Shareholder Letter

January 26, 2018

Dear Shareholders,

During the fourth quarter of 2017, the Osterweis Total Return Fund (the Fund) generated a total return of 0.71%, compared to 0.39% for the Bloomberg Barclays U.S. Aggregate Bond Index (the BC Agg). The Fund’s annualized total returns over the one year and since inception (12/30/2016) periods ending December 31, 2017 were 5.41% and 5.40%, respectively, compared to 3.54% and 3.53% for the BC Agg 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 2.62% and net expense ratio was 0.82% as of March 31, 2017. The Adviser has contractually agreed to waive fees through December 31, 2018. The net expense ratio is applicable to investors.

As discussed in our Investment Outlook, in 2017 we saw modest economic growth and the pull back of the Federal Reserve’s monetary accomodation. In fixed income, the yield curve flattened, volatility was relatively low and investment grade corporate spreads narrowed. During the fourth quarter, the flattening of the Treasury yield curve accelerated, with the difference between 10-year and 2-yield yields falling from 85 basis points (bps) at the end of September to just 52 bps by year end. This was a result of the 2-year yield rising nearly 41 bps, while the 10-year yield rose just over 8 bps. The 30-year yield actually declined by nearly 12 bps, capping the stunning performance of long-duration securities (both Treasuries and corporates) for 2017. Inflation expectations (as measured by breakeven spreads in treasury inflation protected securities (TIPS)) continued to climb, with the 10-year breakeven rising 13 bps from 185 to 198 bps.

Sources of outperformance for the Fund in the fourth quarter versus its benchmark included its allocation to TIPS and its investment in longer-maturity (10+ year) Treasuries. Detractors included security selection in mortgage-backed securities and continued underexposure to longer-maturity corporate bonds. The Fund continued to benefit from its tactical duration positioning throughout the quarter.

Looking ahead, we expect the global economic recovery should continue with short-term interest rates continuing to rise. The key question in our mind is whether inflation moves meaningfully higher. With that in mind, we are keenly focused on managing our interest rate exposure. We therefore expect to maintain a short duration profile and are likely to continue to use TIPS as part of our Treasury allocation. So long as inflation is contained, we believe credit and mortgage spreads may narrow slightly, although we could see an increase in volatility as central bank balance sheets begin to shrink – especially if inflation begins to percolate.

Best regards,

Eddy Vataru
Scott Ulaszek

___________________________________

This commentary contains the current opinions of the authors 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.

Mutual Fund investing involves risk. Principal loss is possible. The Osterweis Total Return Fund may invest fixed income securities which are subject to credit, default, extension, interest rate and prepayment risks. It may also make investments in derivatives that may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may invest in 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 foreign and emerging market securities involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks may increase for emerging markets. Leverage may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the fund to be more volatile than if leverage was not used. Investments in preferred securities have an inverse relationship with changes in the prevailing interest rate. Investments in Asset Backed and Mortgage-Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. It may also make investments in derivatives that may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may invest in municipal securities which are subject to the risk of default.

The Bloomberg Barclays U.S. Aggregate Bond Index (BC Agg) is an unmanaged index which is widely regarded as the standard for measuring U.S. investment grade bond market performance. This index does not incur expenses and is not available for investment. The index includes reinvestment of dividends and/or interest income.

Treasury inflation protected securities (TIPS) refer to a treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation.

A basis point (bp) is a unit that is equal to 1/100th of 1%.

Duration measures the potential volatility of the price of a debt security, or the aggregate market value of a portfolio of debt securities, prior to maturity. Securities with longer durations generally have more volatile prices than securities of comparable quality with shorter durations.

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 osterweis.com. Please read the prospectus carefully before investing to ensure the Fund is appropriate for your goals and risk tolerance.

Osterweis Capital Management is the adviser to the Osterweis Funds, which are distributed by Quasar Distributors, LLC. [30773]

Investment Team

Account Access

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This commentary contains the current opinions of the authors 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 Bloomberg Barclays U.S. Aggregate Bond Index (BC Agg) is an unmanaged index which is widely regarded as the standard for measuring U.S. investment grade bond market performance. This index does not incur expenses and is not available for investment. The index includes reinvestment of dividends and/or interest income.

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 Total Return Fund may invest in fixed income securities which are subject to credit, default, extension, interest rate and prepayment risks. It may also make investments in derivatives that may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. The Fund may invest in 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 foreign and emerging market securities involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks may increase for emerging markets. Leverage may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the fund to be more volatile than if leverage was not used. Investments in preferred securities have an inverse relationship with changes in the prevailing interest rate. Investments in Asset Backed and Mortgage Backed Securities include additional risks that investors should be aware of such as credit risk, prepayment risk, possible illiquidity and default, as well as increased susceptibility to adverse economic developments. It may also make investments in derivatives that may involve certain costs and risks such as liquidity, interest rate, market, credit, management and the risk that a position could not be closed when most advantageous. 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.

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