MaritSolblad-41

Monthly report July 2021 - SCF I

The NAV price for July was 102.98, an increase of 0.40 (0.3997%). It's an ok month. We still have a large cash register, summer silence has hit us.
New lending in June was SEK 75 million. The inflow to the fund was SEK 15 million, thanks to that.

We continue our work with extra frequent follow-up of our companies with regard to the Corona situation.

The market

Are low interest rates only good for risky assets or are we building up a potential blow in the future?
Are artificially low long-term interest rates only good or is it time to let go of the accelerator and reduce asset purchases by central banks before it is too late. What happens if a new crisis arises, what tools are left to take?

The rapidly falling long-term interest rates that we have seen in the last month are normally interpreted as positive for risky assets, this can be seen as a sign that central banks have inflation under control.

It can also be seen that expected growth will fall, a new wave of shutdowns or restrictions due to the Delta variant is putting a damper on the recovery in the West and in developing countries.
Furthermore, it can be seen as an alternative to buying risky assets.

No matter what, we have a very favorable situation right now for risky assets. Some analysts see no end to this and they may be right. (Ps I do not think so Ds) Many of them have probably not been through all the crises of the 80s, 90s and 2000s. It always ends - the question is what will be the triggering factor? The best is a soft deceleration of course, but it rarely happens.

We will get to a point when stock market valuations are so high that an extra purchase seems like a pyramid scheme and who do we buy junk bonds on a yield below 5% forever? When all these long positions have to be wound up, the door can get crowded.

I think the triggering factor is that the Fed realizes that it has pursued too light monetary policy for too long and begins with austerity measures, initially reduced asset purchases, followed by repo rate hikes that exceed market expectations. It will be extremely important more than ever to read between the lines of messages from the major central banks around the world for a hint of changes in monetary policy.
(We received inflation statistics in the US during the month that far exceeded the Fed's own and market expectations.)

In the graph below, you can see a number of inflation indicators in the US, all of which indicate rising inflation and that the statistics are above or well above an average over the past 10 years.

Inflation indicators july 2021
Inflation indicators July 2021

I wonder if the experts do not see the forest for the trees?

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.

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.
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.
At present, when the fund has delayed redemption and if you are in a hurry to sell, the secondary market can be an alternative. The official NAV price 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 price, as it may have been converted fund units in the secondary market to a different price than official NAV.

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Emma Westerberg

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