Quick Facts
Ticker:BUFBX
Inception Date:8/12/1994
Total Net Assets:$702.26 Million  (9/30/18)
Expense Ratio:1.01%
Dividend Distribution:Monthly
Category:Large Cap Value
Benchmark:60% Morningstar U.S. Large Cap

40% ICE BofAML U.S. High Yield
Related Material:
   Fund Fact Sheet Q3 2018
   PM Commentary Q3 2018
   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.

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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™ based on risk-adjusted returns among 315 Allocation–70% to 85% Equity funds as of 10/31/18.

Investment Style

Performance (%)

As of 10/31/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(8/12/94)
BUFFALO FLEXIBLE INCOME FUND-3.69-0.265.826.515.189.537.537.16
  Combined Index
    Morningstar U.S. Large Cap Index (60%)
    ICE BofAML U.S. High Yield Index (40%)
-1.78
-2.73
-0.35
2.69
3.92
0.84
5.19
8.08
0.86
9.78
11.88
6.64
8.84
11.60
4.69
12.31
13.08
11.16
8.18
8.72
7.38
8.65
9.47
7.43
  BofA ML Combined Index
    S&P 500 Index (60%)
    ICE BofAML U.S. High Yield Index (40%)
-2.09
-3.25
-0.35
2.14
3.01
0.84
4.75
7.35
0.86
9.57
11.52
6.64
8.68
11.34
4.69
12.41
13.24
11.16
8.20
8.74
7.38
8.78
9.68
7.43
  Lipper Mixed-Asset Target Allocation Moderate Funds Index-3.62-2.01-0.015.395.028.115.676.75
  Morningstar Allocation--70% to 85% Equity Category-5.25-2.670.046.175.489.236.356.91
As of 9/30/183 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
(8/12/94)
BUFFALO FLEXIBLE INCOME FUND4.775.3811.1711.036.968.128.137.43
  Combined Index
    Morningstar U.S. Large Cap Index (60%)
    ICE BofAML U.S. High Yield Index (40%)
5.92
8.24
2.44
7.82
11.36
2.52
12.41
18.72
2.94
13.90
17.70
8.19
10.74
14.20
5.54
10.89
11.89
9.38
8.81
9.59
7.64
8.77
9.79
7.23
  BofA ML Combined Index
    S&P 500 Index (60%)
    ICE BofAML U.S. High Yield Index (40%)
5.60
7.71
2.44
7.34
10.56
2.52
11.92
17.91
2.94
13.66
17.31
8.19
10.59
13.95
5.54
10.93
11.97
9.38
8.85
9.65
7.64
8.92
10.04
7.23
  Lipper Mixed-Asset Target Allocation Moderate Funds Index2.732.495.738.566.517.076.186.97
  Morningstar Allocation--70% to 85% Equity Category3.503.948.5210.417.547.927.137.23

* 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%)

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.

As of July 27, 2018 the 60% Morningstar U.S. Large Cap Index/40% ICE BofAML US High Yield Index has replaced the Bank of America Merrill Combined Index (60% S&P 500 Index/40% ICE BofAML US High Yield Index) as the Fund’s primary benchmark. The Advisor believes that the new index is more appropriate given the Fund’s holdings.

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
Remaining 2018 Dates:

Record Date: November 19 | Payable Date: November 20

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
No distribution for October 2018
9/17/189/18/18$16.04$0.02689378--$0.02689378
8/17/188/18/18$15.86$0.05035470--$0.05035470
7/17/187/18/18$15.66$0.12908504--$0.12908504
6/18/186/19/18$15.62$0.02556148--$0.02556148
5/17/185/18/18$15.59$0.04873401--$0.04873401
4/17/184/18/18$15.51$0.01254410--$0.01254410
3/19/183/20/18$15.06$0.02352098--$0.02352098
2/20/182/21/18$14.98$0.02173024--$0.02173024
1/17/181/18/18$16.06$0.01756997--$0.01756997

For historical distributions, click here.

Portfolio

Portfolio Characteristics
(As of 9/30/18) 
 
# of Equity Holdings54
# of Fixed Holdings12
Median Market Cap$71.44 B
Weighted Average Market Cap$168.30 B
3-Yr Annualized Turnover Ratio1.92%
Average Duration2.45 years
Average Maturity4.62 years
30-day SEC Yield2.23%
Top 10 Holdings
HoldingTickerSector% of Net
Assets
BoeingBAIndustrials4.36%
HollyFrontierHFCEnergy4.03%
MicrosoftMSFTTechnology3.56%
IntelINTCTechnology3.52%
ConocoPhillipsCOPEnergy3.45%
Exxon MobilXOMEnergy2.99%
Royal Dutch ShellRDS/AEnergy2.88%
Verizon CommunicationsVZConsumer Staples2.88%
ChevronCVXEnergy2.74%
AT&TTCommunications2.72%
TOP 10 HOLDINGS TOTAL33.13%
As of 6/30/18. 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.
Sector Weighting

As of 9/30/18. 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.

