Flexible Income Fund
Ticker
BUFBX
Inception Date
August 12, 1994
Total Fund Assets
$692.81 Million (6/30/18)
Expense Ratio
1.01%
Benchmark Index
ICE BofA ML Combined Index
MORNINGSTAR RATING
Overall Morningstar™ rating out of 313 Allocation–70% to 85% Equity funds as of 6/30/18 (derived from a weighted average of the fund’s three-, five-, and ten-year risk adjusted return measure).
INVESTMENT STYLE
The Morningstar Style Box™ reveals a fund’s investment strategy by showing its investment style and market capitalization based on the fund’s portfolio holdings.
RISK VS CATEGORY
| Low | High |
The Morningstar™ Risk vs Category rating is an assessment of the variations in a fund’s monthly returns, with an emphasis on downside variations, in comparison to the 313 funds in the Allocation–-70% to 85% Equity category, as of 6/30/18.
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Investment Strategy
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.
Our investment strategy seeks to generate yield for any investor needing monthly income with capital appreciation, and we use many methods to address potential downside risks.
~ John Kornitzer, Portfolio Manager
Performance (%)
| As of 6/30/18 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | 15 YR | Since Inception (8/12/94) |
|---|---|---|---|---|---|---|---|---|
| Buffalo Flexible Income Fund | 4.18 | 0.58 | 12.02 | 6.93 | 6.47 | 6.64 | 8.05 | 7.30 |
| BofA ML Combined Index S&P 500 Index (60%) ICE BofA ML HY Master II Index (40%) | 2.46 3.43 1.00 | 1.62 2.65 0.08 | 9.63 14.37 2.53 | 9.38 11.93 5.55 | 10.26 13.42 5.51 | 9.31 10.17 8.03 | 8.64 9.30 7.66 | 8.89 9.81 7.50 |
| Lipper Mixed-Asset Target Allocation Moderate Funds Index | 0.85 | -0.23 | 6.08 | 5.70 | 6.82 | 5.80 | 6.10 | 6.93 |
| Morningstar Allocation--70% to 85% Equity | 1.64 | 0.44 | 8.46 | 6.38 | 7.97 | 6.27 | 7.14 | 7.15 |
| As of 6/30/18 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | 15 YR | Since Inception (8/12/94) |
|---|---|---|---|---|---|---|---|---|
| Buffalo Flexible Income Fund | 4.18 | 0.58 | 12.02 | 6.93 | 6.47 | 6.64 | 8.05 | 7.30 |
| BofA ML Combined Index S&P 500 Index (60%) ICE BofA ML HY Master II Index (40%) | 2.46 3.43 1.00 | 1.62 2.65 0.08 | 9.63 14.37 2.53 | 9.38 11.93 5.55 | 10.26 13.42 5.51 | 9.31 10.17 8.03 | 8.64 9.30 7.66 | 8.89 9.81 7.50 |
| Lipper Mixed-Asset Target Allocation Moderate Funds Index | 0.85 | -0.23 | 6.08 | 5.70 | 6.82 | 5.80 | 6.10 | 6.93 |
| Morningstar Allocation--70% to 85% Equity | 1.64 | 0.44 | 8.46 | 6.38 | 7.97 | 6.27 | 7.14 | 7.15 |
| Year | Buffalo Flexible Income | ICE BofA ML Combined Index | S&P 500 Index (60%) | ICE BofA ML HY Master II Index (40%) | Morningstar Allocation -- 70% to 85% Equity |
|---|---|---|---|---|---|
| 2017 | 13.21 | 16.09 | 21.83 | 7.48 | 16.21 |
| 2016 | 9.90 | 14.17 | 11.96 | 17.49 | 6.03 |
| 2015 | -1.97 | -1.03 | 1.38 | -4.64 | -0.95 |
| 2014 | 3.59 | 9.21 | 13.69 | 2.50 | 7.00 |
| 2013 | 16.68 | 22.40 | 32.39 | 7.42 | 34.93 |
| 2012 | 10.31 | 15.83 | 16.00 | 15.58 | 14.07 |
| 2011 | 9.63 | 3.02 | 2.11 | 4.38 | -3.96 |
| 2010 | 11.68 | 15.11 | 15.06 | 15.19 | 24.61 |
| 2009 | 31.07 | 38.88 | 26.46 | 57.51 | 39.11 |
| 2008 | -29.47 | -32.76 | -37.00 | -26.39 | -43.77 |
Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the fund may be lower of higher than the performance quoted and can be obtained here. Performance is annualized for periods greater than 1 year. Each Morningstar category average represents a universe of funds with similar objectives.
