Flexible Income Fund
Quick Facts
| Investor | Institutional | |
| Ticker: | BUFBX | BUIBX |
| Inception Date: | 8/12/1994 | 7/1/2019 |
| Expense Ratio: | 1.01% | 0.86% |
| Total Net Assets: | $599.75 Million (7/1/19) | |
| Category: | Large Cap Value | |
| Benchmark: | 60% Morningstar U.S. Large Cap 40% ICE BofAML U.S. High Yield | |
| Dividend Distribution: | Monthly | |
| Related Material: Fund Fact Sheet Q2 2019 PM Commentary Q2 2019 Summary Prospectus | ||
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.
▼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
Morningstar Rating
Overall Morningstar Rating™ of BUFBX based on risk-adjusted returns among 295 Allocation 70-85% Equity funds as of 7/31/19.
Investment Style
Performance (%)
| As of 7/31/19 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | 15 YR | Since Inception (8/12/94) |
|---|---|---|---|---|---|---|---|---|
| BUFFALO FLEXIBLE INCOME FUND - Investor | -0.76 | 12.31 | 0.86 | 7.10 | 4.80 | 8.84 | 7.06 | 7.14 |
| BUFFALO FLEXIBLE INCOME FUND - Institutional | -0.80 | 12.33 | 0.94 | 7.23 | 4.94 | 9.00 | 7.22 | 7.30 |
| Combined Index Morningstar U.S. Large Cap Index (60%) ICE BofAML U.S. High Yield Index (40%) | 1.71 1.74 1.67 | 16.25 19.93 10.72 | 7.81 8.39 6.94 | 11.07 13.90 6.83 | 8.98 11.58 5.08 | 11.79 13.91 8.62 | 8.43 9.10 7.42 | 8.77 9.62 7.50 |
| BofA ML Combined Index S&P 500 Index (60%) ICE BofAML U.S. High Yield Index (40%) | 1.68 1.69 1.67 | 16.43 20.24 10.72 | 7.57 7.99 6.94 | 10.75 13.36 6.83 | 8.84 11.34 5.08 | 11.87 14.03 8.62 | 8.43 9.10 7.42 | 8.92 9.86 7.50 |
| Lipper Mixed-Asset Target Allocation Moderate Funds Index | 1.52 | 12.32 | 4.77 | 6.93 | 5.41 | 7.90 | 5.93 | 6.89 |
| Morningstar Allocation 70-85% Equity Category | 0.76 | 14.36 | 2.57 | 7.89 | 5.76 | 9.10 | 6.68 | 7.03 |
| As of 6/30/19 | 3 MO | YTD | 1 YR | 3 YR | 5 YR | 10 YR | 15 YR | Since Inception (8/12/94) |
|---|---|---|---|---|---|---|---|---|
| BUFFALO FLEXIBLE INCOME FUND - Investor | 0.37 | 12.25 | 3.80 | 7.58 | 4.60 | 9.42 | 7.03 | 7.16 |
| BUFFALO FLEXIBLE INCOME FUND - Institutional | 0.41 | 12.34 | 3.95 | 7.74 | 4.76 | 9.58 | 7.19 | 7.32 |
| Combined Index Morningstar U.S. Large Cap Index (60%) ICE BofAML U.S. High Yield Index (40%) | 1.98 2.57 1.09 | 9.10 10.16 7.52 | 6.70 7.58 5.37 | 7.35 7.54 7.06 | 4.57 4.70 4.37 | 9.25 9.22 9.30 | 7.45 7.48 7.41 | 7.47 7.50 7.42 |
| BofA ML Combined Index S&P 500 Index (60%) ICE BofAML U.S. High Yield Index (40%) | 3.02 4.30 1.09 | 14.13 18.54 7.52 | 8.40 10.42 5.37 | 11.34 14.19 7.06 | 8.17 10.71 4.37 | 12.54 14.70 9.30 | 8.21 8.75 7.41 | 8.87 9.83 7.42 |
| Lipper Mixed-Asset Target Allocation Moderate Funds Index | 3.15 | 11.79 | 6.25 | 7.68 | 5.04 | 8.45 | 5.81 | 6.90 |
| Morningstar Allocation -- 70-85% Equity Category | 2.85 | 13.59 | 4.23 | 8.80 | 5.20 | 9.74 | 6.44 | 7.03 |
* Morningstar U.S. Large Cap Index (60%) / ICE BofAML U.S. High Yield Index (40%)
** S&P 500 Index (60%) / ICE BofAML U.S. High Yield Index (40%)
For performance prior to 7/1/19 (Inception Date of Institutional Class), performance of the Investor Class shares is used and includes expenses not applicable and lower than those of Investor Class shares.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.
