Flexible Income Fund
|Total Net Assets:||$425.68 Million (3/31/21)|
|Category:||Large Cap Value|
|Benchmark:||Morningstar Moderately Aggressive Target Risk|
Fund Fact Sheet Q1 2021
PM Commentary Q1 2021
Fund Objective & Investment Process
The investment objective of the Buffalo Flexible Income Fund is primarily the generation of high current income and, as a secondary objective, the long-term growth of capital.
To pursue its investment objectives, the Flexible Income Fund invests in both debt and equity securities.
The allocation of assets invested in each type of security is designed to balance income and long-term capital appreciation with reduced volatility of returns. The Flexible Income Fund expects to change its allocation mix over time based on the Fund managers’ view of economic conditions and underlying security values.▼
The Fund maintains a flexible investment policy which allows it to invest in debt securities with varying maturities. However, it is anticipated that the dollar-weighted average maturity of debt securities that the Fund purchases will not exceed 15 years.
With respect to debt securities, the Fund managers perform extensive fundamental investment research to identify investment opportunities for the Flexible Income Fund. When evaluating investments and the credit quality of rated and unrated securities, the Fund managers look at a number of past, present and estimated future factors, including financial strength of the issuer, cash flow, management, borrowing requirements, sensitivity to changes in interest rates and business conditions, relative value.
The Flexible Income Fund relies on the Fund manager to undertake a careful analysis to determine the creditworthiness of the issuers of rated debt (on debt ratings by Moody’s Investors Service, Inc., (“Moody’s) or S&P Global Ratings, (“S&P”)), as well as the issuers of debt not rated by Moody’s or S&P.
The Fund will not purchase a debt security that is rated less than Caa/CCC by Moody’s or S&P, respectively, and will only purchase an unrated debt security if the Fund managers believe that the security is of at least B quality, subject to a limitation that the Fund may not hold more than 20% of its net assets in debt securities that are rated less than B or that are unrated debt securities of similar quality, based on the Fund managers’ fundamental analysis of the issuer and of rated bonds issued by similar issuers. The Fund has no limitations on principal, interest or reset terms on debt securities held in the Fund.
With respect to equity securities, the Fund managers emphasize dividend-paying stocks that over time have exhibited consistent growth of dividends, but may sell investments to secure gains, limit losses or reinvest
in more promising investment opportunities.
John Kornitzer, Portfolio Manager
Overall Morningstar Rating™ of BUFBX based on risk-adjusted returns among 140 Allocation 85%+ Equity funds as of 5/31/21.
|As of 5/31/21||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||15 YR||20 YR||Since Inception|
|BUFFALO FLEXIBLE INCOME FUND - Investor||10.27||15.59||28.69||7.59||8.82||7.52||7.03||6.65||7.34|
|BUFFALO FLEXIBLE INCOME FUND - Institutional||10.31||15.67||28.90||7.73||8.97||7.67||7.19||6.81||7.50|
|Morningstar Moderately Aggressive Target Risk Index||7.53||9.45||34.76||12.44||12.49||9.18||7.98||7.75||-|
| Combined Index|
Morningstar U.S. Large Cap Index (60%)
ICE BofAML U.S. High Yield Index (40%)
|Lipper Mixed-Asset Target Allocation Moderate Funds Index||6.01||7.33||25.65||10.62||9.86||7.68||6.55||5.96||7.36|
|Morningstar Allocation 85%+ Equity Category||8.37||12.09||42.57||13.24||13.30||10.20||7.68||6.74||7.97|
|As of 3/31/21||3 MO||YTD||1 YR||3 YR||5 YR||10 YR||15 YR||20 YR||Since Inception|
|BUFFALO FLEXIBLE INCOME FUND - Investor||9.11||9.11||40.94||6.86||7.82||7.12||6.68||6.75||7.16|
|BUFFALO FLEXIBLE INCOME FUND - Institutional||9.23||9.23||41.15||7.02||7.99||7.28||6.84||6.91||7.32|
|Morningstar Moderately Aggressive Target Risk Index||4.08||4.08||45.13||10.96||11.81||8.84||7.55||7.82||-|
| Combined Index|
Morningstar U.S. Large Cap Index (60%)
ICE BofAML U.S. High Yield Index (40%)
|Lipper Mixed-Asset Target Allocation Moderate Funds Index||3.15||3.15||33.64||9.51||9.34||7.46||6.22||6.01||7.25|
|Morningstar Allocation 85%+ Equity Category||6.30||6.30||57.99||11.77||12.37||9.79||7.13||6.93||7.80|
Hypothetical Growth of $10,000
— Record Date (6/17/21); Payment Date (6/18/21) – Ordinary Income & Capital Gains, if any
— Record Date (7/19/21); Payment Date (7/20/21) – Ordinary Income & Capital Gains, if any
— Record Date (8/17/21); Payment Date (8/18/21) – Ordinary Income & Capital Gains, if any
— Record Date (9/17/21); Payment Date (9/20/21) – Ordinary Income & Capital Gains, if any
— Record Date (10/18/21); Payment Date (10/19/21) – Ordinary Income & Capital Gains, if any
