Why Active Management Still Matters in 2026 | Buffalo Funds

Over the last decade, passive investing has attracted significant attention from investors due to its simplicity, low costs, and broad market exposure. Index-based strategies now represent a substantial portion of overall market assets, and many investors have become accustomed to simply buying the market rather than attempting to outperform it. While passive investing can play an important role in portfolios, Buffalo Funds believes active management still matters, especially in an environment where economic conditions, interest rates, valuations, and market leadership continue to evolve.

At Buffalo Funds, active management is not simply about trying to outperform an index in any single year. It is about applying disciplined research, thoughtful portfolio construction, and long-term conviction to identify opportunities and manage risk across full market cycles. Markets are constantly changing. Companies rise and fall. Industries evolve. Valuations fluctuate. An index fund cannot evaluate whether a business is becoming more competitive, whether a balance sheet is weakening, or whether a security has become overvalued. Active managers can.

One of the biggest advantages of active management is flexibility. Passive strategies are designed to mirror an index regardless of valuation, momentum, or economic backdrop. This means investors in passive vehicles often become increasingly concentrated in whichever companies or sectors have recently performed best. Over time, this can create unintended risk exposure. Active managers have the ability to adjust portfolios based on changing market conditions, evolving fundamentals, and emerging opportunities.

This flexibility can be particularly important during periods of volatility. When markets become more uncertain, active managers can reassess risk exposures, focus on quality opportunities, and avoid areas they believe may face elevated challenges. While no strategy can eliminate risk entirely, active management allows for decision-making based on analysis and conviction rather than automatic index weighting.

At Buffalo Funds, we also believe active management can be especially valuable in less efficient areas of the market. As an example, smaller companies, international businesses, and below-investment-grade credit markets may present greater opportunities for differentiated research and security selection. In these areas, careful analysis and disciplined investing can potentially create value over time.

Another important element of our approach is long-term thinking. Financial markets are often driven by short-term headlines, emotions, and shifting narratives. Investors can become overly focused on quarterly performance or daily market movements. Buffalo Funds believes patience remains an advantage. Rather than constantly reacting to short-term noise, we focus on business fundamentals, management quality, competitive positioning, valuation, and long-term opportunity.

Our investment philosophy also emphasizes high-conviction investing and relatively low turnover. We believe focused portfolios built around our best ideas can create differentiated results over time. Low turnover reflects our preference for investing with patience and allowing investment theses to develop rather than trading excessively based on short-term sentiment.

Importantly, active management is not necessarily an “all or nothing” decision for investors. Many portfolios successfully combine both active and passive strategies. Passive investments may provide broad market exposure, while active strategies can complement portfolios in areas where research, selectivity, downside awareness, and flexibility may matter more.

For financial advisors, active management can also provide an opportunity to better align portfolios with client goals and market conditions. Advisors often seek strategies that can help manage downside risk, generate income, pursue differentiated growth opportunities, or provide diversification beyond broad market indexes. Active mutual funds can play an important role in solving those portfolio challenges.

The investment landscape in 2026 remains highly dynamic. Interest rates, inflation, global economic growth, technological disruption, and shifting market leadership continue to create both risk and opportunity. In this type of environment, Buffalo Funds believes active management remains highly relevant.
Our focus remains consistent: disciplined research, long-term investing, risk awareness, and high-conviction portfolio management designed to help investors pursue their financial goals through changing markets.

Key Takeaway

Active management still matters because markets are not perfectly efficient, risks evolve over time, and disciplined long-term investors can benefit from experienced managers who actively evaluate opportunities, manage risk, and invest with conviction.

Before you invest in the Buffalo Funds, please refer to the prospectus for important information about the investment company, including investment objectives, risks, charges, and expenses. You may also obtain a hard copy of the prospectus by calling (800) 492-8332. The prospectus should be read carefully before you invest or send money.

Mutual fund investing involves risk; principal loss is possible.
Kornitzer Capital Management is the adviser to the Buffalo Funds, which are distributed by Quasar Distributors, LLC.