Growth of $10k
This chart illustrates the performance of a hypothetical $10,000 investment made in the Fund on the Inception Date. Assumes reinvestment of dividends and capital gains. This chart does not imply future performance.
Portfolio
| # of Equity Holdings | 56 |
| # of Fixed Holdings | 14 |
| Median Market Cap | $81.95 B |
| Weighted Average Market Cap | $152.04 B |
| 3-Yr Annualized Turnover Ratio | 1.68% |
| Average Duration | 2.24 years |
| Average Maturity | 4.32 years |
| 30-day SEC Yield | 2.29% |
| Holding | Ticker | Sector | % of Portfolio |
|---|---|---|---|
| Lions Gate Entmt Cv (1.25% 4/15/2018) | - | - | 4.31% |
| Boeing | BA | Industrials | 4.23% |
| HollyFrontier | HFC | Energy | 4.07% |
| Intel | INTC | Technology | 3.73% |
| Microsoft | MSFT | Technology | 3.27% |
| ConocoPhillips | COP | Energy | 3.09% |
| AT&T | T | Communications | 3.00% |
| Verizon | VZ | Consumer Staples | 2.71% |
| Exxon Mobil | XOM | Energy | 2.67% |
| Royal Dutch Shell | RDS/A | Energy | 2.63% |
| TOP 10 HOLDINGS TOTAL | 33.71% | ||
As of 3/31/18. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Those listed are for the previous quarter. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Buffalo publishes this listing of securities held as of the most recent calendar-quarter end, with a 30 or 60 day lag depending on the portfolio. Buffalo may exclude any portion of holdings from publication when deemed in the best interest of the portfolio.
The portfolio data and its presentation here may differ from the complete schedules of investments in regulatory filings due to differing accounting and reporting requirements.
As of 6/30/18. Security weightings are subject to change and are not recommendations to buy or sell any securities.
Sector Allocation may not equal 100% due to rounding.
As of 6/30/18. Allocation percentages may not equal 100% due to rounding.
Commentary
Commentary for Q1 2018 (As of 3/31/18)
CAPITAL MARKET OVERVIEW
(As of 3/31/18) — The long streak of low volatility and positive stock market returns ended in the 1st quarter of 2018. Strong gains in January were erased in February and March, leaving the S&P 500 Index down 0.76% for the quarter. Volatility as measured by the Cboe Volatility Index (VIX) was up about 80% in the 1st quarter after falling for the last three years. Investor worries about increasing interest rates, possible trade wars, and threatened government action against large technology companies offset generally strong economic data and corporate earnings growth.
PERFORMANCE COMMENTARY
(As of 3/31/18) — The Buffalo Flexible Income Fund delivered a return of -3.45% for the quarter. During the period, the S&P 500 Index returned -0.76% and the ICE BofA Merrill Lynch High Yield Master II Index returned -0.91%.
The equity portion of the portfolio produced a return of -3.45% compared to -0.76% for the S&P 500 Index. The primary sectors that led to the underperformance during the period were Consumer Discretionary and Consumer Staples. The underperformance in Consumer Discretionary was mostly due to a decline in shares of Lions Gate Entertainment, which was the biggest detractor, as it lowered its medium-term earnings guidance to mid/upper single digits versus low double digits previously, reflecting lower film segment earnings and higher programming spend at Starz. Meanwhile the underperformance within the Consumer Staples sector was mostly due to the size of our investments there as the Fund was overweight the worst performing benchmark sector during the quarter.
The top contributors to the Fund in the quarter were Intel, Boeing, and GlaxoSmithKline while the top detractors in the quarter were Lions Gate Entertainment, General Electric, and General Mills. In spite of the setback during the period, the equity component of the Fund continues to focus on large cap dividend payers, which we believe possess significant competitive advantages over the long term.
