SCFI – månadskommentar november 2022

SCFI - Monthly Commentary November 2022


Scandinavian Credit Fund I AB (publ) reports a NAV rate for November of 104.36. That's an increase of 0.12 %. We are targeting a return level of around +4.5 %, which can be considered very good given the market situation during the year.

New subscriptions in November were just over SEK 20 million, many thanks for that.

We have not had any new lending during November, however, three lifts have been carried out on already granted credit of approximately SEK 35 million.

The slightly weaker development during the month is partly explained by a system error that caused the NAV rate for October to show too high a value, which was adjusted to November's NAV to the same extent. The impact on NAV caused by the error was approximately 0.2 percentage points. For unit owners who have received too high an initial price in the fund as a result of the system error, compensation will take place. The fund company Finserve Nordic AB is responsible for implementing the compensation through additional issued profit-sharing loans in the Fund that are issued during the month of December. For unit owners who sold at too high a NAV price due to the error, the fund company will reimburse the fund for this. Thus, these shareholders will not be liable for repayment.

In summary, no shareholder will suffer losses as a result of the error that occurred. Finserve Nordic takes full responsibility for what happened and has tightened its administrative procedures to prevent a similar event from happening in the future.

To return to the fund's return, SCFI is one of the best Fixed Income hedge funds this year according to HedgeNordic, see link below, with a Sharpe ratio of 4.88% (as of October), a stable level of return and low volatility, which we are extremely proud to be able to give to our fund shareholders. Here you can see more about Fixed Income HedgeNordic and the funds by sorting the columns.
We have continued ongoing analysis and dialogue with all our borrowers who may have been or are likely to be negatively affected by the macroeconomic development. We believe that the portfolio is well positioned for the effects of the macro situation and we will continue the work of being proactive in our analysis and dialogue. Direct Lending as an asset class has good opportunities for strong returns as a result of higher interest rates and reduced capital in the market. The fund has a large pipeline of borrowers, which means that invested capital can be loaned immediately at very attractive terms and give the fund a good return. Despite negative developments during the year on the stock market, the fund has developed positively during the same period with many financial challenges, which shows the strength and stability of the fund.

The market and the economy

During November, the stock market in several parts of the world continued to develop somewhat positively. Electricity prices were low in October as a result of warmer weather, but have now increased sharply again in November. Much indicates a continued increase in the coming months as colder weather awaits. During November, the Swedish krona strengthened against the dollar but remained flat against most currencies, which may be a consequence of recovery and a little more stability in the stock market. The head of the FED signaled on the last day of the month that they will reduce the rate of interest rate increases and that this could already happen in December, which confirms the thesis that the inflation and interest rate peak is approaching.

High inflation, rising short-term interest rates and electricity prices continue to hit the economy hard and erode household purchasing power. The Riksbank raised the policy rate by 0.75 % during November. Inflation was lower than expected in the US and in Sweden but remained at a high level. It is likely that inflation will rise further in the short term, which indicates that key interest rates will also continue to rise. The global economic situation continues to affect the Swedish export industry and is not expected to improve in the short term. The economic institute's barometer indicator stopped somewhat in November and the household confidence indicator rose but remains at a very weak level where weakened purchasing power and increased costs have a heavy impact. A colder December will most likely drive up electricity prices and also inflation, which will have consequences for households and businesses, government subsidies will likely reduce the economic effect. Reduced purchasing power and expected increased unemployment in 2023 can reduce inflation and then also dampen or reverse the trend for higher key interest rates.

Read more