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Monthly report December 2021 - SCF I

First of all, I would like to thank you for another year with your best investors. It is sad for us to deliver a weak month the last thing that happens in the year and in the text below you get an explanation for this.

During the month of December, Scandinavian Credit Fund I lost 1.50 percent, which means that the fund's return for 2021 lands at plus 3.15 percent.

The weak development during the month is a result of the IFRS 9 provisions made by the fund in December, which resulted in one of the fund's larger holdings being adjusted downwards in accordance with the precautionary principle. We expect that this provision can be repealed in whole or in part next year, as the company's values become visible, which, all other things being equal, may mean a revaluation of the company in 2022. The provision will have a negative effect on NAV in December.

Scandinavian Credit Fund I makes recurring up and down revisions of the fund's holdings in accordance with the accounting standard IFRS 9. The purpose of these provisions is to provide as fair a valuation of the portfolio's holdings as possible. However, these revisions are made with the precautionary principle as a guiding light. The principle means that assets must be valued conservatively as there is uncertainty about the value of the asset, which means that overvaluation of assets is avoided.

As we, in consultation with our external auditor, have concluded that there is uncertainty about the value of the assets in one of the fund's larger holdings, we make a larger write-down of the holding in December in line with IFRS 9 and the precautionary principle. We can not comment on the underlying holding more specifically at the time of writing, but will return with more information in the near future. Our hope is that this provision is temporary and all or part of it can be returned to the fund next year. In other words, it is not an established credit loss but an accounting adjustment.

We are of course not satisfied with the return for Scandinavian Credit Fund I in 2021, but the fund is performing well in terms of return in comparison with other alternative fixed income funds (see below) during the year. At the same time, the fund's long-term return has been extremely competitive. We expect that the fund in 2022 will reach its target return of over 6 percent.

In the table below you can see how the fund has delivered in relation to other alternative fixed income funds, despite the fact that for us weaker in 2021, the fund is far above the average for other alternative fixed income funds. These are funds that are included in Hedge Nordic's index for alternative fixed income funds.
Månadsrapport december 2021 - SCF I 13
It may seem that the fund's return is going in the wrong direction and I can agree with that, but there are extraordinary circumstances for this. It should then be mentioned in this context that in 2019 it was Trinitas (fraud, where we pursue legal proceedings against the organizer) that pulled down NAV under the target, in 2020 it was Corona and a more exceptional market than the year we as investors may look for, 2021 it is as mentioned above, a downgrade of a holding after consultation with external auditors. For the investor who was unsure of some holdings, they have now once again been nailed by the external auditor and given unchanged values, I expect the fund to reach 6% 2022.

In the graph below, you can see that the annual return since the start if you reinvest the dividend in SCF I is almost 6% despite the mediocre end of 2021.
Månadsrapport december 2021 - SCF I 14
We continue our work with extra frequent follow-up of our companies with regard to the Corona situation.
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.

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/vikten-information/. Each fund's sustainability policy is available on the funds' websites.

We can announce that based on today's sustainability requirements for funds, Scandinavian Credit Fund I is to be regarded as a “light green” fund, which is very good. In Sweden, about 30% of all funds have a rating corresponding to light green or better.

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.

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

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Emma Westerberg

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