Hypothetical Growth of $10,000
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.
Distributions
Record Date: August 19 | Payable Date: August 20
Record Date: September 17 | Payable Date: September 18
Record Date: October 17 | Payable Date: October 18
Record Date: November 18 | Payable Date: November 19
Record Date: December 17 | Payable Date: December 18
| Record Date | Payable Date | Distribution NAV | Net Investment Income | Short-Term Capital Gains | Long-Term Capital Gains | Distribution Total |
|---|---|---|---|---|---|---|
| 7/17/19 | 7/18/19 | $15.27 (Inv) $15.27 (Inst) | $0.00826352 $0.00940197 | - - | - - | $0.00826352 $0.00940197 |
| 6/17/19 | 6/18/19 | $15.13 | $0.02141209 | - | - | $0.02141209 |
| 5/17/19 | 5/20/19 | $15.01 | $0.05121407 | - | - | $0.05121407 |
| 4/17/19 | 4/18/19 | $15.43 | $0.01351815 | - | - | $0.01351815 |
| 3/18/19 | 3/19/19 | $15.18 | $0.03240602 | - | - | $0.03240602 |
| 2/19/19 | 2/20/19 | $15.12 | $0.01889814 | - | - | $0.01889814 |
| 1/17/19 | 1/18/19 | $14.58 | $0.02098656 | - | - | $0.02098656 |
For historical distributions, click here.
Portfolio
Portfolio Characteristics
| (As of 6/30/19) | |
|---|---|
| # of Equity Holdings | 59 |
| # of Fixed Holdings | 7 |
| Median Market Cap | $48.91 B |
| Weighted Average Market Cap | $168.92 B |
| 3-Yr Annualized Turnover Ratio | 3.78% |
| Average Duration | 2.13 years |
| Average Maturity | 5.21 years |
| 30-day SEC Yield | 1.24% |
Top 10 Holdings
| Holding | Ticker | Sector | % of Net Assets |
|---|---|---|---|
| Microsoft | MSFT | Technology | 4.60% |
| Boeing | BA | Industrials | 4.23% |
| Johnson & Johnson | JNJ | Health Care | 2.94% |
| Chevron | CVX | Energy | 2.88% |
| BB&T | BBT | Financials | 2.63% |
| Procter & Gamble | PG | Consumer Staples | 2.56% |
| BP | BP | Energy | 2.56% |
| Coca-Cola | KO | Consumer Staples | 2.48% |
| Intel | INTC | Technology | 2.45% |
| Clorox | CLX | Consumer Staples | 2.43% |
| TOP 10 HOLDINGS TOTAL | 29.76% | ||
Sector Weighting
As of 6/30/19. 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.
Asset Allocation
As of 6/30/19. Allocation percentages may not equal 100% due to rounding.
Management
Commentary
CAPITAL MARKET OVERVIEW
(As of 6/30/19) — The S&P 500 Index posted its best 1st half of a calendar year since 1997, rising 18.54% from January 1 to June 30. During the most recent quarter, the index was in negative territory for the first two months (April and May) then rose 7.05% in the final month, marking the best June since 1955, and finished with a return of 4.30% for the quarter.
Central banks and trade policies continued to drive financial markets during the period. The threat of increasing tariffs against China and Mexico contributed to the sell-off early in the quarter, and the June rally was largely a result of dovish central bank commentary, leading investors to anticipate rate cuts in the coming months.
