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Nordic Factoring Fund AB (publ) reports a NAV rate for July of 103.49, an increase of 0.53 % from the previous month.
Investing in the Finserve Nordic Factoring Fund offers investors access to a well-diversified portfolio that over time yields returns in line with traditional High Yield funds, but with significantly lower risk. The fund has not had a negative monthly return since its inception in 2019, despite several turbulent market situations. The fund cooperates with over 250 counterparties with a high credit rating (average grade A) and has low correlation with other asset classes such as interest rates, equities, credits, currencies and commodities.
July
During the month, the fund has maintained a good level of risk in the portfolio and the outlook ahead looks stable. During the period, the fund has had a high investment rate and the fact that the Euro strengthened against the krona at the end of the month have both had a positive effect on the return. The strategy continues to produce good results as the return is in line with the target return at an attractively low risk level. Lower interest rates will also increase the fund's competitiveness, as other low-risk investments are expected to yield lower returns due to future interest rate cuts. The fund has not made any new investments during the period, but is positive about the current portfolio composition ahead of the autumn. The current market trend with falling interest rates and the beginning of recovery in some markets creates favorable conditions for factoring as a financing alternative. For companies, this becomes an increasingly attractive financing solution that can be used in combination with traditional methods in a very effective way. The fund sees significant opportunities to continue to finance strong and creditworthy counterparties, which further strengthens the fund's underlying collateral and improves the risk profile.
The managers continue to carefully analyze sectors and individual counterparties to minimize risks and maintain a high repayment capacity. The fund continues to assess good opportunities for good risk-adjusted returns and low volatility. The fund's underlying counterparties have an average rating of A and the fund has credit insurance as protection against bankruptcy. The low insurance premium indicates that the composition of the portfolio is satisfactory for the insurance company and a good rating on underlying processes and counterparties.
Forecasts
The past few days have been marked by significant volatility in both equity and fixed income markets, with major pressure on central banks, particularly the Federal Reserve (FED) and the European Central Bank (ECB), to cut interest rates. Despite various macroeconomic signals from major economies such as the US and Germany, market players are demanding aggressive interest rate adjustments to stabilize the situation. In the US, the pressure on the FED to lower interest rates is increasing, as inflation is no longer seen as an acute threat. At the same time, the FED must act carefully so as not to create imbalances or be perceived as giving in to short-term demands.
For the ECB, the challenge is similar, but more complex due to weak economic data from Germany. Despite this, the ECB must balance the need to support the economy with the risk that further interest rate cuts may have limited effect. In Sweden, assessors have concluded that inflation is under control, which means that Sweden's Riksbank can now focus on supporting growth. An interest rate adjustment in August is considered virtually guaranteed. Clear recommendations from the Norwegian Economic Institute to lower interest rates more quickly is a strong signal.
Currency markets have been particularly volatile during July, which is to be expected in a period of market unrest and uncertainty around interest rate cuts. This volatility reflects the uncertainty and the varying macroeconomic figures between different countries and regions. Continued uncertainty around global interest rate cuts can be expected to create further volatility, requiring investors to closely monitor central bank communications and global economic indicators.
In summary, the current economic situation requires attention and action from central banks to manage volatility and support growth. The FED and ECB are facing challenging decisions and despite this it is likely that cuts will start coming very soon. Sweden's Riksbank has clearer guidance with a presumed interest rate decision in August. Currency market volatility is likely to continue, reflecting global economic uncertainty in several areas.
Lower interest rates will facilitate sectors and companies that depend on financing. Factoring is on a strong growth journey as banks and lending institutions become increasingly restrictive with credit. Factoring enables many large and small companies to grow with a more flexible loan option.
IFRS 9
The reserves in the portfolio are very low. Almost 100 % of the fund's exposure is in Category 1, and the collateral is based on over 30,000 invoices pledged in favor of the fund. The invoices are rolled over in 30 to 90 days with credit insurance with and without recourse.