Quick Facts
Investor Institutional
Ticker: BUFHX BUIHX
Daily Pricing:  
As of 9/29/2022  
NAV: $10.07 $10.07
$ Change: $-0.04 $-0.03
% Change:
-0.40% -0.30%
YTD:
-9.14% -8.96%
Inception Date: 5/19/1995 7/1/2019
Expense Ratio: 1.02% 0.87%
Total Net Assets: $269.31 Million  (6/30/22)
Morningstar Category: High Yield Bond
Benchmark Index: ICE BofAML U.S. High Yield
Dividend Distribution: Monthly
Related Material:
   Fund Fact Sheet Q2 2022
   PM Commentary Q2 2022
   Summary Prospectus
Fund Objective & Investment Process

The investment objective of the Buffalo High Yield Fund is primarily current income, with long-term growth of capital as a secondary objective. The High Yield Fund normally invests at least 80% of its net assets in higher-yielding, higher-risk debt securities rated below investment grade by the major rating agencies (or in similar unrated securities), commonly known as “junk bonds”. Debt securities can include fixed and floating rate bonds as well as bank debt and convertible debt securities.

While the Fund maintains flexibility to invest in bonds of varying maturities, the Fund generally holds bonds with intermediate-term maturities. With respect to the remaining 20% of the Fund’s net assets, the Fund may invest in investment grade debt securities, U.S. Treasury Securities (typically with maturities of 60 days or less), money market funds, and equity investments, including dividend paying stocks and convertible preferred stocks.

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Our team brings many years of credit research experience to the bond market. We are proud to have provided our shareholders with what we believe is a conservative approach to investing in high yield bonds since 1995.

Jeff Sitzmann, Portfolio Manager

Morningstar Rating

       

Overall Morningstar Rating™ of BUFHX based on risk-adjusted returns among 630 High Yield Bond funds as of 8/31/22.

Performance (%)

As of 8/31/223 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO HIGH YIELD FUND - Investor-1.76-6.83-6.113.573.684.465.526.216.57
BUFFALO HIGH YIELD FUND - Institutional-1.72-6.75-5.983.733.814.615.686.376.72
  ICE BofA U.S. High Yield Index-3.54-11.02-10.410.812.434.446.037.406.48
  Lipper High Yield Bond Funds Index-3.34-10.14-9.470.952.324.095.056.465.38
  Morningstar High Yield Bond Category-3.23-10.19-9.740.591.883.624.886.245.29
As of 6/30/223 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO HIGH YIELD FUND - Investor-7.98-9.54-8.482.813.164.335.276.086.49
BUFFALO HIGH YIELD FUND - Institutional-7.86-9.39-8.262.963.324.495.426.246.65
  ICE BofAML U.S. High Yield Index-9.97-14.04-12.66-0.041.954.415.647.146.39
  Lipper High Yield Bond Funds Index-9.55-13.03-11.710.081.904.074.666.205.29
  Morningstar High Yield Bond Category-9.32-12.84-11.80-0.211.463.594.515.975.21

 2012201320142015201620172018201920202020
BUFFALO HIGH YIELD FUND - Investor10.359.401.961.806.655.98-2.2612.329.275.53
BUFFALO HIGH YIELD FUND - Institutional10.529.562.111.956.816.14-2.1212.409.435.69
  ICE BofAML U.S. High Yield Index15.587.422.50-4.6417.497.48-2.2614.416.175.36
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.
3 Year Risk Metrics
BUFHX vs ICE BofAML U.S. High Yield Index (As of 6/30/22)
Upside Capture101.64
Downside Capture77.72
Alpha2.82
Beta0.89
Sharpe Ratio0.24
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
Payable
Date
Distribution
NAV
Net Investment
Income
Short-Term Capital
Gains
Long-Term Capital
Gains
Distribution
Total
9/19/229/20/22$10.27 (Inv)

$10.27 (Inst)
$0.05384215

$0.05525385
-

-
-

-
$0.05384215

$0.05525385
8/17/228/18/22$10.55 (Inv)

$10.54 (Inst)
$0.04604583

$0.04732193
-

-
-

-
$0.04604583

$0.04732193
7/18/227/19/22$10.19 (Inv)

$10.18 (Inst)
$0.04817483

$0.04944458
-

-
-

-
$0.04817483

$0.04944458
6/17/226/21/22$10.34 (Inv)

$10.33 (Inst)
$0.04645304

$0.04780864
-

-
-

-
$0.04645304

$0.04780864
5/17/225/18/22$10.56 (Inv)

$10.55 (Inst)
$0.09466703

$0.09668402
-

-
-

-
$0.09466703

$0.09668402
4/18/224/19/22$11.08 (Inv)

$11.07 (Inst)
$0.02849991

$0.02931875
-

-
-

-
$0.02849991

$0.02931875
3/17/223/18/22$11.17 (Inv)

$11.17 (Inst)
$0.03730506

$0.0386135
-

-
-

-
$0.03730506

$0.0386135
2/17/222/18/22$11.24 (Inv)

$11.23 (Inst)
$0.04083297

$0.04218958
-

-
-

-
$0.04083297

$0.04218958
1/18/221/19/22$11.49 (Inv)

$11.48 (Inst)
$0.02618556

$0.02771153
-

-
-

-
$0.02618556

$0.02771153
2022 Distribution Dates:

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)
For historical distributions, click here.

