Quick Facts
InvestorInstitutional
Ticker:BUFHXBUIHX
Inception Date:5/19/19957/1/2019
Expense Ratio:1.03%0.89%
Total Net Assets:$275.73 Million  (3/31/21)
Category:High Yield Bond
Benchmark:ICE BofAML U.S. High Yield
Dividend Distribution:Monthly
Related Material:
   Fund Fact Sheet Q1 2021
   PM Commentary Q1 2021
   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 631 High Yield Bond funds as of 4/30/21.

Performance (%)

As of 4/30/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO HIGH YIELD FUND - Investor2.643.0724.217.546.445.676.336.617.11
BUFFALO HIGH YIELD FUND - Institutional2.683.1224.417.676.585.826.486.777.27
  ICE BofAML U.S. High Yield Index1.622.0120.106.687.336.277.247.497.17
  Lipper High Yield Bond Funds Index2.172.5920.816.156.865.636.116.335.97
  Morningstar High Yield Bond Category1.912.1618.875.646.155.266.036.405.91
As of 3/31/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
(5/19/95)
BUFFALO HIGH YIELD FUND - Investor1.731.7327.077.066.545.686.216.537.08
BUFFALO HIGH YIELD FUND - Institutional1.771.7727.287.196.685.836.366.697.24
  ICE BofAML U.S. High Yield Index0.900.9023.316.537.946.317.217.357.15
  Lipper High Yield Bond Funds Index1.471.4724.075.957.305.686.076.205.95
  Morningstar High Yield Bond Category1.101.1021.795.436.545.316.006.305.89
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 3/31/21)
Upside Capture95.96
Downside Capture87.81
Alpha0.98
Beta0.92
Sharpe Ratio0.63
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
2021 Distribution Dates:

— Record Date (5/17/21); Payment Date (5/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (6/17/21); Payment Date (6/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (7/19/21); Payment Date (7/20/21) – Ordinary Income & Capital Gains, if any

— Record Date (8/17/21); Payment Date (8/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (9/17/21); Payment Date (9/20/21) – Ordinary Income & Capital Gains, if any

— Record Date (10/18/21); Payment Date (10/19/21) – Ordinary Income & Capital Gains, if any

— Record Date (11/17/21); Payment Date (11/18/21) – Ordinary Income & Capital Gains, if any

— Record Date (12/2/21); Payment Date (12/3/21) – Capital Gains, if any

— Record Date (12/17/21); Payment Date (12/20/21) – Ordinary Income, if any
Record
Date
Payable
Date
Distribution
NAV
Net Investment
Income
Short-Term Capital
Gains
Long-Term Capital
Gains
Distribution
Total
4/19/214/20/21$11.89 (Inv)

$11.88 (Inst)
$0.02511590

$0.02671660
-

-
-

-
$0.02511590

$0.02671660
3/17/213/18/21$11.78 (Inv)

$11.77 (Inst)
$0.04416967

$0.04553159
-

-
-

-
$0.04416967

$0.04553159
2/17/212/18/21$11.89 (Inv)

$11.88 (Inst)
$0.03905063

$0.04046545
-

-
-

-
$0.03905063

$0.04046545
1/19/211/20/21$11.83 (Inv)

$11.82 (Inst)
$0.02991434

$0.03150591
-

-
-

-
$0.02991434

$0.03150591
For historical distributions, click here.

Portfolio

Portfolio Characteristics
(As of 3/31/21) 
 
# of Holdings138
3-Yr Annualized Turnover Ratio33.06%
Average Duration2.72 years
Average Maturity7.19 years
30-day SEC Yield3.04%
Top 10 Holdings
Name of Holding% of Net
Assets
Open Lending (1 mo LIBOR + 6.500%, 3/11/27)2.58%
Nuance Communications (1.500%, 11/1/35)2.46%
MPLX (6.875%, 8/15/23)2.17%
Daseke (1 mo LIBOR + 5.000%, 2/27/24)1.86%
Builders FirstSource (5.000%, 3/1/30)1.62%
Michaels Stores (8.000%, 7/15/27)1.61%
CNX Resources (7.250%, 3/14/27)1.61%
Treehouse Foods (4.000%, 9/1/28)1.55%
Diebold Nixdorf (8.500%, 4/15/24)1.52%
Comstock Resources (9.750%, 8/15/26)1.41%
TOP 10 HOLDINGS TOTAL18.39%
As of 12/31/20. 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 3/31/21. Allocation percentages may not equal 100% due to rounding.
Sector Weighting
As of 3/31/21. 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+ Years0.02
7-10 Years1.47
5-7 Years9.51
3-5 Years23.34
1-3 Years28.18
0-1 Years21.01
*Excludes Bank Loans and Converts.
Credit Quality
Quality Breakout (%)
Baa4.27
Ba9.34
B50.15
Caa11.89
Unassigned24.35
All ratings are as of 3/31/21. 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

24 Years of Experience

 View full bio

Jeff Sitzmann, CFA
Portfolio Manager

34 Years of Experience

 View full bio

Jeff Deardorff, CFA
Portfolio Manager

24 Years of Experience

 View full bio

Commentary

CAPITAL MARKET OVERVIEW

(As of 3/31/21) — The U.S. high yield sector continued its rally in the quarter, keeping yields at record lows. High yield bond prices continued their recovery from the COVID-19 sell-off in March 2020 amid stimulus and vaccine optimism. The high yield market, as demonstrated by the JP Morgan Domestic High Yield Index, posted positive returns in each month of the quarter (0.56% in January, 0.44 % in February, and 0.39% in March) maintaining yields at a 4.72% level. The 10-year U.S. Treasury Bond declined -7.08% during the quarter while the S&P 500 Index logged a return of 6.17%.

