits or be involved in disputes that involve the threat of lawsuits seeking substantial

We and/or our sponsored funds are also involved from time to time in governmental and self-regulatory organization investigations and proceedings.

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We may incur substantial legal expenses in defending against proceedings commenced by a client, regulatory authority or other private litigant.

legal liability levied on us could cause significant reputational harm and have an adverse impact on our results of operations and financial condition.

Substantial legal liability levied on us could cause significant reputational harm and have an adverse impact on our results of operations and financial condition.

We are subject to multiple tax jurisdictions and any changes in tax laws or unanticipated tax obligations could have an adverse impact on our financial condition, results of operations and cash flow.

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RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK

We may not pay quarterly dividends as intended or at all .

We may not pay dividends as intended or at all.

The declaration, payment and determination of the amount of our quarterly dividends may change at any time.

In making decisions regarding our quarterly dividends, we consider general economic and business conditions as well as our strategic plans and prospects, business and investment opportunities, financial condition and operating results, working capital requirements and anticipated cash needs, contractual and regulatory restrictions (including under the terms of our credit agreement) and other obligations, that may have implications on the payment of distributions by us to our shareholders or by our subsidiaries to us, and such other factors as we may deem relevant.

In making decisions regarding our dividends, we consider general economic and business conditions as well as our strategic plans and prospects, business and investment opportunities, financial condition and operating results, working capital requirements and anticipated cash needs, contractual and regulatory restrictions (including under the terms of our credit agreement) and other obligations, that may have implications on the payment of distributions by us to our shareholders or by our subsidiaries to us, and such other factors as we may deem relevant.

Our ability to pay or increase our dividends maybe subject to restrictions under the terms of our credit agreement.

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This Annual Report on Form 10-K contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking statements." These statements may be identified by such forward-looking terminology as "expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future,"

"forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about the Company and the markets in which we operate, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, net asset inflows and outflows, operating cash flows, business plans and ability to borrow, for all future periods.

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Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Annual Report on Form 10-K, resulting from:

(i) any reduction in our assets under management including from domestic and global conditions, security price declines and negative performance;

(ii) inability to achieve the expected benefits of our strategic transactions;

(iii) withdrawal, renegotiation or termination of investment advisory agreements;

(i) any reduction in our assets under management;

(ii) inability to achieve the expected benefits of strategic transactions;

(iii) withdrawal, renegotiation or termination of investment management agreements;

(iv) damage to our reputation;

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(vi) inability to attract and retain key personnel;

(vii) challenges from the competition we face in our business;

(vii) challenges from competition;

(viii) adverse developments related to unaffiliated subadvisers;

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(xvi) unfavorable changes in tax laws or limitations;

(xvii) inability to make quarterly common stock dividends;

(xvii) inability to make common stock dividend payments;

(xviii) impediments from certain corporate governance provisions;

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Certain other factors that may impact our continuing operations, prospects, financial results and liquidity, or that may cause actual results to differ from such forward-looking statements, are discussed or included in the Company's periodic reports filed with the SEC and are available on our website at www.virtus.com under "Investor Relations." You are urged to carefully consider all such factors.

Unresolved Staff Comments.

We lease our principal offices, which are located at One Financial Plaza, Hartford, CT 06103.

In addition, we lease office space in California, Connecticut, Florida, Georgia, Illinois, New Jersey, New York, Texas, Singapore and the UK.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors