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Monthly report August 2022 – NFF

NAV rate in August was 104.17, which gives an increase for the month of 0.43 %. Slightly lower than we would like. We have a high level of liquidity in the fund but have a number of projects ahead that will involve our excess liquidity.

Inflow for the month of August is SEK 6 million, many thanks for that.

On an annual basis, we are slightly above 6 %.

The market and the economy

Inflation, interest rate increases, sky-high electricity prices are still in focus. The question economists are now asking themselves is whether there will be a soft landing of the economy or will it be a hard landing. Most economists favor a soft landing, but the risk of a hard landing is significant. And in light of the recent turbulence and announcements of closed industries, as well as the threat of a winter of war (according to our city minister), the danger of a hard landing is imminent.

Households are holding back due to expected interest rate increases and sky-high electricity prices. We also see signs that electricity-intensive industries will have problems in the future. Politicians are trying to pick low-hanging fruit when it comes to energy prices and energy supply. There is a great need to agree and sign a long-term agreement that solves this problem in the best way for Sweden. Adding guarantees to keep the clearing of electricity contracts running is a necessary and good initiative.

The banks come up with forecasts of housing prices that fall by 15-20 %. The stock market has had a relief rally in the last two months but has now shown tendencies to further travel south. Long-term interest rates have started ticking up again. Since the high points at the beginning of the summer, the commodity market has come down a bit, and to some extent alleviated the ravages of inflation. It is really only gas prices and consequently electricity prices that are still hovering around previous peaks. Furthermore, the krona has weakened somewhat, which puts a damper on inflation in Sweden.

The Economic Institute's latest forecast in August shows that the Swedish economy continues to decline. The barometer indicator falls below 100 for August and lands at 97.5, in July the indicator was 101.4.

The chart below shows the fund's development compared to AMF and their long-term interest fund. The NFF stands up well in this comparison.

Månadsrapport augusti 2022 - NFF 5

IFRS 9

The reserves in this fund are very low. Everything is in category 1 and the fund's collateral is over 30,000 invoices pledged in favor of the fund. These 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.

We look brightly at the possibility of growth for factoring in 2022, our partner is getting more and more assignments and that is positive. A bit of a bummer is that competition is increasing and thus pricing is tightening, we therefore believe that we will land closer to 6% in 2022 than 7% which was the case in 2021.

Against the background of the dark picture drawn above for the economy and the market, we have tightened and further tightened our routines for monitoring outstanding invoices.

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Månadsrapport augusti 2022 - NFF 6

ESG

In 2020, Finserve Nordic, which is the fund's AIF manager, joined the company to the PRI network, Principles for Responsible Investment. The network is independent but supported by the UN and encourages investors to make responsible investments by following the principles developed by the network.

Finserve Nordic believes that the integration of sustainability risks is an important part of the funds' investment processes. Sustainability risks are defined as environmental, social, or corporate governance-related circumstances that could have a significant negative impact on the value of investments.

Social aspects include e.g. human rights, labor rights and equal treatment. Environmental aspects are e.g. the companies' impact on the environment and climate. Corporate governance aspects are e.g. anti-corruption, shareholder rights and business ethics

All funds under Finserve's management follow the responsible investment process that is formalized in Finserve's Policy for Integrating Sustainability Risks. The policy is available on the company's website https://finserve.se/viktig-information/. Each fund's sustainability policy is available on the funds' websites. Nordic Factoring Fund is not bright green, however it follows Finserve's policies as far as possible.

When you make your analysis of the fund, you should mainly look at the credit risk and liquidity risk in the fund. Are you comfortable with the credit risk generated by the fund's holdings? Furthermore, the assets are illiquid and it can take some time to get their investment back if many want to withdraw invested funds at the same time. The fund has a low market risk and has a low correlation with other asset classes.

We emphasize that we are not stressed by non-lending funds, but continue to work based on our models for credit assessment, all to ensure a good diversification of the portfolio in relation to the credit risk we take.

If you need to sell your holdings, do so in the primary market where you get the best price.

The official NAV exchange rate is published on the first banking day each month, what is shown during the month on NGM is not, I do not want to emphasize the official NAV exchange rate, as fund units in the secondary market may have been converted to a different exchange rate than official NAV.

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Emma Westerberg

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