As U.S. Treasury yields languish and inflation hovers near post-crisis highs, investors are starved for income. Central bankers around the world continue to cut interest rates. What if interest rates stay low (or lower for longer), further eroding the real after-tax income investors can live on? Markets are expecting further rate cuts. In any case, the flexibility and agility of active managers will be key to navigating uncertainty ahead. Consider how Virtus views some of the traditional and non-traditional possibilities.

The Yields vs. Inflation Challenge

INFLATION RIVALS POST-CRISIS HIGHS – U.S. Core CPI (y-o-y increase)

The Core CPI (Consumer Price Index for All Urban Consumers: All Items Less Food & Energy) is an aggregate of prices paid by urban consumers for a typical basket of goods, excluding food and energy. This measurement is widely used by economists because food and energy have very volatile prices. Source: Labor Department. Note: August 2019 figure is based on median estimate in a Bloomberg survey.

Field of Yields: Harvest Tips for Income Investors With rising corporate debt, increasing leverage, declining rates, and a slowing economy, where do risk-averse investors turn for income? Virtus investment professionals weigh the options.

Sector Yield % Sector Yield %

Asset-Backed 1.86 Emerging Markets Debt 7.93

Agency Debentures 1.77 Agency MBS 2.28

Bank Loans 6.06 Municipals 1.18

U.S. Aggregate 2.13 Non-U.S. Dollar 0.85

Commercial MBS 2.17 Taxable Municipals 2.92

Corp. High Yield 5.72 U.S. Treasuries 1.58

Corp. Investment Grade 2.43 Yankee High Quality 2.52As of 8/31/19. Yield represents yield-to-worst, which is the lowest yield generated, given the potential stated calls prior to maturity. Bank loan yield represents current yield. Non-U.S. dollar yield is Yield to Maturity. Source: Bloomberg, Credit Suisse, FTSE, Virtus Performance & Analytics

0.5

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/19

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/18

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/15

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/14

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/13

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/12

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/10

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/08

Field of Yields: Harvest Tips for Income Investors | 2

David Albrycht, CFA President and Chief Investment Officer Newfleet Asset Management

Investors looking for income outside of low yielding U.S. Treasuries may want to consider a diversified multi-sector portfolio with a manager with experience investing in the total bond market, not just U.S. Treasuries and a handful of core sectors like agency mortgage-backed securities, and corporate investment grade (Barclays Agg). We also believe it can be beneficial to invest with a manager with the flexibility to overweight sectors and securities with the best relative value and rotate between these on an ongoing basis. At Newfleet, we manage portfolios at both the front and the middle of the curve, all with distinct multi-sector mandates. These strategies vary primarily by the amount of credit and interest rate risk they take, providing options for both risk averse investors and those comfortable with additional risk.

Within the higher quality sectors of fixed income markets, we are finding attractive yield opportunities with good risk-adjusted total return potential in asset-backed securities, non-agency mortgage-backed securities, and investment grade corporates. We believe asset-backed securities will continue to perform well based on the continued strength of the U.S. consumer. We expect our overweight to non-agency residential-mortgage-backed securities will continue to benefit from tight underwriting standards, strong mortgage credit, and a solid housing market. Within investment grade corporates, we currently see the best value within the BBB tier of the sector. Although most of our portfolios are below their historic average allocations to high yield, bank loans, and emerging markets, we are maintaining an allocation to these sectors and are still finding attractive opportunities. Given generally fair valuations within the fixed income markets and our view that we are later in the economic cycle, we prefer a higher-quality focus, which is reflected in our overall sector positioning.

Regardless of where we see the best relative value within sectors and securities, we have always strived to maintain prudent diversification, especially at the sector and issuer level, in an effort to help manage overall risk. The bottom line: for more than 25 years, our disciplined process of sector rotation, focusing on areas with higher yields and improving fundamentals—or lower correlation with low Treasury rates—has helped us deliver strong risk-adjusted returns.

