Nordic Factoring Fund månadsrapport – oktober 2023

Nordic Factoring Fund monthly report – October 2023

Nordic Factoring fund AB (publ) reports a NAV rate for October of 104.65. That's up 0.50 %.

The portfolio's underlying return has increased while maintaining a good level of risk, and in Q3 2023 has a return level that corresponds to an annual return of 6.3 % after fees. The fund sees a continued good level of return in the future as a result of a high level of investment and continued good risk levels in the portfolio.

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 has 0 % credit losses in 2023, which demonstrates how stably the fund generates high risk-adjusted returns despite challenging market conditions. In addition to the good credit quality, there is credit insurance that covers the entire portfolio against losses. The good quality in the portfolio and factoring as an asset type have since 2019 proven to be a good investment. In addition to that, credit insurance provides double protection for investors and it is 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.

The market and the economy
The interest rate was left unchanged by the ECB and FED, which may indicate that the interest rate peak has been reached within the respective market. The euro area sees indications, according to preliminary data, of a lower inflation figure in October than expected, which may also strengthen that thesis. The euro area has lower inflation than Sweden according to the latest statistics and has had a clearer effect of the interest rate increases. The Riksbank is responsible for an interest rate announcement in November, which is difficult to predict. A slight reduction in core inflation in September and the continued weakness of the krona create incentives for an increase. Decisive figures are inflation in October and what effect the Riksbank gets from selling EUR. What the market can ascertain is continued weak growth and that a period of high interest rates will characterize the market for a longer period of time. Something that will open up opportunities for factoring because companies want more flexibility in their liquidity management.

Core inflation continues to decline slowly in Sweden. The economy is in a recession and GDP continues to decline. Weak global demand is hitting the export industry while unemployment has begun to rise, which may be an indication that the interest rate is having an effect, albeit slowly. Based on the data available today and in combination with challenges in the value of the krona, it is justified to raise the key interest rate in November. Sweden's economy is in a recession and despite several sectors signaling that the interest rate is hitting the economy hard, it is required that core inflation show a clear reduction as the level is far too high and the assessment is that the Riksbank sees that further measures are required in November.

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 as protection should false invoices appear.

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