In re Virtus Investment Partners, Inc. Securities Litigation

Updated: May 15, 2017
Status: Ongoing Case

Serving as co-lead counsel, we pervailed on the motion for class certification in this securities class action against mutual fund company, Virtus Investment Partners, following an SEC investigation of its subadvisor, F-Squared

On June 9, 2015, Labaton Sucharow was appointed co-lead counsel in this securities action against mutual fund company, Virtus Investment Partners (Virtus).

The action alleges that Virtus made false and misleading statements in the sale of the company's so-called "AlphaSector" funds. The AlphaSector funds purportedly utilized quantitative models to forecast optimal trading decisions, and accounted for approximately 20 percent of Virtus' total assets under management, materially contributing to Virtus' revenue growth. The AlphaSector funds were offered though a co-advisory agreement with F-Squared Investments, Inc.

On July 1, 2016, the court granted in part, and denied in part, the defendants’ motion to dismiss. The court granted the motion with respect to the alleged misstatements concerning Virtus’s oversight of its investment manager F-Squared, its proprietary trading algorithm, and the SEC investigation. The court sustained the claims regarding the alleged misstatements in the prospectus regarding the historical performance of the AlphaSector funds and statements Virtus made regarding the source of its revenue.

On May 15, 2017, the court granted the plaintiffs' motion for class certification. Discovery is ongoing.

The case is In re Virtus Investment Partners, Inc. Securities Litigation, No. 15-1249. The lead plaintiff is Arkansas Teacher Retirement System. The defendant is Virtus Investment Partners Inc.

In marketing materials distributed during the class period, Virtus reported historical returns for the AlphaSector funds that had outperformed the S&P 500 index's performance since 2001. Virtus presented these outstanding historical returns to its retail clients, even though it allegedly knew they were overstated.

On September 3, 2014, the Wall Street Journal reported that F-Squared was under investigation for falsifying performance measures of the AlphaSector strategy in marketing materials. In reaction to these developments, Virtus' stock price fell more than 16 percent. On December 22, 2014, F-Squared settled with the SEC and paid a penalty of $35 million. Virtus stock, which had traded at a high of $240.72 per share during the class period, fell to $169.70 per share.