— Record Date (11/17/21); Payment Date (11/18/21) – Ordinary Income & Capital Gains, if any
— Record Date (12/2/21); Payment Date (12/3/21) – Capital Gains, if any
— Record Date (12/17/21); Payment Date (12/20/21) – Ordinary Income, if any
|(As of 3/31/21)|| |
|# of Equity Holdings||48|
|# of Fixed Holdings||2|
|Median Market Cap||$72.83 B|
|Weighted Average Market Cap||$256.78 B|
|3-Yr Annualized Turnover Ratio||4.51%|
|Average Duration||0.28 years|
|Average Maturity||9.65 years|
|30-day SEC Yield||2.03%|
Top 10 Holdings
|Holding||Ticker / Maturity||Sector||% of Net|
|Nuance Communications||11/1/35, 1.500%||Communications||3.99%|
|Costco Wholesale||COST||Consumer Staples||3.18%|
|Johnson & Johnson||JNJ||Health Care||3.03%|
|Truist Financial||TFC||Financial Services||2.89%|
|Digital Realty Trust||DLR||Real Estate||2.87%|
|TOP 10 HOLDINGS TOTAL||35.99%|
CAPITAL MARKET OVERVIEW
(As of 3/31/21) — Equity markets continued to move higher in the 1st quarter of 2021, with the S&P 500 Index returning 6.17%. The period was marked by outperformance of value stocks as the market rotation that began in the last quarter of 2020 became even more pronounced. The vaccination rollout, combined with prospects for more fiscal stimulus, bolstered optimism towards companies that could benefit from the economy reopening. Additionally, an 80+ basis point move higher in the 10-Year U.S. Treasury yield during the quarter left sentiment towards growth stocks relatively more subdued.
The broad market Russell 3000 Index advanced 6.35% in the quarter. Value outperformed growth for the second straight quarter, with the Russell 3000 Value Index up 11.89% compared to the Russell 3000 Growth Index returning 1.19%. Relative performance was inversely-correlated with market cap size in the quarter, with the Russell Micro Cap Index up 23.89%, the small cap Russell 2000 Index up 12.70%, the Russell Midcap Index up 8.14%, and the large cap Russell 1000 Index returning 5.91%. The more cyclically-sensitive Energy, Financial, and Industrial sectors performed best in the quarter. Consumer Staples, Information Technology, and Utilities were the bottom three performing sectors. All sectors produced positive returns.
(As of 3/31/21) — The Buffalo Flexible Income Fund (BUFBX) produced a return of 9.11% in the quarter, outperforming the Morningstar Moderately Aggressive Target Risk Index return of 4.08%. The top three contributors to the Fund’s performance during the quarter were Hess, Chevron, and ConocoPhillips. All of these companies experienced significant price appreciation as oil prices increased due to the improved outlook for global travel and the corresponding potential for an increase in oil consumption. The top three detractors were Costco, Clorox, and Pepsi. Stocks most leveraged to rising interest rates, a steepening yield curve, and reopening did relatively better, while pricey, more crowded beneficiaries of COVID lockdowns experienced some investor rotation away.
(As of 3/31/21) — The S&P 500 Index achieved a record high during the period and ended just below the intra-quarter peak. The rise can be attributed to the expectation that the economy can recover from the COVID-19 pandemic. New COVID-19 infections, hospitalizations, and deaths have declined in the U.S. as vaccines have been approved and injected into arms. The market favorably reacted to the new administration, passage of additional fiscal stimulus, and the central banks’ continued accommodative policies. Although the Federal Reserve continues to indicate that interest rates increases are on hold for the near future, the longer end of the treasury market sold off on concerns that inflation will increase. The rise in bond yields resulted in some market rotation as investors shifted from growth to value sectors. As the year continues to unfold, investors will be focused on the administration’s recently announced infrastructure proposal, vaccine rollouts, COVID-19 related reopening, and the length of accommodative monetary policy.
Despite the uncertainty created by the pandemic, we remain focused on wide moat, large capitalization dividend paying companies trading at reasonable valuations, in our view. As stock market volatility spikes, we will look for opportunities to find companies that fit our investment criteria, as we continue to follow our process of finding new investment ideas and to be ready when market declines provide better entry points.
We get to know the companies we invest in and learn how they run their business.
Top-Down & Bottom-Up
We identify Top-Down broad, secular growth trends and search for companies from the Bottom-Up.
We construct our portfolios based on our own proprietary investment strategy.
Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.
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