Virtus Equity & Convertible Income Fund: Market Valuations Appear Stretched, But Performance Has Improved

The Virtus Equity & Convertible Income Fund (NYSE:NIE) is a closed-end fund that invests primarily in a combination of equity and convertible securities to provide investors with a stable income. Despite market valuations appearing stretched, the fund's valuation has improved. It offers a unique investment strategy that combines the potential for long-term capital appreciation with a steady income stream.

The Virtus Equity & Convertible Income Fund (NYSE:NIE), a closed-end fund, has demonstrated resilience in providing investors with a stable income stream despite market valuations appearing stretched. The fund's unique investment strategy combines long-term capital appreciation with a steady income stream, making it an attractive option for income seekers.

The fund, launched on February 27, 2007, by Virtus Investment Partners, invests primarily in a mix of equities, convertible securities, and derivatives. This diversified approach aims to generate both capital appreciation and current income. As of June 30, 2025, the fund held approximately 60% of its assets in equities and 37% in convertibles NIE: A Multi-Asset Strategy For Growth & Income Investors^[2].

One of the key features of NIE is its quarterly distribution, which is annualized at $2.00/share, yielding 8.01% on a forward basis. This distribution has remained relatively constant over recent years, providing investors with a degree of predictability for financial planning purposes NIE: A Multi-Asset Strategy For Growth & Income Investors^[2]. The fund's expense ratio of 112 bps makes it one of the lower-cost multi-asset strategies available NIE: A Multi-Asset Strategy For Growth & Income Investors^[2].

The fund's performance has been notable, particularly its ability to outperform many of its peers on a total return basis. For instance, it has outperformed the Calamos Strategic Total Return Fund (CSQ) over one-year, five-year, and 10-year periods NIE: A Multi-Asset Strategy For Growth & Income Investors^[2]. This strong performance is attributed to the fund's diversified portfolio and active management, which includes a covered call strategy on the equity holdings.

However, investors should be aware of certain risks associated with NIE. The fund's focus on the information technology sector, which accounts for approximately 33% of its portfolio weight, exposes investors to concentration risk and beta risk, particularly during periods of market stress NIE: A Multi-Asset Strategy For Growth & Income Investors^[2]. Additionally, the inclusion of below-investment-grade securities in the portfolio may introduce interest rate policy risk NIE: A Multi-Asset Strategy For Growth & Income Investors^[2].

In summary, the Virtus Equity & Convertible Income Fund (NYSE:NIE) offers investors a unique combination of growth and income potential. Despite market volatility, the fund's stable income stream and strong historical performance make it an attractive option for investors seeking a balanced investment strategy.