Virtus Faces Teachers After Deal With Feds

     MANHATTAN (CN) — Less than a year after its $16.5 million settlement with the U.S. Securities and Exchange Commission, Virtus Investment Partners must now face a class action over similar complaints regarding its AlphaSector funds, a federal judge ruled Friday.
     After its initial public offering in 2009, Virtus started marketing a new family of funds called AlphaSector.
     Leading the class action on behalf of its shareholders, the Arkansas Teacher Retirement System claims that AlphaSector is based on an algorithm formulated by a 20-year-old intern that purported to beat the S&P 500 for years.
     The teachers union alleges that Virtus marketing materials puffed up AlphaSector’s performance since 2001, even though the funds did not exist until seven years later.
     Federal regulators found that Virtus and its subadvisor F-Squared Investments substantially overstated performance track record of the funds.
     The Massachusetts-based F-Squared paid a $35 million fine to the SEC in late 2014.
     In February 2015, the teachers’ union fund sued the Hartford, Conn.-based Virtus, which reached a deal with regulators that November.
     U.S. District Judge William Pauley III refused to let Virtus and some of its wholesalers dismiss the case on Friday.
     Virtus did not immediately respond to a request for comment.

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