UPDATE: Morgan Stanley Initiates Coverage on Virtus Investment Partners at Equal-Weight, Establishes $210.00 PT

In a report published Tuesday, Morgan Stanley analyst Thomas Whitehead initiated coverage on Virtus Investment Partners, Inc. VRTS with an Equal-weight rating, establishing a $210.00 price target. According to the report, the initiation follows the analyst's estimate for best-in-class EPS growth and second-best flows is offset by one year fund underperformance, a formidable near-term headwind. “While VRTS trades roughly in line with peers on 2015 P/E, we believe strengthening inflows, potentially in 2H14 from liquid alternatives funds, are necessary for multiple expansion,” the report noted. “Relative to other traditional asset managers, VRTS is earlier in its life cycle ($55B AuM in a multi-affiliate model). As a result, valuation tends to be more volatile depending on flow inflection points, leading to slightly wider risk-reward skew (+/- 31% from base case to bull and bear) vs peers.” A risk to the price target include performance headwinds driving net outflows in near-term could create pressure on operating margin and EPS growth trajectory and is also a risk to the premium P/E multiple. VRTS closed Tuesday at $188.88 with shares trading up at 1.87 percent.