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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 level. Expected interest rate cuts will not affect the fund's return or the 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 future interest rate cuts. The Riksbank lowered the interest rate in May at the same time as the krona strengthened significantly at the beginning of June and other key figures indicate and strengthen the assumption that further reductions will come.
The management team continues to carefully analyze sectors and individual counterparties to minimize risks and maintain a high repayment capacity. The fund continues to assess good opportunities for good 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 bankruptcy. The low insurance premium indicates that the composition of the portfolio is satisfactory for the insurance company.
Investing in the Finserve Nordic Factoring Fund gives access to a diversified portfolio of over 250 counterparties with a high credit rating. The fund has low correlation with other asset classes such as interest rates, equities, credit, currencies and commodities, and has not had a negative month despite market turbulence. This makes it attractive to investors who seek stable returns and want to diversify their portfolios.
Forecasts
In May, the Riksbank lowered the key interest rate, as expected, and signaled that two further cuts may take place in the second half of the year if the inflation outlook remains unchanged. Based on the latest numbers, managers believe more cuts are likely, especially after the ECB cuts and the FED also decides to cut interest rates.
In addition to the Riksbank's decision, the interest rate situation has been affected by US macro data and the uncertainty about when, or if, the FED will start lowering interest rates. After reports of weaker employment data and lower inflation in the US, the interest rate market expects two cuts from the FED this year. Swedish market interest rates have fallen somewhat, and long-term interest rates have fallen faster than expected.
The ECB has communicated that inflation is slightly rising, but despite this, a reduction took place on 6 June. The big question, however, is at what rate these reductions will be implemented. If inflation rises again, planned reductions will likely be postponed.
Lower interest rates will facilitate sectors and companies that depend on financing. Factoring is on a strong growth journey as banks and lending institutions become increasingly restrictive with credit. Factoring enables many large and small companies to grow with a more flexible loan option.
IFRS 9
The reserves in the portfolio are very low. Almost 100 % of the fund's exposure is in Category 1, and the collateral is based on over 30,000 invoices pledged in favor of the fund. The invoices are rolled over in 30 to 90 days with credit insurance with and without recourse.