Nordic Factoring Fund månadsrapport – januari 2024

Nordic Factoring Fund monthly report – January 2024

Nordic Factoring fund AB (publ) reports a NAV rate for January of 100.47. That's an increase of 0.47 %. In January, the fund distributed shares corresponding to the increase in value in 2023.

The portfolio's underlying return has increased while maintaining a good level of risk during H2 2023. The fund has had higher liquidity as a result of a previous deal and redemption that was paid out, 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. During December 2023, the fund has brought in a major institutional investor in the fund who has completed two investments so far, which is very positive and a good rating for the fund and its existing investors. The fund sees great interest from institutions and sees very good potential to bring more major investors into the fund.

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 the good quality in the portfolio and factoring as an asset class has 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 and an asset class that is uncorrelated with other asset classes such as interest rates, stocks and bonds.

The market and the economy
Global economy should benefit from lower inflation and falling interest rates going forward. The major risk to growth and recovery is increased geopolitical tensions, especially in the Middle East. Disruptions to trade flows through the Suez Canal delay production and can result in higher prices. Although shipping costs have increased significantly, this is not considered to be affecting the downward inflation trend to a large extent. The US economy is expected to have a soft landing and show slower growth going forward. Growth within the euro area, especially in Germany, has slowed sharply but the assessment is that recovery will come in 2025.

Interest rates globally are expected to be significantly reduced in 2024 and banks see 4–6 reductions during the year. The first reductions are expected to come in the period March-May and then ongoing reductions will take place at upcoming meetings of the FED, ECB and the Riksbank. The currency can be an influencing factor for inflation in Sweden and can affect the decline if the krona weakens further during Q1. However, the overall picture is that reductions will clearly come in 2024 and influencing factors such as geopolitics, currencies, government investments, can only affect the rate of reductions during the year. Lower interest rates will make it easier for sectors and companies that are dependent on the financing market, here factoring will be a very interesting financing option for that and it will help the companies grow.

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.

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