Flexible Income Fund
Quick Facts
| Investor | Institutional | |
| Ticker: | BUFBX | BUIBX |
| Daily Pricing: | ||
| As of 9/29/2022 | ||
| NAV: | $16.82 | $16.81 |
| $ Change: | $-0.17 | $-0.17 |
| % Change: |
-1.00% | -1.00% |
| YTD: |
-7.37% | -7.27% |
| Inception Date: | 8/12/1994 | 7/1/2019 |
| Expense Ratio: | 1.01% | 0.86% |
| Total Net Assets: | $460.41 Million (6/30/22) | |
| Morningstar Category: | Large Value | |
| Benchmark Index: | Russell 3000 | |
| Dividend Distribution: | Monthly | |
|
Related Material: Fund Fact Sheet Q2 2022 PM Commentary Q2 2022 Summary Prospectus |
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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.
▼John Kornitzer, Portfolio Manager
Morningstar Rating
Overall Morningstar Rating™ of BUFBX based on risk-adjusted returns among 1,154 Large Value funds as of 8/31/22.
Investment Style
Performance (%)
| As of 8/31/22 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | 15 YR | 20 YR | Since Inception |
|---|---|---|---|---|---|---|---|---|---|
| BUFFALO FLEXIBLE INCOME FUND - Investor | -5.81 | -0.97 | 8.39 | 10.85 | 8.83 | 7.60 | 6.69 | 8.47 | 7.42 |
| BUFFALO FLEXIBLE INCOME FUND - Institutional | -5.77 | -0.83 | 8.61 | 11.04 | 8.99 | 7.76 | 6.85 | 8.63 | 7.58 |
| Russell 3000 Index | -3.51 | -16.92 | -13.28 | 11.90 | 11.29 | 12.77 | 8.88 | 9.85 | 9.98 |
| Morningstar Moderately Aggressive Target Risk Index | -5.00 | -15.60 | -14.63 | 5.99 | 5.97 | 7.75 | - | - | - |
| Lipper Mixed-Asset Target Allocation Moderate Funds Index | -3.82 | -13.11 | -11.80 | 5.05 | 5.16 | 6.39 | 4.96 | 6.14 | 6.66 |
| Morningstar Large Value Category | -5.89 | -8.83 | -4.79 | 9.67 | 8.31 | 10.22 | 6.69 | 8.10 | - |
| As of 6/30/22 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | 15 YR | 20 YR | Since Inception |
|---|---|---|---|---|---|---|---|---|---|
| BUFFALO FLEXIBLE INCOME FUND - Investor | -6.34 | -2.67 | 7.52 | 9.38 | 8.76 | 7.69 | 6.54 | 7.92 | 7.40 |
| BUFFALO FLEXIBLE INCOME FUND - Institutional | -6.37 | -2.60 | 7.68 | 9.52 | 8.91 | 7.84 | 6.69 | 8.08 | 7.56 |
| Russell 3000 Index | -16.70 | -21.10 | -13.87 | 9.77 | 10.60 | 12.57 | 8.36 | 9.14 | 9.84 |
| Morningstar Moderately Aggressive Target Risk Index | -13.36 | -17.76 | -14.89 | 4.61 | 5.95 | 7.82 | - | - | - |
| Lipper Mixed-Asset Target Allocation Moderate Funds Index | -10.52 | -14.90 | -11.52 | 4.37 | 5.09 | 6.46 | 4.75 | 5.87 | 6.62 |
| Morningstar Large Value Category | -11.24 | -11.33 | -4.84 | 7.95 | 7.84 | 10.26 | 6.25 | 7.50 | - |
| 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|---|---|---|
| BUFFALO FLEXIBLE INCOME FUND - Investor | 10.31 | 16.68 | 3.59 | -1.97 | 9.90 | 13.21 | -7.00 | 18.76 | -2.24 | 30.00 |
| BUFFALO FLEXIBLE INCOME FUND - Institutional | 10.47 | 16.85 | 3.75 | -1.83 | 10.07 | 13.38 | -6.86 | 18.87 | -2.10 | 30.21 |
| Russell 3000 Index | 16.42 | 33.55 | 12.56 | 0.48 | 12.74 | 21.13 | -5.24 | 31.02 | 20.89 | 25.66 |
| Morningstar Moderately Aggressive Target Risk Index | 14.33 | 20.18 | 4.97 | -2.40 | 10.21 | 18.89 | -6.74 | 22.95 | 13.51 | 14.04 |
Hypothetical Growth of $10,000
Distributions