George Goudelias Managing Director, Head of Leveraged Finance Seix Investment Advisors

Don’t let ominous headlines on the loan market over the last year throw you. The positive fundamentals which drive security selection are in place for most industries, while uncertainty and headline risk persist in retail and energy. While new issue activity has increased recently, we expect year-over-year volumes to be down meaningfully, which we believe will support secondary trading levels. The loan default forecast for 2019 is projected to be 1.5%1, lower than the historical average.

Market prices of loans are still below normal averages, providing technical upside. In addition, loan repayments are above average, providing additional technical support. More importantly, leveraged loan yields are at 6.3%2 — compelling from a risk/reward perspective. The takeaway: leveraged loans offer investors the potential for income and capital appreciation, and active management should continue to play a dominant role in alpha generation.

1JPMorgan Securities – as of 6/30/19. 2CS Leveraged Loan Index – 6/30/19 Yield (3-year life).

Field of Yields: Harvest Tips for Income Investors | 3

Frank Ossino Senior Managing Director, Senior Portfolio Manager, and Bank Loan Sector Head Newfleet Asset Management

The bank loan market should be viewed as an income asset class, not solely as an interest rate hedging tool. Some investors apparently have conditioned themselves to manage loan exposure relative to their interest rate view rather than incorporating other major protections—seniority and security—especially at a time of increasing credit or late-cycle scrutiny. Over time, and in the aggregate, the major differentiators of the loan market have produced attractive risk-adjusted returns relative to other income alternatives over multiple credit cycles and interest rate regimes. Despite the current interest rate environment, it is Newfleet’s view that loans should continue to be a part of a fixed income allocation as investors search for yield in a thoughtful and prudent manner.

Michael Kirkpatrick Managing Director, Senior Portfolio Manager Seix Investment Advisors

We believe the high yield market continues to offer a compelling opportunity to investors. High yield fundamentals have shown remarkable resilience. Leverage ratios remain stable. Interest coverage remains more than sufficient, and high yield bond default rates are expected to remain below historical averages. Credit quality continues to improve. In addition, upgrades exceeded downgrades in the year ended 12/31/2018 (the latest period available), according to JPMorgan, which also reported that rising stars continued to outpace fallen angels3 through 2Q19.

INVESTORS SEEK OUT HIGHER YIELDS IN U.S. JUNK BONDS – U.S. High-Yield Bond Fund Flows

Source: J.P.Morgan

Richard Sherry, CFA Portfolio Manager and Senior Research Analyst Kayne Anderson Rudnick

We launched our global dividend yield strategy eight years ago, specifically to help risk-averse investors achieve their income goals in a low interest rate world. The portfolio strives to be a supplement to an investor’s fixed income allocation.

($m

n)

-5,000

-3,000

-1,000

1,000

3,000

5,000

Sep-19Aug-19Jul-19Jun-19May-19Apr-19Mar-19Feb-19Jan-19

3A rising star is a bond that has been upgraded either to investment grade or to a higher rating within the speculative spectrum. A fallen angel is a bond that was previously investment grade (> BBB- / Baa3) but has since been reduced to speculative grade (< BB+ / Ba1).

Field of Yields: Harvest Tips for Income Investors | 4

The dilemma that investors in higher yielding equities have historically faced has been the inability to achieve three key objectives simultaneously: generate a high level of inflation-protected income that is sustainable and also grows; produce a market-like return with possible capital appreciation; and do so without inordinate risk. We believe investors can achieve all three of those objectives in a concentrated and diversified portfolio of high-quality companies that pay sustainable and growing dividends. We also believe that in-depth fundamental research is key to identifying companies that pay sustainable dividends. At Kayne Anderson Rudnick we have a 30-year history of utilizing in-depth fundamental research in order to analyze and invest in high-quality businesses.

As noted in the charts below, companies that pay stable and growing dividends have historically produced above-average returns and produced less volatility than companies that either don’t pay dividends or have had to cut their dividend.

