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RidgeWorth Seix Floating Rate High Income Fund – 4th Quarter 2016

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RidgeWorth: Welcome to RidgeWorth Investment Fund Podcast Series. It's Monday, January 9th, 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 leveraged loan market from the last quarter?

Goudelias: Sure. Overall, I would say it was another “Steady Eddie” quarter for the asset class, returning about 2.25% for the fourth quarter, which looked very good against other fixed income asset classes, some of which had negative returns. Importantly, as you'd expect with the asset class, it held up very well during the post-election time frame when rates really started to move up.

RidgeWorth: How did the fundamental and technical aspects of the market look as we move into the first quarter of 2017?

Goudelias: Yeah, I'd say fundamentals improved, in particular in the second half. As a lot of the commodity companies, metals, mining, energy in both oil and gas, rebounded and we started to see some opportunistic issuance to improve liquidity. Even lower quality companies saw a rebound in earnings. We were very favorably exposed on the fundamental side. Technicals certainly remain strong. We've seen, in the fourth quarter, we saw over $100 billion of issuance in the loan market. While some of that was certainly opportunistic with some refinancings that accounted for probably over half of that issuance, nonetheless, it was very strong issuance. On the demand side, with the increase in rates, not surprisingly, we did see more demand out of retail funds. For just December alone, we saw inflows of about $5.7 billion into retail funds, which was the largest monthly inflow since August of 2013. For the fourth quarter combined, inflows were about $10.5 billion. The net result for 2016, which started out with negative flows, is that we still had a positive flow of $6.9 billion for the year, versus outflows of about $21.7 billion for 2015.

RidgeWorth: Where are you finding opportunity in the market?

Goudelias: Right now, I would say we're finding more opportunities in the primary market, the new issue market, if you will, and select opportunities in the secondary market. The secondary is where we're seeing the most opportunities including healthcare, energy, telecomm and gaming.

RidgeWorth: How has the recent increase in rates impacted the market?

Goudelias: The increase in rates has brought a lot more attention back to the market with the 3-month LIBOR [London Interbank Offered Rate] now above 1%. Companies will now start to begin to pay actual LIBOR versus what was before either a 0.75% or a 1% LIBOR floor. In addition, many new issues are now coming in without floors at all given the higher rate environment, so we should expect more of that in 2017. Finally, the aforementioned increase in retail fund flows is certainly the result of that recent increase in rates.

RidgeWorth: What is your outlook for leverage loans for the first quarter and the rest of 2017?

Goudelias: For the first quarter, and for 2017, I would say I think it's more realistic now to expect a more modest return relative to last year. Last year the market returned about 10%. I would say for 2017 we'd expect a more modest return of roughly 4-6%, driven somewhat by the higher rate environment. The majority of the return in 2017, we believe, will be driven more by coupon rather than increases in loan prices.

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

Goudelias: Thank you very much.

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DISCLOSURES: LIBOR [London Interbank Offered Rate] 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. The value of the collateral securing a floating rate loan can decline, be insufficient to meet the obligations of the borrower, or be difficult to liquidate. Participation in 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 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. ©2017 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.