| Record Date | Payable Date | Distribution NAV | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | Distribution Total |
|---|---|---|---|---|---|---|
| 9/19/22 | 9/20/22 | $17.57 (Inv) $17.57 (Inst) | $0.03790711 $0.04037947 | - - | - - | $0.03790711 $0.04037947 |
| 8/17/22 | 8/18/22 | $18.82 (Inv) $18.82 (Inst) | $0.03362030 $0.03585815 | - - | - - | $0.03362030 $0.03585815 |
| 7/18/22 | 7/19/22 | $17.86 (Inv) $17.85 (Inst) | $0.00688834 $0.00913984 | - - | - - | $0.00688834 $0.00913984 |
| 6/17/22 | 6/21/22 | $17.63 (Inv) $17.62 (Inst) | $0.04338733 $0.04578480 | - - | - - | $0.04338733 $0.04578480 |
| 5/17/22 | 5/18/22 | $18.35 (Inv) $18.34 (Inst) | $0.02507198 $0.02735278 | - - | - - | $0.02507198 $0.02735278 |
| 4/18/22 | 4/19/22 | $19.37 (Inv) $19.37 (Inst) | $0.00510800 $0.00652534 | - - | - - | $0.00510800 $0.00652534 |
| 3/17/22 | 3/18/22 | $18.58 (Inv) $18.57 (Inst) | $0.00875767 $0.01084725 | - - | - - | $0.00875767 $0.01084725 |
| 2/17/22 | 2/18/22 | $17.95 (Inv) $17.94 (Inst) | $0.01556058 $0.01779806 | - - | - - | $0.01556058 $0.01779806 |
| 1/18/22 | 1/19/22 | $18.47 (Inv) $18.46 (Inst) | $0.01406056 $0.01646594 | - - | - - | $0.01406056 $0.01646594 |
Net Investment Income, if any – Record Date (10/17/22); Payment Date (10/18/22)
Net Investment Income, if any – Record Date (11/17/22); Payment Date (11/18/22)
Capital Gains, if any – Record Date (12/2/22); Payment Date (12/5/22)
Net Investment Income, if any – Record Date (12/19/22); Payment Date (12/20/22)
Portfolio
Portfolio Characteristics
| (As of 6/30/22) | |
|---|---|
| # of Holdings | 56 |
| Median Market Cap | $63.33 B |
| Weighted Average Market Cap | $339.53 B |
| 3-Yr Annualized Turnover Ratio | 3.54% |
| 30-day SEC Yield | 1.93% |
Top 10 Holdings
| Holding | Ticker / Maturity | Sector | % of Net Assets |
|---|---|---|---|
| Microsoft | MSFT | Technology | 8.49% |
| Chevron | CVX | Energy | 4.15% |
| Hess Corp | HES | Energy | 3.60% |
| ConocoPhillips | COP | Energy | 3.57% |
| Costco Wholesale | COST | Consumer Staples | 3.53% |
| APA Corp | APA | Energy | 3.37% |
| Eli Lilly & Co | LLY | Health Care | 3.04% |
| Pfizer | PFE | Health Care | 2.85% |
| Qualcomm | QCOM | Technology | 2.81% |
| ExxonMobil | XOM | Energy | 2.78% |
| TOP 10 HOLDINGS TOTAL | 38.19% | ||
Sector Weighting
Asset Allocation
Management
Commentary
CAPITAL MARKET OVERVIEW
(As of 6/30/22) — The stock market extended year-to-date losses during the 2nd quarter. Inflation, rising interest rates, and economic uncertainty continued to be major headwinds for investors as recession talks gained traction. The S&P 500 Index fell -16.10% during the quarter, bringing the total return for the first half of the year to -19.96%. News headlines, which included energy shortages, the war in Ukraine, China’s COVID lockdowns, and the potential for softer corporate earnings next quarter, added to the pessimistic market sentiment. However, the Federal Reserve’s hawkish stance on inflation, expectations for additional interest rate increases, and a reduction in the size of its balance sheet, continued to signal confidence in the U.S. economy moving forward.