Companies That Pay Stable and Growing Dividends Have a Long History of Above-Average Returns

ANNUALIZED STANDARD DEVIATION S&P 500® INDEX (%) (3/31/72-6/30/19)

ANNUALIZED RETURN S&P 500® INDEX (%) (3/31/72-6/30/19)

24.18 24.39

16.43 15.67

0

30

GrowingDividends

StableDividends

DividendCutters

ZeroDividends

8.6910.84

12.72 12.79

0

15

GrowingDividends

StableDividends

ZeroDividends

DividendCutters

Source: Ned Davis Research © Copyright 2019 Ned Davis Research, Inc. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/

Traditional vs. Non-Traditional: Why Some Investors Are Rethinking Their Income Strategy

With traditional balanced stock and bond portfolios yielding around 2%, yield-starved investors may wish to consider broadening their opportunity set and diversify with non-traditional income sources that have exhibited lower correlations, while being aware of the risk/return trade-offs.

NON-TRADITIONAL SOURCES OF INCOME CAN PROVIDE HIGHER YIELDS

Past performance is no guarantee of future results. Asset classes are not representative of any Virtus portfolio. Investors should consult their financial professional to identify suitable investments. Source: Morningstar Direct, Virtus Performance & Analytics, as of 8/30/19. For illustrative purposes only. The indexes are unmanaged, their returns do not reflect any fees, expenses, or sales charges, and are not available for direct investment. Yields for the asset class indexes have material differences including investment objectives, liquidity, safety, fluctuation of principal or return, and tax features. Yields for fixed income are yield-to-worst, equity yields are current dividend yield, while MLP yield consists primarily of return of capital. U.S. Stocks represented by S&P 500® Index, Treasury Bonds by 10-Year U.S. Treasury, Balanced Portfolio by 60% S&P 500® Index/40% Bloomberg Barclays U.S. Aggregate Bond Index, Core Bonds by Bloomberg Barclays U.S. Aggregate Bond Index, Private Credit by Wells Fargo BDC Index, MLPs by Alerian MLP Infrastructure Index, Bank Loans by Credit Suisse Leveraged Loan Index, High Yield by Bloomberg Barclays HY 2% Issuer Cap Index, Preferred Stock by S&P U.S. Preferred Stock Index, Global Infrastructure by S&P Global Infrastructure Index, REITs by FTSE Nareit All Equity REIT Index, and Utilities by S&P Utilities Index. See back page for index definitions.

1.93 2.01 1.50 2.13

9.868.40

6.01 5.72 5.434.12 3.88 3.04

NON-TRADITIONAL INCOMETRADITIONAL INCOME

UtilityStocks

REITsGlobalInfrastructure

PreferredStock

HighYield

Bank Loans

MLPsPrivateCredit

Core BondsTreasuryBonds

BalancedPortfolio

U.S.Stocks

Yiel

ds (

%)

Field of Yields: Harvest Tips for Income Investors | 5

Jay Hatfield Chief Investment Officer Infrastructure Capital Advisors

Edward Ryan Chief Operating Officer Infrastructure Capital Advisors

MLPs, Preferred Stocks, and REIT Preferred Stocks

MLPs—MLP earnings reports for the second quarter were strong with the companies on average beating consensus estimates by 3.3%4 and raising their distributions by an average of 1.1% sequentially and 4.7% annualized5. The strongest segment of the market was transportation and storage companies, which are benefiting from strong production and export volumes, beating consensus estimates by an average of 5.0%4. The gathering and processing companies reported earnings that were in line with consensus.

We expect crude oil prices to be relatively stable for the rest of 2019. We expect to see West Texas Intermediate crude remaining in the $50-60/bbl range, with prices capped by steadily growing U.S. production and slowing global demand related to the ongoing trade war, and prices supported by OPEC production constraints and strong demand for U.S. gasoline and distillate. We expect third-quarter earnings to continue to be solid as volumes continue to increase and new projects come on line. There has been significant mergers and acquisition activity in the MLP sector this year with two pipeline companies receiving buyout offers from private equity firms. We expect additional strategic activity in the sector as valuations are very depressed relative to Treasury bonds and other yield investments.

