Quick Facts
Investor Institutional
Ticker: BUFHX BUIHX
Daily Pricing:  
As of 2/23/2024  
NAV: $10.56 $10.55
$ Change: $0.01 $0.01
% Change:
0.09% 0.09%
YTD:
1.38% 1.41%
Inception Date: 5/19/1995 7/1/2019
Expense Ratio: 1.03% 0.87%
Total Net Assets: $359.88 Million  (9/30/23)
Morningstar Category: High Yield Bond
Benchmark Index: ICE BofA U.S. High Yield
Dividend Distribution: Monthly
Related Material:
   Fund Fact Sheet Q4 2023
   PM Commentary Q4 2023
   Portfolio Manager Q&A
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 614 High Yield Bond funds as of 1/31/24.

Performance (%)

As of 1/31/243 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO HIGH YIELD FUND - Investor6.040.809.713.775.964.667.755.686.72
BUFFALO HIGH YIELD FUND - Institutional6.090.829.883.936.104.817.915.836.88
  ICE BofA U.S. High Yield Index8.450.029.281.924.304.458.666.396.62
  Lipper High Yield Bond Funds Index8.010.298.542.144.174.007.915.525.54
As of 12/31/233 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO HIGH YIELD FUND - Investor4.7811.6811.683.646.444.598.005.696.72
BUFFALO HIGH YIELD FUND - Institutional4.8311.8511.853.806.594.748.155.846.87
  ICE BofA U.S. High Yield Index7.0813.5413.542.055.244.539.046.476.89
  Lipper High Yield Bond Funds Index6.3512.3412.342.185.034.048.205.595.55

2013201420152016201720182019202020212022
BUFFALO HIGH YIELD FUND - Investor9.401.961.806.655.98-2.2612.329.275.53-5.53
BUFFALO HIGH YIELD FUND - Institutional9.562.111.956.816.14-2.1212.409.435.69-5.39
  ICE BofAML U.S. High Yield Index7.422.50-4.6417.497.48-2.2614.416.175.36-11.17
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 BofA U.S. High Yield Index (As of 12/31/23)
Upside Capture66.27
Downside Capture50.49
Alpha2.34
Beta0.60
Sharpe Ratio0.27
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
12/18/2312/19/23$10.48 (Inv)

$10.47 (Inst)
$0.07226549

$0.07355413
-

-
-

-
$0.07226549

$0.07355413
12/04/2312/05/23-

-
-

-
-

-
-

-
-

-
11/17/2311/20/23$10.31 (Inv)

$10.30 (Inst)
$0.06311527

$0.06438573
-

-
-

-
$0.06311527

$0.06438573
10/17/2310/18/23$10.14 (Inv)

$10.13 (Inst)
$0.05958087

$0.06077673
-

-
-

-
$0.05958087

$0.06077673
9/18/239/19/23$10.28 (Inv)

$10.27 (Inst)
$0.05536777

$0.05665901
-

-
-

-
$0.05536777

$0.05665901
8/17/238/18/23$10.21 (Inv)

$10.20 (Inst)
$0.06851735

$0.06978151
-

-
-

-
$0.06851735

$0.06978151
7/17/237/18/23$10.27 (Inv)

$10.27 (Inst)
$0.047884

$0.04899432
-

-
-

-
$0.047884

$0.04899432
6/20/236/21/23$10.19 (Inv)

$10.18 (Inst)
$0.10207486

$0.10354105
-

-
-

-
$0.10207486

$0.10354105
5/17/235/18/23$10.16 (Inv)

$10.15 (Inst)
$0.05642670

$0.05766717
-

-
-

-
$0.05642670

$0.05766717
4/17/234/18/23$10.23 (Inv)

$10.22 (Inst)
$0.03394236

$0.03465101
-

-
-

-
$0.03394236

$0.03465101
3/17/233/20/23$10.03 (Inv)

$10.02 (Inst)
$0.04805092

$0.04921480
-

-
-

-
$0.04805092

$0.04921480
2/17/232/21/23$10.17 (Inv)

$10.16 (Inst)
$0.05531821

$0.05655771
-

-
-

-
$0.05531821

$0.05655771
1/17/231/18/23$10.31 (Inv)

$10.30 (Inst)
$0.01288989

$0.01411530
-

-
-

-
$0.01288989

$0.01411530
For historical distributions, click here.

Portfolio

Portfolio Characteristics
(As of 12/31/23) 
 
# of Holdings135
3-Yr Annualized Turnover Ratio37.09%
Average Duration2.10 years
Average Maturity4.11 years
30-day SEC Yield7.12%
Top 10 Holdings
Name of HoldingMaturity Date% of Net
Assets
Uniti Group Lp 10.5%15-Feb-20282.75
Northern Oil And Gas, Inc. 8.125%01-Mar-20282.56
Geo Group Inc Term Loan23-Mar-20272.52
Directv Financing Llc Term Loan02-Aug-20272.49
Consensus Cloud Solutions, Inc. 6.0%15-Oct-20261.94
KDC/One Development Corporation, Inc. Term Loan03-Aug-20281.90
Energy Transfer, L.p. 7.125% PerpPerpetual1.78
Talos Energy Inc 12.0%15-Jan-20261.76
Corecivic, Inc. 8.25%15-Apr-20261.71
Burford Capital Global Finance Llc 9.25%01-Jul-20311.70
TOP 10 HOLDINGS TOTAL21.12%
As of 9/30/23. 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 12/31/23. Allocation percentages may not equal 100% due to rounding.

