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Nordic Factoring Fund AB (publ) reports a NAV rate of 101.46 for March, which means an increase of 0.50 %
The portfolio's underlying return remains strong with an unchanged risk level. The expectation for the fund's future return is that it should be in line with historical return and risk. The fund is expected to benefit from forecast interest rate cuts, which favors it compared to other low-risk financial products.
In March, a large institutional investor joined and made additional investments, which is a strong rating for the fund and its existing investors. Interest in the fund is increasing from both Swedish and European institutional investors.
The managers have carefully analyzed different sectors and individual counterparties to minimize portfolio risks and maintain the fund's low volatility. The fund's underlying counterparties have an average credit rating of A. In addition, the fund is insured against bankruptcy with cost-effective credit insurance, which shows that the insurance company considers the composition of the portfolio to be satisfactory.
Despite the European Central Bank (ECB) warning of increased credit risk in the market, the fund's counterparties with high credit ratings remain robust. The fund has not had a single negative month since it started in 2019 and the portfolio has managed both the Covid-19 crisis and the consequences of the invasion in Ukraine effectively. By investing in the Finserve Nordic Factoring Fund, investors gain access to a well-diversified portfolio consisting of over 250 counterparties with a high credit rating, which shows low covariation with other asset classes such as interest rates, shares, credits, currencies and commodities.
The market and the economy
In the US, inflation continues to fall but remains at a high level. However, core inflation has picked up, causing market concerns about the timing of the first rate cut. The latest forecasts have led to speculation that an interest rate cut by the Federal Reserve (Fed) may take place in the first half of the year. Both Sweden and the euro area are showing signs of reduced inflation, and interest rate cuts from the ECB and the Riksbank are likely at the next meeting. The Riksbank faces the challenge of a weakened krona during the first quarter, which may affect the timing of interest rate cuts. The market consensus is that there will be 3–4 interest rate cuts in 2024.
Lower interest rates will benefit sectors and companies that depend on financing: Factoring is experiencing strong growth as banks and other lenders become more restrictive. Factoring enables growth for both large and small businesses with controlled indebtedness.
IFRS 9
The reserves within 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 have a term of 30 to 90 days, with credit insurance both with and without recourse. In addition, there is property insurance against false invoices.