Preferred Stocks—In today’s sustained low yield environment, preferred stocks provide a unique opportunity for investors to generate high income with dividend yields of more than 6%. Preferred stocks have relatively low correlation to the stock market compared to common stocks and also have modest sensitivity to Treasury bonds yields compared to many fixed income alternatives. Consequently, preferred stocks have the potential to offer investors attractive income with modest levels of volatility in most market environments.

REIT Preferred Stocks—The growing size of the REIT industry has led to the emergence of a significant market for REIT preferred stocks. As preferred stocks have priority over common stocks, the preferred shareholders are first in line to receive dividend payouts made by REITs. In addition, a majority of REIT preferred stocks are cumulative in nature, which means that issuers are obligated to pay any historical dividends, if any payments are missed, at some point in the future. For instance, 98% of REIT preferred stocks in the Indxx REIT Preferred Stock Index are structured such that dividends are cumulative. As a result, REIT preferreds have significant downside protection during economic downturns relative to common stocks.

Seth Kadushin Portfolio Manager Virtus ETF Advisers LLC

Matthew B. Brown Chief Operating Officer and Portfolio Manager Virtus ETF Advisers LLC

6

Private Credit and Real Assets

Private Credit—Amid tightening spreads and the prospect of further rate cuts by the Federal Reserve, yield-starved investors have good reason to explore private credit, one of the fastest growing asset classes, given attractive yields compared to conventional fixed income. At the heart of the private credit market are small- and medium-

4Compiled with Bloomberg consensus data. 5Calculated as quarterly growth value as base and number of quarters used as exponent for annualized calculation. 6 Indxx, LLC: Founded in 2005, with offices in New York, Prague, and New Delhi, Indxx endeavors to deliver innovative and custom indexing solutions to the investment management community at large. Indxx has three dozen ETFs worldwide with assets of over $4.5 billion (as of 12/31/18) tracking its indexes, and calculates hundreds of indexes for clients around the globe. Indxx is the index provider to the Fund. The portfolio managers are affiliated with Virtus ETF Advisers, LLC, the Fund’s adviser.

Field of Yields: Harvest Tips for Income Investors | 6

sized companies shunned by banks since the financial crisis, which can now borrow from institutional investors and specialty finance companies. These entities, in turn, package such non-investment grade loans into vehicles with attractive yields both on an absolute and a relative basis.

With headline inflation expected to be benign, unemployment running at 50-year lows, and GDP still rising at a moderate rate, fears of a credit bubble appear to be overblown. However, the U.S. is clearly in the later stages of expansion which, historically, has ranged between nine months and two years. As such, we find comfort in the fact that key private credit players like business development companies (BDCs) cannot exceed leverage ratios of 2:1 (most BDCs employ 1x leverage, while banks are generally levered about 9:1); have diversification requirements; and invest in senior secured loans. We expect private credit fundamentals will remain constructive, and the market for private credit to continue to show moderate growth.

Real Assets—As an alternative to traditional bonds, investors have begun allocating to real assets (real estate, infrastructure, and natural resources), which can offer both attractive yield and appreciation to protect against inflation. They have been cheap lately, relative to other financial assets, partly because commodities have been challenged, particularly in the energy and mining sectors, and we believe real estate fundamentals are likely to stay comparatively strong. Another attraction is that real assets may provide a hedge against inflation and increased downside protection through the potential to generate attractive dividend income. Additionally, certain real assets (e.g., farmland and timber) may benefit from a bit of tailwind, given their stewardship of scarce resources in the face of increasing environmental concerns.

While institutions have long sought the benefits of real asset exposure, individual investors have had difficulty sourcing and managing these complex income producing asset classes that require more time, resources, and expertise. However, we believe exposure to a diverse pool of income producing, high-quality real assets can play a role in most traditional balanced portfolios. They may complement a core income portfolio, and may provide for a convenient “one-stop-shop” real asset income solution.