The Russell 3000 Index returned 4.10% in the quarter. By style, growth outpaced value, with the Russell 3000 Growth Index up 4.50% and the Russell 3000 Value Index up 3.68%. Large caps generally outperformed small caps in the quarter. The Russell 1000 Index returned 4.25%, just ahead of the Russell Mid Cap Index return of 4.13%. The Russell 2000 returned 2.10% during the quarter. Financials were the best performing sector, followed by Materials and Information Technology. Energy was the only sector to post a negative return, driven by a decline in oil prices. Health Care and Real Estate also underperformed relative to the broad market.
PERFORMANCE COMMENTARY
(As of 6/30/19) — The Buffalo Flexible Income Fund produced a return of 0.37% for the quarter and underperformed the primary prospectus benchmark (60% Morningstar U.S. Large Cap Index / 40% ICE BofAML High Yield Index) return of 3.69%. The Fund’s peer group index, the Lipper Mixed-Asset Target Allocation Moderate Funds Index, produced a return of 3.15% for the quarter.
EQUITIES PERFORMANCE
The equity portion of the portfolio underperformed the S&P 500 Index with a return of 0.61% for the quarter. The relative underperformance was primarily driven by the Energy, Consumer Discretionary, and Industrials sectors. The underperformance within Energy was primarily driven by sector allocation as the Fund was overweight the worst performing sector in the index.
The underperformance within the Consumer Discretionary sector was primarily due to security selection. Lions Gate Entertainment was the primary detractor from Fund performance due to weak films and fears over disintermediation.
Relative underperformance within the Industrials segment was due to security selection. Specific securities that held back performance were Pitney Bowes and Boeing. Pitney Bowes was negatively impacted by the secular trend away from traditional mail while Boeing was adversely impacted by the grounding of the 737 MAX airplanes due to safety issues.
Overall the top three contributors to the Fund’s performance during the quarter were Microsoft, Qualcomm, and Waste Management while the top three detractors were Dupont, Pitney Bowes, and Lions Gate Entertainment.
FIXED INCOME PERFORMANCE
The fixed income portion of the Fund represented roughly 5% of the Fund. The best performers within the fixed income portion were the Medicines Corporation 2.5% convertible bonds and the Everi Payments 7.5% senior notes. The Medicines convertible bonds benefited from positive clinical trial data for its cholesterol drug, inclisirin, while Everi Payments benefited from positive underlying fundamentals and news that the company was exploring strategic alternatives, including a possible sale.
OUTLOOK
(As of 6/30/19) — The strong gains in the stock market for the 1st half of the calendar year have been primarily driven by expansion in market valuation metrics, as earnings have been relatively flat. Aiding the valuation expansion has been The Federal Reserve’s (the “Fed”) dovish pivot on monetary policy indicating that the next interest rate action will be down. The Fed has become concerned with inflation running below their targeted levels and slowing economic growth. Vagaries regarding trade policy (tariffs and trade agreements), evolving geopolitical risks, and the divided congress further limit their forecasting abilities. A key driver for further stock market advancement is likely to be impacted by how aggressive the Fed cuts rates (0.25% or 0.50%) and how many cuts they decide to make this year. As always, we appreciate your confidence in our investment capabilities over the long term.
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. Earnings growth is not representative of the fund’s future performance.
Literature
| Buffalo Flexible Income Fund Documents | Last Updated |
|---|---|
| Fact Sheet | 6/30/19 |
| Quarterly Commentary | 6/30/19 |
| Full Fund Holdings | 3/31/19 |
| Summary Prospectus | 7/1/19 |
| Prospectus | 7/1/19 |
| Statement of Additional Information | 7/1/19 |
| Annual Report | 3/31/19 |
| Semi-Annual Report | 9/30/18 |
| Tax Guide - 2018 | 1/10/19 |
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.
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 (BUFBX) received 2 stars among 295 for the 3-year, 2 stars among 265 for the 5-year, and 3 stars among 193 Allocation 70-85% Equity funds for the 10-year period ending 7/31/19.
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. ©2019 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. 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.
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.