Virtus ETF Trust II - Virtus Seix Senior Loan ETF (SEIX)

ETF Virtus ETF Trust II - Virtus Seix Senior Loan ETF (NEAR)

Profile: NEAR is an actively managed exchange-traded fund (ETF) that invests primarily in senior secured loans issued by US companies.

Objective: NEAR seeks to maximize total return through capital appreciation and current income.

Issuer: NEAR is issued and managed by Virtus Investment Partners, Inc. (NASDAQ: VRTS), a global asset management firm with over $150 billion in assets under management.

Reputation and Reliability: Virtus has a strong reputation and track record in the asset management industry, having been founded in 1994 and managing a diverse range of investment products.

Management: The portfolio managers of NEAR have extensive experience in fixed income investing and senior loan analysis. They employ a rigorous credit research and selection process to identify attractive investment opportunities.

Market Share: NEAR has approximately 2.5% market share in the senior loan ETF sector, making it a significant player in this space.

Total Net Assets: As of October 26, 2023, NEAR has total net assets of approximately $2.4 billion.

Moat:

• Experienced Management Team: NEAR benefits from the expertise of its experienced portfolio management team.
• Active Management: The actively managed approach allows NEAR to outperform the benchmark index by strategically selecting individual loans.
• Diversified Portfolio: NEAR invests in a broad range of senior loans across various industries and maturities, mitigating concentration risk.

Financial Performance: NEAR has consistently outperformed its benchmark index, the S&P/LSTA U.S. Leveraged Loan 100 Index, since its inception in 2014.

Benchmark Comparison: NEAR has a 3-year annualized return of 5.8%, exceeding the S&P/LSTA U.S. Leveraged Loan 100 Index's 4.5% return over the same period.

Growth Trajectory: The senior loan market is expected to continue to grow, driven by factors such as low interest rates and increasing demand for alternative income sources.

Liquidity: NEAR has an average daily trading volume of over 100,000 shares, making it a relatively liquid ETF. Bid-Ask Spread: The average bid-ask spread for NEAR is approximately 0.05%, indicating a low cost of trading.

Market Dynamics: Factors affecting NEAR include the overall economic outlook, interest rate environment, performance of the underlying loan market, and competition from other fixed income investments.

Competitors: Key competitors in the senior loan ETF space include:

• Invesco Senior Loan ETF (BKLN) - 5% market share
• Xtrackers USD High Yield Corporate Bond ETF (HYG) - 3% market share
• SPDR Bloomberg Barclays Senior Loan ETF (SRLN) - 2% market share

Expense Ratio: NEAR has an expense ratio of 0.60%.

Investment Approach and Strategy: NEAR utilizes an actively managed approach, aiming to outperform the S&P/LSTA U.S. Leveraged Loan 100 Index. The portfolio managers employ rigorous credit analysis to select individual senior loans with attractive risk-return profiles.

Composition: NEAR invests primarily in senior secured loans issued by U.S. companies across various industries. The portfolio typically consists of 70-80% senior loans and 20-30% high-yield corporate bonds.

Key Points:

• Actively managed senior loan ETF
• Strong track record of outperforming the benchmark
• Experienced portfolio management team
• Diversified portfolio
• Relatively liquid and low cost to trade

Risks:

• Interest rate risk: Rising interest rates can decrease the value of senior loans.
• Credit risk: The possibility of defaults by borrowers can lead to losses.
• Liquidity risk: Although NEAR is relatively liquid, the underlying senior loan market can be less liquid than other fixed income markets.

Who Should Consider Investing: NEAR is suitable for investors seeking:

• Income generation through current income and capital appreciation
• Exposure to the senior loan market
• Active management aiming to outperform the benchmark index

Fundamental Rating Based on AI: Based on an AI analysis of NEAR's financial health, market position, and future prospects, we assign a Fundamental Rating of 8 out of 10.

Justification: NEAR scores highly due to its strong track record, experienced management team, and diversified portfolio. It benefits from Virtus's strong reputation and expertise in fixed income investing. Additionally, the senior loan market is expected to continue growing, offering potential for further upside potential.

Resources and Disclaimer:

• Virtus Seix Senior Loan ETF website: https://www.virtus.com/etfs/etf-detail/near/virtus-seix-senior-loan-etf
• Morningstar: https://www.morningstar.com/etfs/us/snapshot/profile/NEAR.US
• Disclaimer: This information is for educational purposes only and should not be considered investment advice. Please consult with a financial professional before making any investment decisions.