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Nordic Factoring Fund AB (publ) reports a NAV rate for May of 102.49, an increase of 0.47 % from the previous month.
The fund's underlying return is in line with expectations and risk levels. Expected interest rate cuts will not affect the fund's return or its historically stable risk level. Lower interest rates will also increase the fund's competitiveness, as other low-risk investments are expected to yield lower returns due to upcoming rate cuts. The Riksbank cut rates in May, while the krona strengthened significantly at the beginning of June, and other key indicators support the assumption of further cuts.
The management team continues to carefully analyze sectors and individual counterparties to minimize risks and maintain a high repayment capacity. The fund continues to see good opportunities for solid risk-adjusted returns and low volatility. The fund's underlying counterparties have an average rating of A, and the fund has credit insurance as protection against bankruptcies. The low insurance premium indicates that the portfolio composition is satisfactory to the insurance company.
Investing in Finserve Nordic Factoring Fund provides access to a diversified portfolio with over 250 counterparties with high credit ratings. The fund has low correlation with other asset classes such as interest rates, equities, credits, currencies, and commodities, and has not had a negative month despite market turbulence. This makes it attractive for investors seeking stable returns and wishing to diversify their portfolios.
Forecasts
In May, the Riksbank lowered the policy rate, as expected, and signaled that two more cuts might occur in the second half of the year if inflation prospects remain unchanged. Based on the latest figures, the managers assess that more cuts are likely, especially after the ECB has cut rates and the Fed also decides to lower their rates.
In addition to the Riksbank's decision, interest rates have been influenced by U.S. macro data and uncertainty about when, or if, the Fed will begin to cut rates. After reports of weaker employment data and lower inflation in the U.S., the interest rate market expects two cuts from the Fed this year. Swedish market rates have fallen slightly, and long-term rates have dropped faster than expected.
The ECB has communicated that inflation is slightly rising, but despite this, a cut occurred on June 6. The big question, however, is the pace at which these cuts will be implemented. If inflation rises again, planned cuts will likely be postponed.
Lower rates will ease sectors and companies dependent on financing. Factoring is on a strong growth trajectory as banks and lending institutions become increasingly restrictive with credits. Factoring enables many large and small companies to grow with a more flexible loan option.
IFRS 9
Provisions in the portfolio are very low. Almost 100% of the fund's exposure is in category 1, and the security is based on over 30,000 invoices pledged in favor of the fund. The invoices roll over 30 to 90 days with credit insurance with and without recourse.