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Nordic Factoring fund AB (publ) reports a NAV rate for December of 105.63. That's an increase of 0.45 %.
The portfolio's underlying return has increased while maintaining a good level of risk and has during H2. During December, the fund changed a deal and has had higher liquidity as a result of the deal and the redemption that is paid out in January, which has affected the return somewhat. However, the fund sees a continued good level of return going forward as a result of a high level of investment and continued good risk levels in the portfolio.
Factoring financing enables businesses to manage liquidity needs, reduce risk and focus on growth. The potential flexibility and adaptability of factoring solutions make it an attractive financing option for various types of businesses, especially those looking to manage their finances in a more flexible and efficient way. The fund continues to see great demand and can finance the capital against good counterparties. The fund has carefully analyzed sectors and individual counterparties to mitigate risks and the portfolio outlook remains very good. Despite increased risk in the market, the fund sees that the counterparties in the portfolio manage their payments and demonstrate strong repayment capacity.
The fund sees very good prospects in the market and has 0 % credit losses for investors in 2023, which demonstrates how stable the fund generates high risk-adjusted returns despite challenging market conditions. In addition to the good credit quality, there is credit insurance that covers the entire portfolio against losses. The good quality in the portfolio and factoring as an asset type have since 2019 proven to be a good investment. In addition to that, the credit insurance provides double protection for investors and a good rating for the fund's assets and processes that insurance companies are willing to insure. By investing in NFF, investors gain access to a large, well-diversified portfolio with over 250 counterparties.
The market and the economy
Long-term interest rates rose in mid-December in the United States as a result of a strong labor market report, which may indicate a soft landing for the American economy, but also a risk that interest rates will not be lowered at the rate hoped for in 2024. Expectations that the ECB will start lowering interest rates earlier than forecast increases, much as a result of the German economy shrinking more than expected. The ECB apparently wants to avoid a deep recession in Germany and will have to act if the trend continues. Swedish inflation decreased significantly at the end of the year, in line with other European countries. The banks are revising their analyzes and forecasts regarding the interest rate and see a high probability of several interest rate cuts in 2024. Sweden has had a strong economic trend, which indicates that inflation will reach the target of 2 % earlier than expected. The krone has strengthened somewhat during December and seems to be most affected by how the US economy develops. The Riksbank will continue to sell EUR, but the krone exchange rate is said to be strongly influenced by upcoming macro figures from Europe and the US. The market has already shifted focus to when the first reduction will come, but what can be seen is still weak growth, even though the economy has shown positive figures recently, and that a period of high interest rates will mark the market for a longer time. Factoring will continue to be an excellent tool for companies to manage their liquidity and parry challenges in a reduced economy and possible temporary loss in sales figures. The fund sees the asset class becoming more and more attractive for companies both from a business and accounting perspective.
IFRS 9
The portfolio reserves are very low. Almost 100 % of the fund's exposure is in category 1 and the collateral is over 30,000 invoices pledged in favor of the fund. The invoices are rolled over in 30 to 90 days with credit insurance both with and without recourse. Furthermore, there is property insurance for an eventuality should false invoices appear.