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Nordic Factoring Fund AB (publ) reports a NAV rate for October of 104.96, an increase of 0.50 percentage points compared to the previous month. The year's return amounts to 4.96% after fees at a volatility of 0.3% which leads to an annual Sharpe ratio of 12.43.
Investing in the Finserve Nordic Factoring Fund gives investors access to a well-diversified portfolio of over 1,000 credit counterparties with high credit ratings and an asset class that exhibits low correlation with other asset classes, such as interest rates, equities, traditional credit, currencies and commodities.
The portfolio consists of approximately 150,000 invoices issued by more than 1,000 companies with an average invoice amount of EUR 2,500.
During October, the risk level in the credit portfolio remained unchanged. The strategy has consistently achieved the target return and exhibited low volatility since inception, with no negative monthly returns.
No new investments have been made during the period, but management assesses that the current portfolio composition is well positioned for future market developments during the current quarter and beyond.
We assess that there are still good prospects for an attractive risk-adjusted return with low volatility. The underlying counterparties in the portfolio have an average credit rating of A, and the entire portfolio is protected by credit insurance that protects against bankruptcy. The low insurance premium shows that the portfolio composition is considered satisfactory by the insurance company and reflects the quality of the underlying processes and counterparties.
Forecasts
With the Riksbank's low inflation rate, the probability of future interest rate cuts is strengthened, which increases the fund's competitiveness in the long term and makes the fund more attractive compared to other low-risk investments, which will probably give a lower return in a lower interest rate situation.
Two major events marked October: the American election and the Riksbank's interest rate announcement. As expected, Trump won the election and the new administration may have indirect effects on Swedish interest rates and inflation. The new US policy could lead to increased government spending and a higher rate of inflation, which could prompt the Federal Reserve to pause or raise interest rates to counter inflation. This could put pressure on long-term interest rates in other countries, including Sweden. On the other hand, Trump has promised tax cuts, which would stimulate the economy but increase the debt.
The Riksbank chose to lower the interest rate by 0.50 %, which was expected. Previous and current forecasts indicate continued reductions, however there is a risk of changes depending on how the effects of US monetary policy will affect the market.
The fund's current strategy and portfolio positioning are prepared for a scenario of potential market uncertainty and rising credit spreads. By maintaining a diversified portfolio and selecting counterparties with strong balance sheets, the fund is well equipped to handle market stress.
IFRS 9
The reserves in the portfolio are very low. 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 with a 30 to 90 day payment period and are credit insured, both with and without recourse