The Virtus Ceredex Mid-Cap Value Equity Fund delivered an exceptional performance in the third quarter of 2025, significantly outpacing its benchmark. This notable achievement was a result of astute investment decisions, particularly in sectors experiencing robust growth driven by advancements in artificial intelligence and evolving market dynamics. The fund's strategic allocation and careful stock selection were pivotal in navigating a dynamic market landscape, leading to substantial returns for investors.
During the third quarter, the Virtus Ceredex Mid-Cap Value Equity Fund posted an impressive return of +9.29% for its Class I shares. This performance comfortably exceeded the +6.18% return of the Russell Midcap\u00ae Value Index, highlighting the fund's effective management and investment strategy. The broader U.S. stock markets also saw widespread gains, largely fueled by continued enthusiasm around artificial intelligence and expectations of a Federal Reserve rate adjustment, which materialized in mid-September.
A significant contributor to the fund's outperformance was the strong showing of companies like Western Digital, a prominent data storage solutions provider. This company benefited immensely from robust demand for its high-capacity hard disk drives, underscoring the growing need for data infrastructure. Additionally, the fund strategically acquired shares in Teradyne, a leading backend semiconductor testing company, and Solaris Energy Infrastructure, positioning itself to capitalize on the increasing investments in AI-driven data centers.
The fund's active management also involved calculated adjustments to its portfolio. It strategically reduced exposure to asset-sensitive regional banks and insurance companies, anticipating potential pressures from interest rate fluctuations and broader economic cycles. Concurrently, it reallocated capital towards more cyclical, liability-sensitive financial institutions and trimmed positions in companies facing deteriorating outlooks or significant industry disruptions. These moves reflect a proactive approach to risk management and opportunity capture.
The fund's success stemmed from an overweight position and strong stock selection within the information technology, consumer discretionary, and industrials sectors. Beyond Western Digital, companies like Corning also played a crucial role, benefiting from AI-driven demand and solid fundamental performance. This targeted investment strategy allowed the fund to harness secular growth trends while maintaining a focus on fundamentally strong businesses.
Looking ahead, the outlook for the Virtus Ceredex Mid-Cap Value Equity Fund remains highly positive. Its current portfolio is well-structured from a fundamental perspective, suggesting continued strength and potential for future growth. The strategic investments in emerging technologies and robust industries, combined with a dynamic approach to market changes, position the fund favorably for sustained success in the evolving investment landscape.
