Quick Facts
InvestorInstitutional
Ticker:BUFHXBUIHX
Inception Date:5/19/19957/1/2019
Expense Ratio:1.03%0.87%
Total Net Assets:$299.17 Million  (9/30/21)
Morningstar Category:High Yield Bond
Benchmark Index:ICE BofAML U.S. High Yield
Dividend Distribution:Monthly
Related Material:
   Fund Fact Sheet Q3 2021
   PM Commentary Q3 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 629 High Yield Bond funds as of 11/30/21.

Performance (%)

As of 11/30/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO HIGH YIELD FUND - Investor-0.484.216.537.785.996.056.106.506.99
BUFFALO HIGH YIELD FUND - Institutional-0.444.366.727.926.136.206.266.667.15
  ICE BofAML U.S. High Yield Index-1.173.425.397.106.126.796.877.517.07
  Lipper High Yield Bond Funds Index-0.974.056.126.765.776.295.816.555.89
  Morningstar High Yield Bond Category-1.153.074.896.155.205.785.696.485.81
As of 9/30/213 MOYTD1 YR3 YR5 YR10 YR15 YR20 YRSince Inception
BUFFALO HIGH YIELD FUND - Investor0.745.0713.007.396.096.486.346.737.07
BUFFALO HIGH YIELD FUND - Institutional0.775.1913.227.526.246.636.506.887.23
  ICE BofAML U.S. High Yield Index0.944.6711.466.626.357.307.177.937.16
  Lipper High Yield Bond Funds Index0.885.2011.976.206.026.776.116.905.98
  Morningstar High Yield Bond Category0.584.2210.505.695.416.256.016.825.90

 2011201220132014201520162017201820192020
BUFFALO HIGH YIELD FUND - Investor3.5410.359.401.961.806.655.98-2.2612.329.27
BUFFALO HIGH YIELD FUND - Institutional3.6910.529.562.111.956.816.14-2.1212.409.43
  ICE BofAML U.S. High Yield Index4.3815.587.422.50-4.6417.497.48-2.2614.416.17
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 BofAML U.S. High Yield Index (As of 9/30/21)
Upside Capture98.21
Downside Capture88.17
Alpha1.21
Beta0.92
Sharpe Ratio0.71
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 (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
12/2/2112/3/21$11.45 (Inv)

$11.44 (Inst)
-

-
$0.19891

$0.19891
$0.14537

$0.14537
$0.34428

$0.34428
11/18/2111/19/21$11.89 (Inv)

$11.88 (Inst)
$0.03967448

$0.04129057
-

-
-

-
$0.03967448

$0.04129057
10/18/2110/19/21$11.93 (Inv)

$11.92 (Inst)
$0.04366965

$0.04519780
-

-
-

-
$0.04366965

$0.04519780
9/17/219/20/21$11.94 (Inv)

$11.93 (Inst)
$0.03991191

$0.04143702
-

-
-

-
$0.03991191

$0.04143702
8/17/218/18/21$11.87 (Inv)

$11.86 (Inst)
$0.03582984

$0.03725405
-

-
-

-
$0.03582984

$0.03725405
7/19/217/20/21$11.92 (Inv)

$11.91 (Inst)
$0.04163377

$0.04318868
-

-
-

-
$0.04163377

$0.04318868
6/17/216/18/21$11.96 (Inv)

$11.95 (Inst)
$0.06239306

$0.06385012
-

-
-

-
$0.06239306

$0.06385012
5/17/215/18/21$11.88 (Inv)

$11.87 (Inst)
$0.02955878

$0.03092565
-

-
-

-
$0.02955878

$0.03092565
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 9/30/21) 
 
# of Holdings147
3-Yr Annualized Turnover Ratio32.79%
Average Duration2.80 years
Average Maturity7.27 years
30-day SEC Yield3.26%
Top 10 Holdings
Name of HoldingMaturity Date% of Net
Assets
Nuance Communications1.500%, 11/1/352.52%
MPLX6.875%, 8/15/232.44%
Northern Oil & Gas8.125%, 3/1/282.06%
Matador Resources5.875%, 9/15/261.93%
PetIQ3 Month LIBOR +4.250%, 4/7/281.69%
Energy Transfer7.125%, perpetual preferred1.59%
CNX Resources7.250%, 3/14/271.46%
Builders FirstSource5.000%, 3/1/301.43%
Diebold Nixdorf8.500%, 4/15/241.40%
Consol Energy11.000%, 11/15/251.36%
TOP 10 HOLDINGS TOTAL17.88%
As of 6/30/21. 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 9/30/21. Allocation percentages may not equal 100% due to rounding.
Sector Weighting
As of 9/30/21. 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+ Years0.00
7-10 Years0.34
5-7 Years14.19
3-5 Years23.83
1-3 Years25.82
0-1 Years19.76
*Excludes Bank Loans and Converts.
Credit Quality
Quality Breakout (%)
Baa2.25
Ba8.63
B45.41
Caa10.45
Unassigned33.26
All ratings are as of 9/30/21. 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 9/30/21) — The U.S. high yield sector continued its positive return streak in the quarter, posting a sixth consecutive positive quarter, after suffering a significant correction in March 2020. Though positive, high yield returns were more muted this quarter, as investors weighed strong corporate earnings and economic data early in the first half of the quarter versus Federal Reserve tapering concerns, uncertainty regarding the spread of the Delta variant, and potential fallout from China’s Evergrande default. High yield bonds ended the quarter at a 4.51% yield to worst, after touching a record low of 4.22% in July. The 10-year Treasury Bond declined -0.28% during the quarter while the S&P 500 Index posted a return of 0.58%.