John P. Bartlett, CFA President, Portfolio Manager, Research Analyst Reaves Asset Management

Joseph ‘Jay’ Rhame, III, CFA Chief Executive Officer, Portfolio Manager, Research Analyst Reaves Asset Management

Utilities Stocks

In today’s environment of economic and political uncertainty, the defensive characteristics of the utilities sector have borne fruit. To wit: The total return of the S&P 500® Utilities Index from capital appreciation and dividends totaled 25.4% for the nine months ended 9/30/19 and 27.1% for the 12 months ended 9/30/19, and dividend income grew by over 4%. Yields from the sector remain favorable on a relative basis as well. The 28-stock S&P 500 Utilities® Index had a dividend yield of 3.01% as of 9/30/19, which comfortably exceeded the 1.92% yield of the S&P 500® Index and the 10-year Treasury yield of 1.68%.

In our opinion, the best utilities have a very high visibility of earnings and dividend growth that should be largely unaffected by changes in economic growth as the sector continues to benefit from the combination of strong operating fundamentals and a supportive regulatory/legislative backdrop. Many utilities offer a current yield that is twice that of the 10-year U.S. Treasury bond. Importantly, it is yield of real income, rather than a return of capital.

Reaves Asset Management has over 40 years of experience investing in the utility sector.

Field of Yields: Harvest Tips for Income Investors | 7

The Takeaway

With interest rates likely to be lower for longer, risk-averse investors may want to consider active fixed income managers. Active fixed income managers generally have the flexibility, agility, and tools to pivot toward under-researched opportunities and relative values, especially as macro risks intensify and investment-grade corporate debt issuers are downgraded.

Investors looking to supplement their fixed income allocations may also want to consider a global dividend yield strategy to help them achieve their income goals, given the range of quality companies with a history of raising their dividends.

Then there are non-traditional sources of income that offer the potential to diversify their portfolios with lower correlations. Virtus ETFs offers innovative and differentiated approaches to hard-to-manage and difficult-to-access income streams. The field of yield possibilities may surprise you. But be aware that stretching for yield involves additional risks.

About Virtus Investment Partners

Virtus Investment Partners (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. The company provides investment management products and services through its affiliated managers and select subadvisers, each with a distinct investment style, autonomous investment process, and individual brand.

For more information

on Virtus investment

strategies to help in the

search for yield, visit

virtus.com or call us at

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2247 10-19 © 2019 Virtus Investment Partners

IMPORTANT RISK CONSIDERATIONSBank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary market. Loans can carry significant credit and call risk, can be difficult to value, and have longer settlement times than other investments, which can make loans relatively illiquid at times. High Yield-High Risk Fixed Income Securities: There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities. 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 or medium-sized companies may enhance that risk. Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities. ABS/MBS: Changes in interest rates can cause both extension and prepayment risks for asset- and mortgage-backed securities. These securities are also subject to risks associated with the repayment of underlying collateral. Foreign & Emerging Markets: Investing internationally, especially in emerging markets, involves additional risks such as currency, political, accounting, economic, and market risk. Geographic Concentration: Events negatively affecting the fiscal stability of a state, country, or region will cause the value of the fund’s shares to decrease. Because the fund concentrates its assets in a state, country, or region, the fund is more vulnerable to those areas’ financial, economic, or other political developments. Industry/Sector Concentration: A fund that focuses its investments in a particular industry or sector will be more sensitive to conditions that affect that industry or sector than a non-concentrated fund. Exchange-Traded Funds: The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track. The costs of owning the ETF may exceed the cost of investing directly in the underlying securities. Passive Strategy/Index Risk: A passive investment strategy seeking to track the performance of the underlying index may result in the fund holding securities regardless of market conditions or their current or projected performance. This could cause the fund’s returns to be lower than if the fund employed an active strategy. 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. Leverage: When a fund leverages its portfolio, the value of its shares may be more volatile and all other risks may be compounded. Real Estate: The fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage, property, and management. Equity REITs: The Fund may be negatively affected by factors specific to the real estate market, including interest rates, leverage property, and management. Preferred Stocks: Preferred stocks may decline in price, fail to pay dividends, or be illiquid. MLPs: Investments in Master Limited Partnerships may be adversely impacted by tax law changes, regulation, or factors affecting underlying assets. MLP Interest Rates: As yield-based investments, MLPs carry interest rate risk and may underperform in rising interest rate environments. Additionally, when investors have heightened fears about the economy, the risk spread between MLPs and competing investment options can widen, which may have an adverse effect on the stock price of MLPs. Rising interest rates may increase the potential cost of MLPs financing projects or cost of operations, and may affect the demand for MLP investments, either of which may result in lower performance by or distributions from the Fund’s MLP investments. Infrastructure: A fund that focuses its investments in infrastructure-related companies will be more sensitive to conditions affecting their business or operations. Utilities Sector Concentration: The fund’s investments are concentrated in the utilities sector and may present more risks than if the fund were broadly diversified over numerous sectors of the economy. No Guarantee: There is no guarantee that the portfolio will meet its objective.