The broad-based Russell 3000 Index declined -16.70% in the quarter. Value stocks fell less than growth stocks as the Russell 3000 Value Index returned -12.41%, versus a return of -20.83% for the Russell 3000 Growth Index. Relative performance slightly favored market cap size as large caps outperformed small caps in the quarter. Larger cap stocks, as measured by the Russell 1000 Index, returned -16.67% compared to the smaller cap Russell 2000 Index return of -17.20% and the Russell Microcap Index return of -18.96%. There were no advancing economic sectors for the quarter, but Consumer Staples, Energy, Utilities, and Healthcare held up better on a relative basis. Consumer Discretionary, Information Technology and Communication Services areas lagged.
PERFORMANCE COMMENTARY
(As of 6/30/22) — The Buffalo Flexible Income Fund (BUFBX) declined 6.34% for the quarter compared to a loss of 16.70% for the Russell 3000 Index.
Top Contributors
The top three contributors to the Fund’s performance during the quarter were Eli Lilly, AT&T, and General Mills. All three companies operate within defensive industries which typically outperform when the broad market declines significantly, as it has this year. Additionally, Eli Lilly, a manufacturer and marketer of pharmaceutical products, reported good 1st quarter earnings as well as positive data from its phase III drug Tirzepatide, which is being developed as a treatment for diabetes and obesity. Shares of General Mills advanced in the quarter as management reported strong earnings and provided a good outlook for its fiscal 2023.
Top Detractors
The top three detractors were Microsoft, APA, and Costco. All of these companies operate in more cyclical industries which tend to underperform when markets decline. Microsoft reported decent financial results during the quarter, but rising interest rates resulted in a lower valuation multiple, and currency headwinds led to a reduction of management’s financial guidance moving forward. APA, which operates in the oil and gas industries, benefited earlier this year from rising commodities prices, but shares pulled back this quarter, as oil declined from very elevated levels. The retailer Costco declined primarily due to investor concerns around softer consumer spending and higher costs associated with inflation when two of the leading retailers, Walmart and Target, mentioned both of these concerns on their earnings calls during the period.
OUTLOOK
(As of 6/30/22) — Investors are increasingly concerned about the economy, as inflation continues to rise and Federal Reserve (the “Fed”) policy remains hawkish. The Fed implemented two rate increases during the quarter to curb demand and slow the pace of rising prices. Stocks declined as the Fed has indicated that inflation is its top priority and will raise rates even if it causes an economic slowdown. Stock market performance is likely to reflect how well the Fed can manage a soft-landing. Although layoff announcements have ticked up, healthy employment reports and elevated job openings indicate the economy remains resilient. Investors also may start to look beyond the current round of increases and start to price in expectations for when the Fed will shift its policy. We will be ready to take advantage of opportunities created by stock market volatility using market declines as attractive entry points for long-term investors./p>
Literature
| Buffalo Flexible Income Fund Documents | Last Updated |
|---|---|
| Fact Sheet | 6/30/22 |
| Quarterly Commentary | 6/30/22 |
| Full Fund Holdings | 6/30/22 |
| Summary Prospectus | 7/29/22 |
| Prospectus | 7/29/22 |
| Statement of Additional Information | 7/29/22 |
| Annual Report | 3/31/22 |
| Semi-Annual Report | 9/30/21 |
| Tax Guide - 2021 | 1/3/22 |
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We construct our portfolios based on our own proprietary investment strategy.
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