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RidgeWorth Seix Floating Rate High Income Fund – 3rd Quarter 2016

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RidgeWorth: Welcome to RidgeWorth Investments Fund Podcast Series. It's Wednesday, October 12th and we're speaking with George Goudelias of Seix Investment Advisors, subadviser to the RidgeWorth Seix Floating Rate High Income Fund. George, can you share some highlights from the floating rate fixed income market from the last quarter?

Goudelias: Of course, thank you. Overall, another solid quarter from the leveraged loan market. We saw the Credit Suisse Leveraged Loan Index returning 3.1% for the quarter. We saw a notable strength in metals and mining, followed by the energy sector, as well as the wireless communication sector. Notable detractors on the quarter, while still positive returns but returning below the benchmark, were utilities, food and tobacco, as well as transportation.

RidgeWorth: How has the market been impacted by the increase in the 3-month LIBOR rate?

Goudelias: The increase in the 3-month LIBOR rate over the course of the year has been about a little more than a half a percent from about a quarter percent to, right now, almost about of a percent or 87 basis points. As a result, we've seen kind of two different impacts. The first is any leveraged loan debt that does not have a LIBOR floor has seen their 3-month LIBOR increase by roughly about half a percent, a little bit more than half a percent. If your coupon on that particular loan, for example, is 4%, you might have been receiving a total all-in coupon earlier including LIBOR of 4% percent. Now you're seeing a total return, a total coupon on that loan of 4%, so a notable increase in yield for loans that don't have LIBOR floors. Those that have LIBOR floors that are right now below 3-month LIBOR, in particular, loans with of 1% floor, now you get the higher of, so ultimately that's an increase of about of a percent over your previous coupon, so it has benefited primarily those two types of loans.

RidgeWorth: Do you expect this trend to continue and, if so, how might the market react?

Goudelias: Right now the big date on the calendar is October 14th, when some of the new regulations that impact the money market asset class go into effect. Many strategists out there believe that LIBOR, 3-month LIBOR, will increase to 1% by the end of the year. I think it's prudent to wait until we see the impact of the new regulations on the money market industry following the 14th of February. I think, at a minimum, we wouldn't expect LIBOR to really decline from here but it could increase a little bit more. Of course, we still have a couple of more Fed [Federal Reserve Board] meetings between now and the end of the year that could also dictate where rates are heading.

RidgeWorth: What's the case for leveraged loans in the current fixed income market environment?

Goudelias: We think the current case is still an attractive one. Right now, the Credit Suisse Leveraged Loan Index is yielding about 6%. We still think that's a very attractive overall yield for the asset class. You are still first in line as it relates to the kind of pecking order, if you will. If a company were to run into trouble, you're still kind of first in line, have first claim on assets. A 6.1% yield for this asset class, with kind of the built-in inflation hedge and the built-in interest rate hedge that floating rate leveraged loans offer we believe is still attractive.

RidgeWorth: What's your outlook for leveraged loans through the end of the year?

Goudelias: Through the balance of the 4th quarter here, I would say it should be relatively “steady Eddie.” The average price of a leveraged loan has increased to close to 100 cents on the dollar, or par. We should see some very modest increase in the average price. And, the bulk of your return most likely for the fourth quarter will be garnered from the underlying coupon on that particular instrument. We think the technicals right now in the loan market have improved dramatically. We've seen about 9-10 weeks right now of inflows into the leveraged loan mutual funds that are out there. That has led to good supply/demand dynamic, which as we saw in particular in September, where the asset class outperformed both equities and most other fixed income asset classes with a nice positive return. Overall, we're very constructive and we believe the rest of the year should lead to a nice solid finish for the leveraged loan asset class.

RidgeWorth: Thanks so much for your time today, George.

Goudelias: Thanks.

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DISCLOSURES: Credit Suisse Leveraged Loan Index is a market-weighted index that tracks the performance of institutional leveraged loans. A basis point is equal to 0.01%. LIBOR is a benchmark rate that some of the world’s leading banks charge each other for short-term loans. All investments involve risk. Comments and general market related projections are based on information available at the time, are for informational purposes only, are not intended as individual or specific advice, may not represent the opinions of the entire firm and may not be relied upon for individual investing purposes. Information provided is general and educational in nature, provided as general guidance on the subject covered and is not intended to be authoritative. All information contained herein is believed to be correct but accuracy cannot be guaranteed. This information may coincide or conflict with activities of the portfolio managers. It is not intended to be and should not be construed as investment, legal, estate planning or tax advice. RidgeWorth does not provide legal, estate planning or tax advice. Bonds offer a relatively stable level of income, although bond prices will fluctuate providing the potential for principal gain or loss. Intermediate-term, higher quality bonds generally offer less risk than longer term bonds and a lower rate of return. Generally, a fund’s fixed income securities will decrease in value if interest rates rise and vice versa. Although a fund's yield may be higher than that of fixed income funds that purchase higher rated securities, the potentially higher yield is a function of the greater risk of that fund’s underlying securities. Floating rate loans are typically senior and secured, in contrast to other below-investment grade securities. However, there is no guarantee that the value of the collateral will not decline, causing a loan to be substantially unsecured. Loans generally are subject to restrictions on resale. Certain types of loans may limit the ability of a fund to enforce its rights and may involve assuming additional credit risks. Past performance is not indicative of future results. For performance data current to the most recent month end visit our website at www.ridgeworth.com. Before investing, investors should carefully read the prospectus or summary prospectus and consider the fund’s investment objectives, risks, charges and expenses. Please call 888.784.3863 or visit ridgeworth.com to obtain a prospectus or summary prospectus, which contains this and other information about the funds. ©2016 RidgeWorth Investments. All rights reserved. RidgeWorth Investments is the trade name for RidgeWorth Capital Management LLC, an investment adviser registered with the SEC and the adviser to the RidgeWorth Funds. RidgeWorth Funds are distributed by RidgeWorth Distributors LLC, which is not affiliated with the adviser. All third party marks are the property of their respective owners. Seix Investment Advisors LLC is a registered investment adviser with the SEC and a member of the RidgeWorth Capital Management LLC network of investment firms.