Summary

• AI emerged as a critical driver of investor sentiment during 1Q26, especially at the sector and issuer level.
• The escalation of Middle East conflicts and closure of the Strait of Hormuz drove moves in energy prices, with Brent crude briefly exceeding $100 per barrel.
• Virtus Seix High Yield Fund's I share decreased by -0.86% for the first quarter, trailing the ICE BofA U.S. High Yield BB-B Constrained Index by 48 basis points.
• Seix Investment Advisors continues to see attractive opportunities where market concerns around AI-related disruption have weighed on valuations, particularly in parts of financials and insurance brokerage.
• While valuations are no longer exceptionally cheap, all-in yields are now at levels that have historically provided attractive forward return potential for the high yield market.

Market Review

The U.S. high yield market entered 2026 with constructive fundamentals and solid yields, but the first quarter was marked by a rapid reassessment of macro risk, sector durability, and technological disruption. While defaults remained low and issuer