Sector Weighting
 

As of 12/31/23. 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 Years0.11
5-7 Years1.41
3-5 Years28.94
1-3 Years31.52
0-1 Years10.18
*Excludes Bank Loans and Converts.
Credit Quality
Quality Breakout (%)
Baa1.07
Ba25.40
B66.21
Caa4.81
Unassigned2.51

All ratings are as of 12/31/23. 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

26 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

36 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

26 Years of Experience

 View full bio

Commentary

PERFORMANCE COMMENTARY

(As of 12/31/23)

The Buffalo High Yield Fund produced a total return of 4.78% for the quarter, a result
that trailed the ICE BofA US High Yield Index return of 7.08%.

The U.S. high yield asset class posted its fifth consecutive quarter of positive returns
as economic data signaled resiliency and the Federal Reserve softened its hawkish
rhetoric prompting speculation that interest rate cuts may come sooner than
previously expected. The high yield index posted a loss of 1.24% in October before
surging 8.24% in November and December as 10-year Treasury Yields sank. The
significant downward pressure on treasury yields in the last two months of the year
pushed the yield to worst for high yield down to 7.82% by the end of the quarter,
marking a low point for 2023. For reference, the record low yield to worst of 4.22%
occurred in July 2021. Leveraged loans ended the quarter with a yield of 8.60%, which
was 140 basis points (bps) tighter than the previous quarter driven by moderating
inflation and resilient growth.

According to JP Morgan, high yield funds saw quarterly cash inflows of $5.3 billion
compared to roughly $3.5 billion of outflows during the preceding quarter. For
calendar year 2023, high yield fund outflows totaled -$7.9 billion compared to -$14.5
billion in 2022.

There were 65 high yield bonds issued during the quarter totaling $42.1 billion, slightly
higher than the $39.2 billion in new issues for the third quarter. The energy sector
accounted for nearly 25% of total new issuance, followed by financials and industrials
which each accounted for about 10% of the volume.

BB and CCC rated bonds outperformed single-B rated issues during the quarter (CCC
= 7.03%, B = 6.86%, BB = 7.15%) as investors focused on higher duration (BB issues)
and higher risk/reward (CCC issues) in anticipation of more aggressive interest rate
cuts. According to data from JP Morgan, the Retail, Housing, and Broadcasting sectors
were the best performers with returns of 9.36%, 8.65% and 8.55%, respectively. Retail
and Housing were the two worst performing sectors in the prior quarter, but investors
expect both to perform well in a declining rate environment. There were no negative
performing sectors during the quarter, but Metals/Minerals and Transportation were
the worst performing sectors delivering returns of 4.06% and 4.16%, respectively.

The U.S. high yield market’s spread to worst for the period was 377bps, 43bps
tighter than the preceding quarter, according to data from JP Morgan, and 185bps
tighter than its 20-year historical average of 562bps. The yield to worst for the high
yield market at quarter end was 7.82%, matching the 20-year average of 7.82%, and
significantly below the yield of 8.97% from the third quarter. Leveraged loan yields
tightened as well from 541bps in the prior period to 500bps.

Top Contributors
The top three contributors to performance for the quarter were Vista Outdoor 4.5%
corporate bonds, Uniti 10.5% corporate bonds, and Energy Transfer 7.125% corporate
bonds. Vista Outdoor bonds benefited from the announcement that Vista would be
acquired by Czechoslovak Group and the bonds will be repaid once the acquisition
is finalized. The 10.5% coupon and annuity-like cash flows attracted investors to the
Uniti bonds during the quarter and are now trading over par. The Energy Transfer
bonds rallied nearly 10 points during the quarter as investors were drawn to its near
investment grade quality and longer duration characteristics which should benefit the
bonds in a declining interest rate environment.

Top Detractors
The Array Technologies 1% convertible bonds, the iHeart Communication 8.375%
corporate bonds and the Mastec 6.625% corporate bonds were the worst performers
during the quarter. Array convertible bonds were negatively impacted by the 24%
decline in the underlying common stock price driven by unexpected project delays.
iHeart bonds declined after giving disappointing guidance and general concern over
the health of the radio industry as competitor Audacy filed for bankruptcy. The Mastec
bonds suffered from project delays, similar to Array’s, compounded by some illiquidity
volatility given there is only $78 million outstanding of the issue.

OUTLOOK

(As of 12/31/23)

We are focused first and foremost on the Federal Reserve’s balancing act between
taming inflation while avoiding a recession, lingering supply chain disruptions, and the
geopolitical uncertainty caused by the conflicts in Ukraine and the Middle East. We are
managing the fund cautiously yet actively, focusing on higher-quality, non-investment
grade 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
relative to industry average. 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
135 positions, up slightly from the previous quarter’s level of 132 (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

Buffalo High Yield Fund
Documents
Last Updated
  Fact Sheet12/31/23
  Quarterly Commentary12/31/23
  Full Fund Holdings6/30/23
  Prospectus7/28/23
  Statement of Additional Information7/28/23
  Annual Report3/31/23
  Semi-Annual Report9/30/22
  Tax Guide - 20231/8/24
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 614 for the 3-year, 5 stars among 581 for the 5-year, and 5 stars among 434 High Yield Bond funds for the 10-year period ending 1/31/24.

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.