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Nordic Factoring Fund AB (publ) reports a NAV rate for September of 104.44, an increase of 0.46 percent compared to the previous month. The fund has an accumulated return after fees since inception in June 2019 of 35.61 percent
Investing in the Finserve Nordic Factoring Fund gives investors access to a well-diversified portfolio with over 250 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.
During September, the risk level in the credit portfolio remained well balanced and continued to finance counterparties with strong balance sheets. The strategy has consistently achieved targets and exhibited low volatility since inception, with no negative monthly returns.
Inflation remains low, which strengthens the thesis of more interest rate cuts. With lower interest rates, the fund's competitiveness becomes stronger and makes the fund more attractive compared to other low-risk investments, which will yield lower returns as a result of the upcoming interest rate cuts. No new investments have been made during the period, but the managers are positive about the current portfolio composition ahead of autumn's market development. The prevailing trend of falling interest rates and signs of recovery in certain market segments creates good conditions for factoring as an attractive financing alternative. For companies, factoring is becoming an increasingly beneficial solution, which can be effectively integrated with more traditional financing methods.
The underlying counterparties in the portfolio have an average credit rating of A, and the entire portfolio is protected by credit insurance to protect against bankruptcy. The low insurance premium shows that the portfolio composition is considered satisfactory by the insurance company.
MSCI World Index compared to Finserve Nordic Factoring Fund during the period 2019-06-30-2024-09-30. Source: Infront
The market
In September, the US cut interest rates twice, an unexpected move that reflects a stronger labor market than forecasts previously indicated. At the same time, unemployment fell to a lower-than-expected level, and the number of new jobs increased significantly, suggesting that the US economy may be headed for a "soft landing," as the central bank governor put it. This means that the rulers hope to moderate inflation without causing a recession.
In Europe, the European Central Bank (ECB) is expected to adjust its monetary policy at its next meeting to deal with a faster decline in inflation and a slowing growth rate. The ECB will most likely need to cut interest rates at its next meeting to stimulate the economy and avoid stagnation.
In Sweden, inflation decreased to 1.1 % in September, which was in line with expectations. The Riksbank is facing increasing pressure to lower interest rates further to support the economy, as signs of a future rapid interest rate adjustment are becoming increasingly clear. The general consensus is that interest rates can be lowered relatively quickly in the coming months.
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. 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.