The Alerian MLP Infrastructure Index is a composite of energy infrastructure Master Limited Partnerships (MLPs), whose constituents earn the majority of their cash flow from the transportation, storage, and processing of energy commodities. The index is calculated using a float-adjusted, capitalization-weighted methodology on a total-return basis. The Bloomberg Barclays U.S. Aggregate Bond Index measures the U.S. investment grade fixed rate bond market. The index is calculated on a total return basis. The Bloomberg Barclays U.S. High-Yield 2% Issuer Capped Bond Index is a market-capitalization-weighted index that measures fixed rate, non-investment grade debt securities of U.S. and non-U.S. corporations, with no single issuer accounting for more than 2% of market cap, calculated on a total return basis. The Credit Suisse Leveraged Loan Index is a market-weighted index that tracks the investable universe of the U.S. dollar denominated leveraged loans. The FTSE Nareit All Equity REITs Index is a free-float adjusted, market capitalization-weighted index of U.S. equity REITs. Constituents of the index include all tax-qualified REITs with more than 50 percent of total assets in qualifying real estate assets other than mortgages secured by real property. The S&P 500® Index is a free-float market capitalization-weighted index of 500 of the largest U.S. companies. The index is calculated on a total return basis with dividends reinvested. The S&P 500® Utilities Index is a free-float market capitalization-weighted index comprised of companies included in the S&P 500® utilities sector. The index is calculated on a total return basis with dividends reinvested. The S&P Global Infrastructure Index is designed to track 75 companies from around the world chosen to represent the listed infrastructure industry while maintaining liquidity and tradability. To create diversified exposure, the index includes three distinct infrastructure clusters: energy, transportation, and utilities. The S&P U.S. Preferred Stock Index is designed to measure the performance of the U.S. preferred stock market. Preferred stocks pay dividends at a specified rate and receive preference over common stocks in terms of dividend payments and liquidation of assets. The Wells Fargo Business Development Company Index is a float adjusted, capitalization-weighted Index that is intended to measure the performance of all Business Development Companies that are listed on the New York Stock Exchange or NASDAQ and satisfy specified market capitalization and other eligibility requirements.

Past performance is not indicative of future results.The market commentaries and insights above are the opinions of the individual affiliates and subadvisers and intended to provide some perspective on the yield environment in their respective asset classes. This material has been prepared using sources of information generally believed to be reliable; however, its accuracy is not guaranteed. Opinions represented are subject to change and should not be considered investment advice or an offer of securities. Forward-looking statements are necessarily speculative in nature. It can be expected that some or all of the assumptions or beliefs underlying the forward-looking statements will not materialize or will vary significantly from actual results or outcomes.

Not insured by FDIC/NCUSIF or any federal government agency. No bank guarantee. Not a deposit. May lose value.Mutual funds distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc. ETFs distributed by ETF Distributors LLC, an affiliate of Virtus ETF Advisers LLC.