If You Invested in Virtus Equity & Convertible Income Fund (NIE)

Virtus Equity & Convertible Income Fund (NYSE: NIE) is a diversified, closed-end management investment company. The fund’s stated investment objective is to seek total return comprised of capital appreciation, current income, and gains. It is part of the Virtus family of closed-end funds in the finance and insurance sector.

According to the fund’s disclosures, Virtus Equity & Convertible Income Fund pursues its objective by investing in a diversified portfolio of equity securities and income-producing convertible securities. Under normal circumstances, the fund expects to invest at least 80% of its net assets, plus any borrowings for investment purposes, in this combination of equity and convertible income instruments.

The fund is structured as a closed-end fund, meaning its shares trade on an exchange and may trade at a premium or discount to their net asset value (NAV). The fund’s shares are listed on the New York Stock Exchange under the ticker symbol NIE. As a closed-end fund, it can use a managed distribution plan to provide shareholders with regular cash distributions.

Investment objective and strategy

The fund’s investment objective is explicitly described as total return, combining capital appreciation, current income, and gains. To pursue this objective, the fund invests in equity securities and income-producing convertible securities. These holdings may span multiple sectors; prior portfolio descriptions have referenced exposure to areas such as aerospace and defense, banks, IT services, software, and other industries, reflecting a diversified approach across sectors.

Virtus Equity & Convertible Income Fund operates under a Managed Distribution Plan. Under this plan, the fund seeks to maintain a consistent distribution level that may be paid from net investment income, realized capital gains, or a combination of both. The fund also notes that if aggregate net investment income and net realized capital gains are less than the distribution level, the difference may be paid from the fund’s assets and would constitute a return of capital.

Adviser and subadviser

The fund identifies Virtus Investment Advisers, LLC, a registered investment adviser affiliated with Virtus Investment Partners, Inc., as its investment adviser. The fund further states that Voya Investment Management serves as its subadviser. In earlier communications, the fund was described under the name Virtus AllianzGI Equity & Convertible Income Fund, with Allianz Global Investors acting in a subadvisory capacity; more recent notices refer to Voya Investment Management as subadviser.

Distributions and managed distribution plan

Virtus Equity & Convertible Income Fund regularly announces quarterly distributions on its common shares and, at times, special year-end distributions. In its Section 19(a) notices, the fund provides estimates of the sources of each distribution, breaking them out among net investment income, net realized short-term capital gains, net realized long-term capital gains, and return of capital (or other capital source). These notices emphasize that the amounts and sources are estimates and are not provided for tax reporting purposes.

The fund explains that its managed distribution plan is intended to maintain a consistent distribution level. It also cautions that shareholders should not draw conclusions about the fund’s investment performance solely from the amount of the distribution or from the terms of the managed distribution plan. For tax purposes, shareholders receive a Form 1099-DIV from the fund or their broker indicating how distributions should be reported for federal income tax purposes.

Net asset value and performance metrics

In its distribution notices, Virtus Equity & Convertible Income Fund presents performance and distribution metrics calculated using net asset value. These include measures such as average annual total return on NAV for a multi-year period, the annualized current distribution rate as a percentage of NAV, fiscal year-to-date cumulative total return on NAV, and fiscal year-to-date cumulative distribution rate. The fund notes that these figures are based on NAV rather than the market price of the fund’s shares and are not intended to represent individual shareholder performance.

Risk considerations

The fund repeatedly highlights that an investment in a fund is subject to risk, including the risk of possible loss of principal. It states that a fund’s shares may be worth less upon their sale than what an investor paid for them. The fund also notes that shares of closed-end funds may trade at a premium or discount to their net asset value. For more detail on investment objectives and risks, the fund directs investors to its annual report, which it indicates is available free of charge through its shareholder services channels.

Relationship to Virtus Investment Partners

Virtus Equity & Convertible Income Fund is part of the Virtus Investment Partners platform. Virtus Investment Partners is described in fund communications as a partnership of boutique investment managers that provide investment management products and services through affiliated managers and select subadvisers, each with its own investment style and process. Virtus Investment Advisers, LLC, as the adviser to NIE, is affiliated with Virtus Investment Partners.

Summary

In summary, Virtus Equity & Convertible Income Fund (NIE) is a NYSE-listed, diversified closed-end fund in the finance and insurance sector. It seeks total return through a combination of capital appreciation, current income, and gains, investing primarily in equity and income-producing convertible securities. The fund uses a managed distribution plan, provides detailed Section 19(a) notices on distribution sources, and is advised by Virtus Investment Advisers, LLC with Voya Investment Management as subadviser. Investors are reminded that the fund’s shares can trade at a premium or discount to NAV and that investment in the fund involves the risk of loss of principal.