Video
Rethinking the Core
Investment grade bonds continue to struggle. In this video John Sheehan, portfolio manager for the Strategic Income Fund, explains why investors may want to consider alternatives to traditional core allocations.
Strategic Income Fund (OSTIX)
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Morningstar Rating
Rated 4 Stars Overall in the High Yield Bond Category
Fund Literature
Investment Objective
The Fund seeks to preserve capital and attain long-term total returns through a combination of current income and moderate capital appreciation.
Investment Strategy
The Strategic Income Fund invests primarily in income bearing securities. We will adjust the allocation of the Fund’s assets among these securities as dictated by changes in interest rates as well as the overall economic environment.
Highlights
- Strategic top-down asset allocation based on macroeconomic conditions
- Bottom-up security selection based on rigorous fundamental and credit analysis
- Unconstrained, risk-aware strategy
- Experienced investment team
- Adviser is majority-owned by its employees
Minimum Investments
- $5,000 initial investment for regular accounts
- $1,500 initial investment for IRA or other tax-deferred accounts
- $100 for subsequent investments
NAV as of 3/27/25
| Price | $11.15 | Change | $-0.06 |
|---|
Fund Facts
| Ticker | OSTIX |
|---|---|
| CUSIP | 742935489 |
| Inception Date | 8/30/2002 |
| Load | None |
| 12b-1 Fees | None |
| Redemption Fee | None |
|
Net Assets (as of 2/28/25) |
$6.1 billion |
|
Fiscal Year Turnover (as of 3/31/24) |
24% |
|
Gross Expense Ratio (as of 3/31/24) |
0.87% |
Philosophy
We believe that by avoiding the “style box” trap and having the flexibility to invest in multiple classes of bonds, we can manage each portfolio in such a way as to emphasize the most attractive sector at any given time. By strategically shifting out of overvalued assets, we strive to minimize potential risk and produce better returns over time.
Furthermore, our research has shown that the various sectors of the bond market behave differently under different economic conditions. For instance, during periods of economic expansion, high yield and convertible bonds tend to perform well as rising corporate profits lead to improved credit profiles. Conversely, they tend to perform very poorly during periods of economic contraction as credit profiles deteriorate. During such recessionary periods, investment grade bonds generally prove to be better performers because of their responsiveness to declining interest rates.
Within particular sectors we choose individual securities based on rigorous fundamental and credit analysis. We emphasize a thorough understanding of each company’s balance sheet by determining the company’s ability to generate recurring free cash flow from its operations. As a result, we do a significant amount of work to determine the company’s business prospects as well as the positive and negative levers in its financial model, which influence the company’s ability to generate cash flow. We believe that we find our best investments in companies that have great products, a competitive advantage that gives them pricing power in the market, a consistent operating history, and management that operate the company as if they own it. Finally, we determine what we believe to be the appreciation potential versus the downside risk to gauge the attractiveness of the security versus other available investment opportunities.
Over time, we expect the maturity structure, credit quality, and sector concentration of the portfolio will differ during periods of economic contraction versus economic expansion. In short, we will employ a strategy based on the belief that over the long term positive returns can be achieved, and losses minimized, through careful security selection and by shifting the allocation among fixed income sectors.
Investment Team
Carl Kaufman
Co-President, Co-Chief Executive Officer, Chief Investment Officer – Strategic Income & Managing Director – Fixed Income
Carl Kaufman
Co-President, Co-Chief Executive Officer, Chief Investment Officer – Strategic Income & Managing Director – Fixed Income
Carl Kaufman serves in several key roles for the firm. He has managed the Osterweis Strategic Income Fund since its inception and serves as the Managing Director of Fixed Income, as well as a co-lead Portfolio Manager for the Osterweis Growth & Income Fund. Additionally, in his role as Co-President & Co-CEO he oversees key investment matters and is an integral part of the firm’s Management Committee.
He joined Osterweis Capital Management in 2002, after nearly 24 years at Robertson Stephens and Merrill Lynch.
Carl graduated from Harvard University and attended New York University Graduate School of Business Administration.