Asset Allocation

As of 9/30/18. Allocation percentages may not equal 100% due to rounding.

Management

John Kornitzer
Portfolio Manager

50 Years of Experience

 View full bio

Paul Dlogosch, CFA
Portfolio Manager

21 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 9/30/18) — U.S. economic strength and solid corporate earnings growth drove healthy equity returns in the 3rd quarter. The widely-followed S&P 500 Index had a total return of 7.71%, its best quarterly gain since 2013. In September, initial jobless claims fell to the lowest level since 1969, wages grew at the fastest rate since 2009, consumer confidence reached the highest level since 2000, and the National Federation of Independent Business (NFIB) survey of small business optimism was at an all-time high (the survey dates back to 1974). Against this strong economic backdrop, the Federal Reserve raised the targeted federal funds rate by another 25 basis points to a range of 2.00% to 2.25%. Slowly rising interest rates led to flat bond returns.

The divergence between domestic and international equity market performance continued during the quarter, with the MSCI EAFE Index advancing just 1.35%. The Russell 3000 Index gained 7.12% in the 3rd quarter. By style, growth continued to outperform value, with the Russell 3000 Growth Index increasing 8.88% compared to the Russell 3000 Value Index’s advance of 5.39%. Large caps did better than small caps as the Russell 1000 Index returned 7.42%, the Russell Midcap Index returned 5.00%, and the Russell 2000 Index returned 3.58% in the quarter. Every economic sector was positive this quarter, with Health Care and Industrials the top performers, while Materials and Energy lagged the indexes.

PERFORMANCE COMMENTARY

(As of 9/30/18) — The Buffalo Flexible Income Fund produced a return of 4.77% for the period and outperformed the Lipper Mixed-Asset Target Allocation Moderate Funds Index return of 2.73%, but underperformed the primary benchmark, a blended index comprised of 60% of the Morningstar U.S. Large Cap Index and 40% of the ICE BofAML U.S. High Yield Index, which produced a return of 5.92% for the period.

The equity portion of the portfolio returned 5.30% vs. the S&P 500 Index return of 7.71% during the quarter. The fixed income portion of the portfolio generated a return of 1.62% for the quarter, which underperformed the ICE BofAML U.S. High Yield Index return of 2.44%.

TOP CONTRIBUTORS
The Fund’s equity component is primarily focused on large cap dividend payers, with top contributors in the quarter being Microsoft, Boeing, and Johnson & Johnson. The top contributors to the Fund’s fixed income performance included Nuance Communications, Consolidated Communications, and Wildhorse Resource Corporation.

TOP DETRACTORS
The primary sectors that led to the relative underperformance were Energy, Industrials, and Consumer Discretionary. Within Energy, the underperformance was due to our sector allocation decision, specifically the significant overweight to energy-related companies, as that area was among the worst performing benchmark sectors for the period. Meanwhile the underperformance within the Industrials and Consumer Sectors
was primarily due to security selection.

Specific securities that detracted from performance within Industrials included General Electric and Pitney Bowes while the underperformance in the Consumer Discretionary sector included shares of Ford and Lions Gate Entertainment. Additionally, the Fund did not own Amazon, as it is a non-dividend payer, which was once again one of the top contributors for the benchmark.

OUTLOOK

(As of 9/30/18) — As we begin the 4th quarter, significant uncertainty about the direction of the stock market exists, driven by factors including:
• the upcoming midterm elections in November and possible Democratic gains in the Congress,
• the ultimate outcome of the trade dispute with China and the impact it will have on earnings of large U.S.-based companies,
• the potential for continued interest rate hikes, and
• the fact that many stocks are trading at elevated valuations after the multi-year bull market.

This uncertainty is offset, in part, by continued strength in the U.S. economy and job markets. Amidst this uncertainty, we continue to be diligent in our process of seeking income-producing securities trading at reasonable valuations by our analysis. Given that we believe the U.S. is in the later stages of the current economic cycle, we continue to find ourselves confronted with relatively low spread and yield levels with the non-investment grade fixed income asset class that we prefer over the long haul. This backdrop has resulted in a bond allocation that is close to the low end of our expected range in terms of the fund’s overall asset mix of stocks, bonds, and cash. Within the fixed income portion of the portfolio we continue to focus on high-quality, non-investment grade issuers with defensive business models and manageable credit metrics. As always, we appreciate your support and confidence in our investment process 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.

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 received 3 stars among 315 for the three-year, 3 stars among 270 for the five-year, and 4 stars among 192 Allocation--70% to 85% Equity funds for the ten-year period ending 10/31/18.

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. 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.