The fixed income portion of the Buffalo Flexible Income Fund generated a return of -3.34% for the quarter which underperformed the ICE Bank of America Merrill Lynch Master II Index return of -0.91%. Underperformance within the Consumer Discretionary segment was responsible for the entire shortfall relative to the fixed income benchmark during the quarter. The Fund was significantly overweight the Consumer Sector and a decline in our investments in fixed income securities issued by Lions Gate Entertainment, as explained above, negatively impacted performance.
The top contributors to the Fund’s fixed income portfolio included Approach Resources, Medicines Company, and Everi Payments while the top detractors were Lions Gate Entertainment and Nuance Communications.
OUTLOOK
(As of 3/31/18) — We believe the market could continue to experience increased volatility in the coming quarters as the Federal Reserve continues with its desire to normalize interest rates and as investors contemplate potential trade wars and threatened government action on large technology companies. Prospective tailwinds for the economy include further job growth, wage increases, lower tax rates, and simply more optimism from both businesses and consumers; all of which could lead to higher Gross Domestic Product (GDP) growth.
Despite the expectation of more volatility, we continue to focus on wide moat, large-capitalization companies that are trading at reasonable valuations, in our view. As always, the Fund will continue to focus on competitively advantaged companies that can be purchased at a fair price, in our opinion. As the stock market has continued to climb, it is getting harder to find companies that fit our investment criteria, but we continue to follow our process of finding new investment ideas and are ready when market declines provide better opportunities.
Within the fixed income portion of the fund, we continue to focus on higher quality, below investment grade credit securities. With credit yield spreads near cycle lows, in our view, we are being selective and disciplined with purchases, as we do not anticipate much price appreciation within fixed income markets, in general.
The opinions expressed are those of the Portfolio Manager(s) and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security. Fund holdings and sector allocations are subject to change and are not recommendations to buy or sell any security. Earnings growth is not representative of the fund’s future performance.
Literature
| Document | Last Updated |
|---|---|
| Fact Sheet | 6/30/18 |
| Quarterly Commentary | 3/31/18 |
| Prospectus | 11/17/17 |
| Full Fund Holdings | 3/31/18 |
| Annual Report | 3/31/18 |
| Semi-Annual Report | 9/30/17 |
| Statement of Additional Information | 1/2/18 |
| Tax Guide - 2017 | 1/10/18 |
| General Account Forms |
| New Account Application |
| Change or Add Account Details |
| Power of Attorney |
| Individual Retirement Account (IRA) Forms |
| IRA Account Application |
| IRA Beneficiary Addition / Change Form |
| IRA / Qualified Plan Distribution Request Form |
| IRA Transfer Form |
| Coverdell Education Savings Accounts (ESA) Forms |
| Coverdell ESA Application |
| Coverdell ESA Distribution Request |
| Coverdell ESA Transfer Form |
| Retirement Information |
| Retirement Savings Options for Individuals |
Fundamental Approach
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.
Proprietary Philosophy
We construct our portfolios based on our own proprietary investment strategy.
Disciplined Investing
Sticking to our disciplined investment strategy ensures we maintain a consistent, balanced approach.
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The Morningstar Rating™ for funds, or "star rating", is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating™ for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating™ metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods.
The Buffalo Flexible Income Fund received 3 stars among 313 for the three-year, 2 stars among 274 for the five-year, and 4 stars among 199 Allocation--70% to 85% Equity funds for the ten-year period ending 6/30/18.
In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% Below Average, the middle 35% Average, the next 22.5% Above Average, and the top 10% High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund. Funds with less than three years of performance history are not rated.
©2018 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Bond ratings are grades given to bonds that indicates their credit quality as determined by a private independent rating service such as [Standard & Poor's or Moody’s, etc.]. The firm evaluates a bond issuer's financial strength, or its ability to pay a bond's principal and interest in a timely fashion. Ratings are expressed as letters ranging from 'AAA', which is the highest grade, to 'D', which is the lowest grade. Not Rated category includes holdings that are not rated by any rating agencies.