High yield funds saw a relatively benign cash inflow of $1.9 billion in the quarter, but it was the first quarterly inflow this year, following outflows of -$10.6 billion and -$3.3 billion in the March and June quarters respectively. Meanwhile, high yield new issuance produced the seventh highest quarterly volume on record with $108.5 billion, following the third highest volume of $142.5 billion issued in the preceding June 2021 quarter. According to JP Morgan, the middle and upper credit quality tiers (B

During the quarter, the 10-year Treasury Bond yield rose 6 basis points (bps) to 1.53% from 1.47% at the end of June, after dropping as low as 1.17% in early August. Every sector in the U.S. high yield universe and every credit rating silo produced positive returns during the 3rd quarter. According to data from JP Morgan, the lower quality end of the high yield credit spectrum outperformed the middle and upper tiers, with the split B and CCC segments performing the best at 1.17% and 1.03% respectively. The split BB and split BBB segments were the laggards, with both posting a 0.72% gain.

According to data from JP Morgan, the U.S. high yield market’s spread to worst for the period was 385 bps, 15 bps wider than the preceding June quarter and 204 basis points tighter than its 20-year historical average of 589 basis points. The yield to worst for the high yield market at quarter end was 4.51%, bouncing off of the all-time record low of 4.30% in the preceding June quarter, and still well below the 8.14% 20-year average.

PERFORMANCE COMMENTARY
(As of 9/30/21) — The Buffalo High Yield Fund (BUFHX) increased 0.74% in the 3rd quarter, trailing the ICE BofAML U.S. High Yield Index (the “Index”) and Lipper High Yield Bond Funds Index, which gained 0.94% and 0.88% respectively. We ended the quarter with 147 positions, basically unchanged from the previous quarter’s level of 148 (excluding cash).

Fund Composition by Asset Class
9/30/2012/31/203/31/216/30/219/30/21
Straight Corporates60.6%61.0%62.7%61.5%65.3%
Convertibles17.6%14.7%16.3%17.0%16.1%
Bank Loans16.3%17.2%11.2%13.7%13.5%
Preferred Stock1.5%1.2%2.2%2.3%2.2%
Convertible Preferred0.0%0.0%0.0%0.0%0.0%
Common Stocks0.4%0.1%0.0%0.0%0.0%
Cash3.6%5.8%7.6%5.5%2.9%

Approximate Rate and Contribution of Return from the Fund’s Various Asset Classes in 3Q21
Contribution to Return
Straight Corporates0.96%
Convertibles-0.19%
Bank Loans0.15%
Preferred Stocks0.04%
Convertible Preferred0.00%
Common Stocks0.00%
Total0.74%

TOP CONTRIBUTORS

The three top contributors for the Fund during the quarter were Consol Energy 11% corporate bonds, Quad Graphics 7% corporate bonds, and Air Transportation Services 1.125% convertible bonds. Consol Energy operates coal mines in Pennsylvania and West Virginia, and its bonds gained during the quarter, as coal prices increased roughly 60% during the period. Quad Graphics performed well after posting better-than-expected earnings in the quarter and announcing the sale of a non-core business, which was used to pay down debt. Air Transportation Services convertible bonds rallied in conjunction with the underlying common stock, after the company posted better-than-expected earnings in early August.

TOP DETRACTORS

The Invacare 4.25% convertible bonds, Smile Direct Club 0.0% convertible bonds, and the Avaya 2.25% convertible bonds were the worst performers during the quarter. Invacare convertible bonds were negatively impacted by disappointing earnings announcement that were driven by global supply chain disruptions. Smile Direct Club convertible bonds declined after posting weaker-than-expected earnings. The position was liquidated during the quarter. Despite meeting analysts’ estimates, Avaya convertible bonds declined after the company provided guidance for the rest of 2021 that missed expectations.

OUTLOOK

(As of 9/30/21) — We are focused first and foremost on the ongoing recovery from the COVID-19 pandemic, the supply chain disruptions that have occurred as a result, and the Federal Reserve’s balancing act between growth and inflation. The potential for new regulatory changes to various industries from the Biden Administration is a secondary focus. 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 the 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.

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 4 stars among 629 for the 3-year, 4 stars among 557 for the 5-year, and 3 stars among 368 High Yield Bond funds for the 10-year period ending 11/30/21.

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.