Portfolio

Portfolio Characteristics
(As of 6/30/22) 
 
# of Holdings128
3-Yr Annualized Turnover Ratio47.75%
Average Duration3.31 years
Average Maturity7.76 years
30-day SEC Yield6.62%
Top 10 Holdings
Name of HoldingMaturity Date% of Net
Assets
Northern Oil & Gas8.125%, 3/1/283.01%
DirecTV Financing1 Month LIBOR + 5.000%, 8/2/272.96%
MPLX3 Month LIBOR +4.652%, 8/15/232.48%
Penn Virginia Escrow9.250%, 8/15/262.31%
Talos Production12.000%, 1/15/262.18%
Consol Energy11.000%, 11/15/252.11%
Matador Resources5.875%, 9/15/261.88%
Energy Transfer7.125%, perpetual preferred1.82%
PetIQ3 Month LIBOR +4.250%, 4/7/281.66%
Magnite6 Month LIBOR +5.000%, 4/3/281.49%
TOP 10 HOLDINGS TOTAL21.90%
As of 3/31/22. Top 10 Holdings for the quarter are not disclosed until 60 days after quarter end. Fund holdings are subject to change and are not recommendations to buy or sell any securities.
Asset Allocation
Percentages of Total Assets as of 6/30/22. Allocation percentages may not equal 100% due to rounding.
Sector Weighting
As of 6/30/22. 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.
Duration
Duration Breakout (%)*
10+ Years0.00
7-10 Years0.00
5-7 Years12.08
3-5 Years29.63
1-3 Years33.04
0-1 Years5.50
*Excludes Bank Loans and Converts.
Credit Quality
Quality Breakout (%)
Baa2.11
Ba22.18
B55.24
Caa6.37
Unassigned14.10
All ratings are as of 6/30/22. Moody’s is the rating source for the Quality Breakout Table. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO), such as Moody’s or Standard & Poor’s. The firm evaluates the of credit worthiness of an issuer with respect to debt obligations, including specific securities, money market instruments, or other bonds. Ratings are measured on a scale that generally ranges from Aaa (highest grade) to C (lowest grade); ratings are subject to change without notice. Unassigned rating indicates that the debtor was not rated by an NRSRO and should not be interpreted as indicating low quality.

Management

Paul Dlugosch, CFA
Portfolio Manager

25 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

35 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

25 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 6/30/22) — The U.S. high yield sector posted consecutive losing quarters as inflation fears and the economic fallout from the ongoing Russia/Ukraine conflict continued to weigh on investor sentiment. A 75-basis point (bps) increase in the Federal Funds rate, accompanied by hawkish commentary from the Federal Reserve, caused significant upward pressure on Treasury yields during the period. Commodity prices also remained elevated as the Ukraine invasion persisted. High yield bonds ended the quarter at a yield to worst of 9.21%, up 290 bps from the beginning of the quarter, finishing significantly higher than the record low of 4.22% achieved in July 2021. The 10-year Treasury yield rose 68 bps and produced a negative return of -5.00% during the quarter, while the S&P 500 Index posted a loss of -16.10% over the same period.

High yield funds continued its streak of monthly cash outflows that began in January 2022. High yield funds experienced $15.3 billion in outflows in the quarter. The current stretch of high yield outflows is the largest six-month period of outflows on record. Unsurprisingly, high yield new issuance was only $24.6 billion, which was the lightest volume since the December 2018 quarter and compares to the quarterly average of $117 billion over the last two years. According to JP Morgan, split BBB and BB-rated credits accounted for the bulk of the new issue activity in the 2nd quarter (53%), and was heavily tilted toward Energy (21.8%), Automotive (13.3%), and Metals/Mining (11.2%).

