Månadsrapport december 2021 – SCF I

Monthly report December 2021 – SCF I

First of all, I want to thank you for another year with your best investors. It is sad for us to deliver a weak month as the last thing that happens in the year, and in the text below you will find an explanation for this.

During the month of December, Scandinavian Credit Fund I lost 1.50 percent, which means that the fund's return for 2021 lands at plus 3.15 percent.

The weak development during the month is a result of the IFRS 9 reservations that the fund made in December, which resulted in one of the fund's larger holdings being adjusted down in accordance with the precautionary principle. We expect that this reservation can be fully or partially rescheduled during the next year, as the company's values are made visible, which, all else being equal, could mean an increase in the company's valuation in 2022. The reservation affects the NAV negatively in December.

Scandinavian Credit Fund I makes recurring upward and downward revisions of the fund's holdings in accordance with the accounting standard IFRS 9. The purpose of these reservations is to provide as fair a valuation of the portfolio's holdings as possible. However, these revisions are made with the precautionary principle as a guiding principle. The principle means that assets must be valued conservatively when there is uncertainty about the asset's value, which means that overvaluation of assets is avoided.

As we have come to the conclusion in consultation with our external auditor that there is uncertainty about the value of the assets in one of the fund's larger holdings, in line with IFRS 9 and the precautionary principle, we are making a major write-down of the holding during December. We cannot comment on the underlying holdings more specifically at the time of writing, but will return with more information shortly. Our hope is that this reservation is temporary and all or part of it can be returned to the fund during the next year. In other words, it is not a confirmed credit loss but an accounting technical adjustment.

We are of course not satisfied with the return for Scandinavian Credit Fund I in 2021, but the fund compares well in terms of return to other alternative fixed income funds (see below) during the year. At the same time, the fund's long-term return has been extremely competitive. We expect that in 2022 the fund will reach its target return of over 6 percent.

In the table below, you can see how the fund delivered in relation to other alternative fixed income funds, despite the fact that for us weaker in 2021, the fund is far above the average for other alternative fixed income funds. These are funds that are included in Hedge Nordic's index for alternative fixed income funds.

It may seem that the fund's returns are going in the wrong direction and I can agree with that, but there are extraordinary circumstances for this. It should then be mentioned in the context that in 2019 it was Trinitas (fraud, we are pursuing legal proceedings against the organizer) that brought the NAV down below the target, in 2020 it was Corona and a more exceptional market than that year we as investors have to look for, 2021 is as mentioned above, a devaluation of a holding after consultation with external auditors. For the investor who was unsure about some holdings, they have now been nailed again by the external auditor and given unchanged valuations, I expect the fund to reach 6% in 2022.

In the graph below you can see that the annual return since inception if you reinvest the dividend in SCF I is almost 6% despite the mediocre finish in 2021.

We continue our work with extra frequent follow-up of our companies with regard to the Corona situation.
Finserve Nordic, which is the fund's AIF manager, has in 2020 joined the company to the PRI network, Principles for Responsible investment. The network is independent but supported by the UN and encourages investors to invest responsibly by following the principles developed by the network.

All funds under Finserve's management follow the responsible investment process formalized in Finserve's Sustainability Risk Integration Policy. The policy is available on the company's website https://finserve.se/viktig-information/. Each fund's sustainability policy is available on the funds' websites.

We can announce that based on today's sustainability requirements for funds, Scandinavian Credit Fund I is to be considered a "light green" fund, which is very good. In Sweden, about 30% of all funds have a rating corresponding to light green or better.

When you do your analysis of the fund, you should primarily look at the credit risk and the liquidity risk in the fund. Are you comfortable with the credit risk that the fund's holdings generate? Furthermore, the assets are illiquid and it can take some time to get your investment back if many people want to withdraw deposited funds at the same time. The fund has a low market risk and has a low correlation with other asset classes.

If you need to sell your holdings, do it in the primary market, where you will get the best price.