Outside his professional endeavors, he enjoys playing classical piano and actively contributes to the community as a member of the Board of Trustees for the San Francisco Conservatory of Music, supporting the arts and enhancing the cultural fabric of the SF Bay Area. Additionally, he enjoys playing golf, an activity that continually challenges his patience and precision.
Bradley Kane
Vice President & Portfolio Manager – Strategic Income
Bradley (Brad) Kane is a Portfolio Manager for the strategic income strategy and a partner at the firm. In his role he provides clients with a low-risk way to increase wealth, leveraging his extensive experience and deep understanding of the market.
Prior to joining Osterweis in 2013, Brad was a Portfolio Manager and Analyst at Newfleet Asset Management, where he managed both high yield and leveraged loan portfolios. Before that, he was a Vice President at GSC Partners, focusing on management of high yield and collateralized debt obligations. Earlier in his career, he managed high yield assets as a Vice President at Mitchell Hutchins Asset Management. In these positions he learned the importance of staying focused on one’s investing strategy and discovering new securities and investor types without succumbing to trends.
Brad graduated from Lehigh University with a B.S. in Business & Economics. Outside of his professional life, he enjoys playing golf, watching lacrosse and ice hockey, and indulging in his diverse taste in music, including a particular appreciation for heavy metal.
Craig Manchuck
Vice President & Portfolio Manager – Strategic Income
Craig Manchuck, a partner at Osterweis, is a Portfolio Manager for the strategic income strategy. In this role he enjoys investing clients’ assets in a common sense way that is designed to generate good risk-adjusted returns. Throughout his career, Craig has learned the importance of patience and that relationships with company management teams are invaluable.
Prior to joining Osterweis Capital Management in 2017, Craig was a Managing Director of Fixed Income Sales at Stifel Nicolaus, where he was responsible for sales and origination of high yield bonds, leveraged loans, and post reorg equities. Before Stifel, he held a similar role at Knight Capital. Before that, Craig was the Executive Director for Convertible Securities and then High Yield/Distressed Securities at UBS. He has previous experience in Convertible Securities Sales at Donaldson, Lufkin & Jenrette, SBC Warburg, and Merrill Lynch.
Craig graduated from Lehigh University with a B.S. in Finance and NYU Stern School of Business with an M.B.A. Outside of work, he enjoys golfing, wine, gardening, and spending time with family.
John Sheehan, CFA
Vice President & Portfolio Manager – Strategic Income
John Sheehan, a partner at Osterweis, is a Portfolio Manager for the strategic income strategy. In his role he appreciates the opportunity to contribute to clients feeling confident that their investments are positioned to meet their long-term goals. As a portfolio manager, he likes that the bond market is an ever-evolving game that blends art and science.
Prior to joining the Strategic Income team at the end of 2023, John was a portfolio manager for the total return strategy. Before that, he spent more than 20 years working at Citigroup, first as Managing Director responsible for Investment Grade Syndicate in New York City, where he advised issuers on accessing funding in the corporate bond market. Later at Citigroup, he was Managing Director in charge of West Coast Investment Grade Sales in San Francisco, where he covered several of the largest U.S. investment grade credit investors.
John graduated from Georgetown University with a B.A. in Economics. He holds the CFA designation and is a member of the CFA Society of San Francisco. Outside of work, John enjoys swimming and skiing with his family, as well as seeing live music.
The Fund was rated 4 Stars against 592 funds Overall, 4 Stars against 592 funds over 3 Years, 5 Stars against 538 funds over 5 Years, 4 Stars against 424 funds over 10 Years in the High Yield Bond category based on risk-adjusted returns as of 2/28/25.
The Morningstar Rating™ for funds, or “star rating,” is calculated for 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 has the greatest impact because it is included in all three rating periods.
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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 Strategic Income 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. 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. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Small- and mid-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Higher turnover rates may result in increased transaction costs, which could impact performance. From time to time, the Fund may have concentrated positions in one or more sectors subjecting the Fund to sector emphasis risk. The Fund may invest in municipal securities which are subject to the risk of default.
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.