As mentioned previously, the 10-year Treasury Bond’s yield rose 68 bps from 2.34% to 3.02%, compounding the 83 bps increase in the previous quarter ending March 31st. Every credit rating silo produced negative returns during the 2nd quarter. According to data from JP Morgan, the highest quality split BBB credit tier declined -6.93% and outperformed the rest of the credit spectrum. CCC-rated bonds performed the worst, producing a return of -14.05% for the quarter. Similarly, every sector within U.S. high yield market produced negative returns during the quarter. According to data from JP Morgan, the Diversified Media sector was the best performing industry, declining -5.30% while Broadcasting’s decline of -14.60% was the worst.

According to data from JP Morgan, the U.S. high yield market’s spread to worst for the period was 620bps, 221bps wider than the previous quarter and 43bps tighter than its 20-year historical average of 577 basis points. The yield to worst for the high yield market at quarter end was 9.21%, above the 20-year average of 7.93%, and higher than the 6.31% yield at the end of the March 2022 quarter.

PERFORMANCE COMMENTARY
(As of 6/30/22) — The Buffalo High Yield Fund (BUFHX) declined -7.98% for the quarter but outperformed the ICE BofA U.S. High Yield Index and the Lipper High Yield Bond Funds Index returns of -9.97% and -9.55%, respectively.

Fund Composition by Asset Class
6/30/219/30/2112/31/213/31/226/30/22
Straight Corporates61.5%65.3%67.8%68.3%69.4%
Convertibles17.0%16.1%7.1%6.3%4.6%
Bank Loans13.7%13.5%16.7%18.5%18.9%
Preferred Stock2.3%2.2%2.6%2.7%2.9%
Convertible Preferred0.0%0.0%0.0%0.0%0.0%
Common Stocks0.0%0.0%1.3%0.0%0.0%
Cash5.5%2.9%4.5%4.1%4.1%

Approximate Rate and Contribution of Return from the Fund’s Various Asset Classes in 2Q22
Contribution to Return
Straight Corporates-6.38%
Convertibles-0.68%
Bank Loans-0.61%
Preferred Stocks-0.09%
Convertible PreferredN/A
Common StocksN/A
Total-7.98%

TOP CONTRIBUTORS

The three top contributors for the Fund in the period were NuStar Energy 9.00% preferred stock, Maxar Technologies term loan, and Consol Energy term loan. NuStar Energy transports and stores crude oil and refined products and benefited from strong demand for crude and refined products during the quarter. Maxar Technologies term loan was refinanced during the quarter resulting in a recovery from its market price to its par value. Consol Energy provides coal mining services and experienced significant improvement in operating metrics, driven by European natural gas shortages and thus rising coal prices.

TOP DETRACTORS

The Northern Oil & Gas 8.125% corporate bonds, Entercom Media 6.750% corporate bonds, and the Diebold Nixdorf 8.500% corporate bonds were the worst performers during the quarter. In mid-June, Northern Oil & Gas announced the acquisition of assets in the Williston Basin. Despite the low-priced accretive deal and debt/preferred repurchases, bonds came under pressure. Entercom (now called Audacy) sold off with the rest of the broadcasting sector over concerns a slowing economy would lead to less ad spending. Diebold Nixdorf reported weaker than expected earnings, and the Fund liquidated its position during the quarter.

OUTLOOK

(As of 6/30/22) — We are focused first and foremost on the Federal Reserve’s balancing act between taming inflation while avoiding a recession. We are also mindful of continued supply chain disruptions and the geopolitical uncertainty caused by the tragic conflict in Ukraine. It should come as no surprise that we are managing the Fund cautiously yet actively, focusing on high-quality issuers with defensive business models and manageable credit metrics. We will continue to deploy cash in opportunities that we believe offer the most appealing risk/reward tradeoff with a bias toward shorter durations and less levered credits. Additionally, we believe bank loans offer a more defensive position as they provide senior positioning in the capital structure and less interest rate sensitivity due to their floating rate structures. Finally, we continue to look for opportunities in convertible bonds and preferred stocks. We ended the quarter with 128 positions, down from the previous quarter’s level of 138 (excluding cash).

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

General Account
Forms
Investor
Class
Institutional
Class
Both
  New Account Application
  New Account Application - Entity
  Change or Add Account Details
  Cost Basis Method Election
  Power of Attorney
Individual Retirement Account (IRA) Forms
  IRA Account Application
  IRA Beneficiary Addition / Change
  IRA Required Minimum Distribution (RMD)
  IRA / Qualified Plan Distribution Request
  IRA Transfer
Coverdell Education Savings Accounts (ESA) Forms
  Coverdell ESA Application
  Coverdell ESA Distribution Request
  Coverdell ESA Transfer
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.

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 High Yield Fund (BUFHX) received 5 stars among 630 for the 3-year, 5 stars among 576 for the 5-year, and 4 stars among 395 High Yield Bond funds for the 10-year period ending 8/31/22.

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. ©2022 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.