Virtus Has a Bold Plan Behind its $175 MM Secondary Offering
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Wednesday, September 11, 2013

Virtus Has a Bold Plan Behind its $175 MM Secondary Offering

Execs at Virtus [profile] are raising funds to kick some ass. They already know what they'll do with the money.

The Connecticut firm announced earlier this week that it plans to raise $175 million in a public offering.

That would represent, according to Yahoo FINANCE page for Virtus stock, ticker symbol VRTS, would represent a 14 percent increase from the company's market cap (as of 2:00 p.m.) of $1.24 billion.

What would Virtus do with this kind of money?

Keep up the firm's momentum in organic, according to Joe Fazzino, Virtus' vice president for investor relations and corporate communications, who called MFWire from a cross-country road show to promote the offering.

According to figures provided by Virtus, the firm saw a 25 percent rise in AUM during the six months ending on June 30, 2013. The firm saw 53 percent AUM annualized growth in 2012, and 43 percent growth in 2011.

"Most people in the industry have been growing in the low single digits. If you look at our recent annualized organic growth, it has been in the 40 percent range. We have had net positive flows for our mutual funds for the last 17 consecutive quarters," he said.

The money will be used in three ways, according to Fazzino.

Firstly, some of the money will be used as seed capital for a number of existing funds that are still on the smallish side and need more AUM to get access to more platforms.

Secondly, some of the money will be used to launch new funds. Fazzino said the firm has a number of mooted funds that have yet to be introduced to '40 Act Country.

Lastly, some of the money will go to further research and development of investment strategies in the alts space.

"There is a real opportunity for us in the alt space. The demand is significant but product development jut hasn't been there to keep up with this demand."

Fazzino said that the wirehouses and many platforms are suggesting clients should allocate maybe 10 to 15 percent of their assets into alts now. However, he estimates that most clients average around 4 percent.

"What we are hearing from advisors and their investors is that they like our story," he said. "They realize that we have growth that is significantly higher than others in the industry."

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