Nordic Factoring Fund månadsrapport – mars 2023

Nordic Factoring Fund monthly report – March 2023

Nordic Factoring fund AB (publ) reports a NAV rate for March of 101.19. That's an increase of 0.37 %.

During March, the fund set up two new lines of credit for financing invoices of approximately SEK 135 million in total. The fund has renegotiated the interest rate on the loans in the portfolio, which will increase the underlying rate and thus affect the NAV positively in the future. The fund continues to see good opportunities for converting the liquidity in the portfolio and is positive about the fund's future development. The NAV was negatively affected during the month as a result of a previous system error that affected the calculation of interest in the previous month's NAV. The adjustment was carried out this month and is deemed to be well within the fund companies' guidelines for material error.

Against the background of the weaker economic outlook for the market, the fund has tightened and continued to expand its routines for monitoring outstanding invoices and the assessment of companies. During the month, the fund has seen a reduction in the proportion of outstanding invoices, which is a positive development and reflects that the fund's strategy is working.

The market and the economy
After the major banking crisis at the beginning of March, which led to great turbulence and a sharp decline in both the stock market and interest rates, market confidence has returned. The authorities' and Central Banks' quick and strong intervention to secure market confidence and ensure that the crisis is stopped from spreading as well as protecting depositors' money in affected banks has led most people to believe that the banking crisis is over, which, however, may be a bit early to say for sure. But the focus will now again shift to inflation. The US saw a reduction in inflation and is now the lowest since September 2021, however core inflation appears to be more difficult to bring down. The inflation figures for Europe will guide the interest rate setting from the ECB and preliminary figures indicate a reduction in inflation, what will also have a big effect here is the underlying core inflation. Sweden publishes inflation figures in mid-April and even there core inflation will be a big factor.

The latest producer prices to come out of the Eurozone show a decline of 0.5% for February which was slightly more than expected. The underlying inflation, has low volatility and prices very rarely fall once they have been raised unless the economy goes into a major review. This means that we still have an underlying inflation which in many cases is rising on an annual basis despite the reduced activity in the economy. Inflation will probably have to be fought harder, which will lead to further interest rate increases in the future, where the expectation for April is 0.5 % by the Riksbank.

The market is volatile and uncertain, and the pressure on companies and households is increasing as a result of inflation and interest rate increases. The currency will need to be strengthened through interest rate increases in order not to import inflation, which could affect refinancing and bond markets. The risks in the market should lead to increased problems for companies and an increase in bankruptcies.

The reserves in this fund are very low. The fund's entire exposure is in category 1 and the security 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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