Following $3.4 billion in cash outflows in the final quarter of 2020, high yield mutual funds recorded another $10.2 billion in outflows this quarter. Interestingly, between the months of April to August 2020, high yield funds posted five consecutive months of inflows totaling $59.1 billion, which included the two largest monthly inflows ever recorded in April ($17.1 billion) and May ($20.5 billion), only to be followed by seven consecutive months of outflows totaling -$9.2 billion.

High yield new issuance volume was a record $158.6 billion during the three-month period after posting $99 billion in the previous quarter. Refinancing continued to be the primary use of proceeds accounting for ~77% of transaction volume in the quarter. According to JP Morgan, mid-tier and upper tier (B-split BBB) issues accounted for the bulk of activity in the quarter (86%) with the heaviest volume coming from Energy (20.3%), Gaming/Lodging (9.8%), and Telecommunications (6.8%).

The yield on the 10-year Treasury Bond increased 82 basis points (bps) during the quarter, from 0.92% to 1.74%, as early signs of inflation and a “return to normal” post-COVID outlook crept into the market. According to data from JP Morgan, the higher credit rating silos, which are more sensitive to interest rate movements, posted negative returns in the quarter while the lower tier silos performed better, as investors sought higher yields. The Defaulted segment produced the largest gain of 21.86% and the BB segment was the worst performer with a 0.09% loss.

According to data from JP Morgan, the U.S. high yield market’s spread to worst for the period was 406 bps, 38 bps tighter than the preceding December quarter and 194 bps tighter than its 20-year historical average of 600 bps. The yield to worst for the high yield market at quarter end was 4.72%, below the 20-year average of 8.34%, and essentially unchanged from the 4.71% at the end of the 4th quarter of 2020.

PERFORMANCE COMMENTARY

(As of 3/31/21) — The Buffalo High Yield Fund (BUFHX) increased 1.73% in the quarter, outperforming the ICE BofAML U.S. High Yield Index return of 0.90% for the three-month period. The Fund also outperformed the Lipper High Yield Bond Funds Index return of 1.47%.

Fund Composition by Asset Class
3/31/206/30/209/30/2012/31/203/31/21
Straight Corporates60.1%55.4%60.6%61.0%62.7%
Convertibles16.7%20.1%17.6%14.7%16.3%
Bank Loans19.1%16.6%16.3%17.2%11.2%
Preferred Stock1.3%1.7%1.5%1.2%2.2%
Convertible Preferred0.0%0.0%0.0%0.0%0.0%
Common Stocks1.0%0.6%0.4%0.1%0.0%
Cash1.8%5.6%3.6%5.8%7.6%
Total100.0%100.0%100.0%100.0%100.0%
Approximate Rate and Contribution of Return from the Fund’s Various Asset Classes in 1Q21
Contribution to Return
Straight Corporates1.31%
Convertibles0.19%
Bank Loans0.29%
Preferred Stocks0.14%
Convertible Preferred0.00%
Common Stocks0.00%
Total1.73%

TOP CONTRIBUTORS

During the period 112 out of the 143 issues in the Buffalo High Yield Fund produced positive returns. The three top contributors were Southwest Airlines 1.25% convertible bonds, J2 Global 1.75% convertible bonds, and Quad Graphics 7.00% corporate bonds. The rise in Southwest Airlines convertible bonds was driven by the underlying common stock rallying throughout the quarter as COVID-19 vaccinations began rolling out and interest in air travel picked up steam. J2 Global improved on the back of the underlying common stock increasing over 22% during the quarter, driven by better than expected earnings and continued demand for its cloud-based communication services. Quad Graphics corporate bonds returned to near par levels, after the company reported better than expected earnings during the quarter, and investors were attracted to its higher coupon, lower duration profile.

TOP DETRACTORS

Guidewire 1.25% convertible bonds, Smile Direct Club zero coupon convertible bonds, and the Air Transport Services 1.125% convertible bonds were the worst performers during the quarter. Guidewire performed well in the December quarter and gave some of that back this period as investors rolled out of Technology and into value sectors. Smile Direct Club convertible bonds were issued during the quarter as the stock was peaking and then retreated after the issuance. Air Transport Services convertible bonds declined after the common stock peaked at year-end despite Amazon announcing that it was purchasing another eleven aircraft from the company.

OUTLOOK

(As of 3/31/21) — We are managing the Fund cautiously yet actively, focusing on high quality, below 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. 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 period with 143 positions, up slightly 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 631 for the 3-year, 3 stars among 557 for the 5-year, and 4 stars among 355 High Yield Bond funds for the 10-year period ending 4/30/21.

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. ©2021 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.