Virtus Newfleet ABS/MBS ETF (VABS US) – Portfolio Construction Methodology

The investment strategy governing the actively managed Virtus Newfleet ABS/MBS ETF seeks to generate income by allocating primarily to securitized credit, focusing on asset-backed securities and commercial and residential mortgage-backed securities issued by US government-related and private entities in USD. The sub-adviser uses a relative-value, sector-rotation process across securitized subsectors, continuously comparing yields, structures, and risk characteristics to reposition the portfolio toward segments offering more attractive risk-adjusted income. Security selection relies on bottom-up fundamental analysis of collateral pools, originators, deal structures, cash-flow waterfalls, and pre-issuance pricing discussions, with an emphasis on structural protections and stability of underlying cash flows. Portfolio construction concentrates exposure in ABS and MBS while using derivatives such as credit default swaps to increase or hedge sector exposure. Positions are actively traded as collateral performance, structural features, and relative-value assessments evolve, with an ongoing focus on liquidity and diversification within securitized markets.

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