July 22, 2020
During the second quarter of 2020, the Osterweis Fund (the Fund) generated a total return of 17.85% compared to 20.54% for the S&P 500 Index (the S&P 500). The Fund’s annualized total returns over the one-year, five-year, ten-year, and twenty-year periods ending June 30, 2020 were 10.57%, 6.10%, 9.43%, and 6.72%, respectively, compared to 7.51%, 10.73%, 13.99%, and 5.91% for the S&P 500 over the same periods.
Performance data quoted represent 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 higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by calling (866) 236-0050. An investment should not be made solely on returns. The Fund’s gross expense ratio was 1.20% and net expense ratio was 0.96% as of March 31, 2020. The Adviser has contractually agreed to waive certain fees through June 30, 2021.
As we enter the third quarter, we find ourselves in the midst of a second wave of Covid-19 that is complicating the recovery picture. Wall Street has generally remained optimistic thus far, buoyed by support from the Fed and continued progress towards a vaccine, but the situation remains fluid.
In our latest Outlook, we take a closer look at how we are positioning the Fund given this uncertainty. Most importantly, we are focusing on high quality companies that are well-positioned to weather the slowdown, however long it may last. This is not new for us – we have favored dominant companies for a while – but given the pandemic we think it is even more critical to own companies that are able to grow during the downturn, either organically or by taking market share from weaker competitors that are unable to survive.
We also discuss why we believe today’s low interest rate environment is potentially a major tailwind for equity markets. Stock prices are inversely correlated with interest rates and positively correlated with growth rates. We believe companies with clear paths to growth in this environment should generate favorable returns. Furthermore, many of these companies pay attractive dividends that we expect will grow over time as well.
We thank you for your continued confidence in our management.
John Osterweis & Team
This commentary contains the current opinions of the author as of the date above, which are subject to change at any time. This commentary has been distributed for informational purposes only and is not a recommendation or offer of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed.
The S&P 500 Index is an unmanaged index that is widely regarded as the standard for measuring large-cap U.S. stock market performance. The index does not incur expenses, is not available for investment, and includes the reinvestment of dividends.
Fund holdings are subject to change and should not be considered a recommendation to buy or sell any security.
Earnings growth is not representative of the fund’s future performance.
The Osterweis Funds are available by prospectus only. The Funds’ investment objectives, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectuses contain this and other important information about the Funds. You may obtain a summary or statutory prospectus by calling toll free at (866) 236-0050, or by visiting www.osterweis.com/statpro. Please read the prospectus carefully before investing to ensure the Fund is appropriate for your goals and risk tolerance.
Mutual fund investing involves risk. Principal loss is possible.
The Osterweis Fund may invest in medium and smaller sized companies, which involve additional risks such as limited liquidity and greater volatility. The Fund may invest in foreign and emerging market securities, which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks may increase for emerging markets. The Fund may invest in Master Limited Partnerships, which involve risk related to energy prices, demand and changes in tax code. The Fund may invest in debt securities that are un-rated or rated below investment grade. Lower-rated securities may present an increased possibility of default, price volatility or illiquidity compared to higher-rated securities. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities.
While the fund is no-load, management fees and other expenses still apply. Please refer to the prospectus for more information.
Osterweis Capital Management is the adviser to the Osterweis Funds, which are distributed by Quasar Distributors, LLC.