Quick Facts

(As of 3/31/17)


Inception Date
  May 19th, 1995

Total Fund Assets
  $236.0 M

Expense Ratio

Benchmark Index
  BofA Merrill Lynch HY Master II


Overall Morningstar™ rating out of 596 High Yield Bond funds as of 3-31-2017 (derived from a weighted average of the fund’s three-, five-, and ten-year risk adjusted return measure, if applicable).




Income Investing Strategies to Preserve Principal

Using techniques identified in the article, a few income funds are highlighted (including the Buffalo High Yield Fund) that pay regular dividends and preserved investors’ capital during the period before and through the Great Recession.


Investment Strategy

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.


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.

~ Jeffrey Sitzman, Portfolio Manager



(As of 3/31/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo High Yield2.142.148.373.795.326.246.837.27
BofA Merrill Lynch HY Master II2.712.7116.884.626.857.348.257.40
Lipper High Yield Bond Funds Index2.772.7715.253.626.115.937.136.05
Morningstar High Yield Bond2.312.3113.523.155.565.867.01-
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 3/31/17)3 MOYTD1 YR3 YR5 YR10 YR15 YRSince Inception
Buffalo High Yield2.142.148.373.795.326.246.837.27
BofA Merrill Lynch HY Master II2.712.7116.884.626.857.348.257.40
Lipper High Yield Bond Funds Index2.772.7715.253.626.115.937.136.05
Morningstar High Yield Bond2.312.3113.523.155.565.867.01-
Each Morningstar category average represents a universe of funds with similar objectives.
YearBuffalo High Yield FundBofA Merrill Lynch HY Master II IndexMorningstar High Yield Bond Category
Each Morningstar category average represents a universe of funds with similar objectives.
(As of 3/31/17)
vs BofA Merrill Lynch HY Master II
Upside Capture51.45
Downside Capture38.90
Standard Deviation3.49
Sharpe Ratio1.04

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.

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.


(As of 3/31/17)
# of Holdings122
3-Yr Annualized Turnover Ratio34.20%
30-day SEC Yield4.08%
Average Duration3.24 years
Average Maturity5.42 years
Holding% of Portfolio
Bankrate Inc Del 144A 6.125%2.65%
Akorn Inc Tlb2.62%
Lions Gate Entmt Cv 1.25%2.28%
Digitalglobe T/L B (12/16)2.20%
Kcg Hldgs 144A 6.875%1.97%
Tutor Perini 7.625%1.96%
Endo Fin Llc / Endo Finco 144A 5.75%1.74%
Consolid Comms 6.5%1.74%
Fti Consult 6%1.65%
Triump Grp Inc New 4.875%1.64%
View Full Holdings

As of 12/31/16. 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 3/31/17. 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 3/31/17. Allocation percentages may not equal 100% due to rounding.

Duration Breakout (%)
10+ Years0.09
7-10 Years1.57
5-7 Years7.74
3-5 Years34.70
1-3 Years28.73
0-1 Years13.80
*Excludes Bank Loans and Converts.
Quality Breakout (%)
A & Above0.73
Non Rated13.89

Standard & Poor’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 D (lowest grade); ratings are subject to change without notice. Not Rated (NR) indicates that the debtor was not rated by an NRSRO and should not be interpreted as indicating low quality. All ratings are as of 3/31/17.



The Buffalo High Yield Fund posted a total return of 0.62% for the quarter ending December 31, 2016 underperforming the Bank of America Merrill Lynch High Yield Master II Index (the “Index”) which returned 1.88% during the same period.

The high yield market generated a return of 1.88% during the quarter despite the yield on the U.S. 10-Year Treasury Note rising 85 basis points (bps) and the Federal Reserve increasing its target Fed Funds rate by 25 bps in the period. We believe the returns reflected the following events: (i) continued strength in the commodity markets, (ii) implementation of President-elect Donald Trump’s pro-growth policies and (iii) continued improvement in the U.S. economy (with unemployment rates near cycle lows).

According to data from JP Morgan, high yield mutual funds experienced negative outflows during the fourth quarter of about $1 billion compared to inflows of roughly $6 billion in the prior quarter. The high yield new issuance calendar declined to $52 billion in the quarter which was down from the prior quarters $79 billion.

During the quarter the yield on the 10-Year Treasury Note rose from 1.60% to 2.45%, resulting in a price decline of 6.28% for those government bonds. The rise in Treasury yields negatively impacted sovereign government bond returns, as well as investment grade and crossover issues which are typically longer in duration and more sensitive to moves in interest rates. However, as noted above, the high yield market was still able to generate positive returns due to spread compression and investor expectations of better growth ahead due to new policies from President-elect Trump. Also according to data from JP Morgan, the best performing sectors in the high yield market during the quarter were lower quality securities as the CCC segment returned 5.36% followed by the single B segment return of 1.87% and the BB return of 0.23%. The portfolio’s high yield bond allocation is focused on the higher credit quality segments of the market which mostly comprises the BB and B segments and largely explains our underperformance during the quarter. Additionally the fund was underweight the two best performing sectors during the quarter – Metals & Mining and Energy which produced returns of 7.86% and 7.15% respectively. Historically, the fund has been underweight these sectors given the cyclicality of the businesses operating within these sectors.

The U.S. high yield market’s spread to worst as of December 2016 was 476 bps which was 82 bps tighter than the preceding quarter and 281 bps below the same time last year. The yield to worst for the high yield market at 12/31/16 was approximately 6.40% versus over 9.00% last year at this time.


The fund’s cash balance at the end of the quarter was 7.60% which is up from the prior quarter of 2.40% due to called bonds and selling activity.

Convertible bonds were the best performing asset class. Specific securities that positively contributed to performance within this asset class during the quarter included the Lions Gate Entertainment 4.000% convertible bonds and Greenbrier 3.500% convertible bonds which increased in price due to better underlying fundamentals. Within the straight corporate debt category, Neustar, Digital Globe and Consolidated Communications were the best performers. Neustar increased in value due to a takeout, while Digital Globe and Consolidated Communications improved due to better earnings. Bank loans that contributed to performance during the quarter include Akorn and Digital Globe. Securities that detracted most from performance during the quarter included Accuray 3.500% convertible bonds, Community Health 7.125% senior notes and MDC Partners 6.500% senior notes. Community Health and MDC both decreased in value due to weak operating fundamentals.

As noted above, high yield performance remained strong with yields and spreads compressing throughout the past year. High yield spreads are now approaching their lowest level in the past couple of years as an improving economy has boosted fundamentals and default rates remain muted. As a result, we believe high yield returns going forward will likely be lower than those in 2016 and may experience more volatility given current prices and spreads. The positives for high yield securities overall are the improving economy, a new President that is focused on fiscal stimulus and reduced regulations, and lower default rates. The potential risks to high yield assets are the prospects for interest rates to rise faster than expected, geopolitics, and protectionism.


The portfolio remains well diversified with over 115 individual positions. We continue to manage the fund in a conservative manner and are focused on higher quality credits with shorter durations. Additionally, we also believe that bank loans offer a compelling opportunity as they are senior in the capital structure and increase in value as rates increase. Lastly, we remain opportunistic as it relates to convertible bonds.

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. Diversification does not assure a profit, nor does it protect against a loss in a declining market.

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 RatingTM 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 RatingTM 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 received 4 stars among 596 for the three-year, 3 stars among 471 for the five-year, and 4 stars among 318 High Yield Bond category funds for the ten-year period ended 3/31/17.

©2017 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.