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Scandinavian Credit Fund I AB (publ) reports a NAV rate for May of 102.69. That's up 0.37 (0.3616%), a slightly weaker month than expected.
Inflow for the month of May is SEK 31 million, many thanks for that.
The new lending in May is approximately SEK 30 million.
The reason for the somewhat weaker NAV rate is that we have written down the expected recovery in the bankruptcy estate for Trinitas. We previously had indications that our recovery could be about SEK 6 million, now, after dialogue with the bankruptcy trustee, we have adjusted it to SEK 2 million, that is the difference between an ok month and what we report in May. So, in practice, there is no downside left there, however, the process against the organizer of the bond continues and we will see the outcome of it. Information about that development, I ask to be allowed to come back.
The fund is still at a pace of plus 6 % at an annual rate.
One of our portfolio companies, Vimab AB, has been acquired by Headsent AB, which is listed on First North. The deal will be finally completed when it is approved by Headsent's shareholders at an extraordinary general meeting. We cannot take up any possible price gain until it is clear and the deal is completed. There is a press release from Headsent available in the market for those interested.
Our lending objects are still doing well given the information we currently have, we of course follow all companies as carefully as during covid. We continue with the work to liquidate companies that we liquidated and I will return when I can reveal more about this.
Given the situation the market is in, "cash" will be harder to raise. We are now receiving inquiries from large, fine companies that would otherwise be able to raise capital on the bond market. It is therefore a seller's market for whoever has liquidity. It is possible to charge good fees for new lending now.
The market
It feels a bit boring to write about inflation, central bank policy and the war in Ukraine. However, these are the factors that affect the market directly or indirectly now and for a long time to come.
The image below shows aggregated forecasts from around twenty banks that make macro forecasts for Sweden.
What stands out is how quickly they think inflation will fall back and the strengthening of the krona seen in the forecast. The Riksbank will certainly raise
the interest rate and the interest rate market's forecast are higher than the economists'. However, such a large strengthening of the krona presupposes rising stock markets or at least that the market calms down and that may happen, but I personally think 2023 at the earliest and then maybe the second half.
We need to see that the rate of increase in price increases slows down, that the war in Ukraine is over or a ceasefire and that the central banks have clearly increased. I maintain that it will be unsettled in the markets well into 2023.
Source: Bloomberg
Comparison
Below you can see SCF I and its return since inception compared to a long bond fund. You can sell a long bond fund on the day, but you hardly get an interesting return if you compare with SCF I since its inception. It looks good to be able to present a curve that has produced a steady and consistent return.
Source: Bloomberg
IFRS 9
In category 3, the provisions have decreased significantly, however, the price of the assets has been written down according to the "fair value" principle and this has an effect as great as the reduction in the provisions. This has been done in consultation with the auditors and gives a better picture of the exposure in category 3.
ESG
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.
Finserve Nordic believes that the integration of sustainability risks is an important part of the funds' investment processes. Sustainability risks are defined as environmental, social or corporate governance-related circumstances that could have a significant negative impact on the value of investments.
Social aspects include e.g. human rights, labor rights and equal treatment. Environmental aspects are e.g. the companies' impact on the environment and climate. Corporate governance aspects are e.g. anti-corruption, shareholders' rights and business ethics
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.
We emphasize that we are not stressed by non-loaned funds, but continue to work based on our models for credit assessment, all to ensure a good diversification of the portfolio in relation to the credit risk we take.
If you need to sell your holdings, do it in the primary market, where you will get the best price. The official NAV rate is published on the first banking day of each month, what is shown during the month on NGM is not, I want to emphasize not always the official NAV rate, as fund units may have been traded in the secondary market at a different rate than the official NAV.