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Monthly report October 2021 - SCF I

The NAV price for October was 104.21, an increase of 0.36 (0.3467%). It is a slightly weaker month than we had hoped for.

We make a reservation in an ongoing process where we have a court decision on a personal guarantee that is provided to the fund. We do this in case it is not possible to get the full amount back through the foreclosure. It is a precautionary measure that we expect to recover eventually.

The weaker development in recent months means that I see a return of plus 5% after fees for 2021 instead of plus 6%.

Inflow of SEK 35 million, thank you very much for that.

New lending approx. SEK 75 million, now the excess liquidity is almost gone.

The property sale is in progress and we have bidding on the large object.

The IPO that we planned before the turn of the year for a company under Riddargatan, we are postponing to Q1 in 2022, we are working on a deal in the company that, all other things being equal, is worth the wait for the unit holders.

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

 

 The market:

I was going to take a macro update in this monthly newsletter.

My impression of fundamental statistics that came during the year is that it is of the positive kind. Reality is not always what the eye sees, in the graph below which shows whether the statistics have surprised positively or negatively (even if it is positive), it has since last summer surprised negatively. The market reacts to statistics that deviate from the expectations priced into current asset prices. This may be one of the explanations for the somewhat shaky stock market we saw in the autumn.

Surprise

(source Bloomberg)

In the graph below, we see a compilation of fundamental statistics regarding Sweden from about 20 banks. It is striking how confident everyone is that the inflation we are now seeing is transient. This coincides with the declining rate of increase in growth that we can also read in the compilation. The very large fiscal stimulus in the wake of the pandemic is fading and the economy must once again stand on its own two feet.

It is election year in Sweden next year, we can safely expect that a stimulating fiscal policy will last over 2022. Today, a Swedish ten-year government bond yield of 0.35% is in yield, the forecast here is 0.90 in 2023. It can only be interpreted as When the Riksbank ceases to buy bonds, everything else being equal, it will give a boost to long-term market interest rates.

Is the risk in these figures on the upside or downside? Regarding inflation, I am absolutely certain that the risk is on the upside.

We have: rising energy prices, soaring shipping prices, bottlenecks due to lack of supply of ex semiconductors, rising food prices, rising fuel prices, etc. It is just over 12 years since the Riksbank raised the interest rate when we had our most recent financial crisis. It's easy to forget, it was with the result in hand totally wrong action at the time. Companies will, where possible, raise prices to end customers.

Fundamenta

(source Bloomberg)

In the graph below, you can see the market's pricing of the repo rate around the world. Today's reality that the market prices and the rhetoric from the central banks is not synchronized. The market is always quicker to react, we get those who are right in a year or so. The important thing is to relate to what is discounted in today's asset prices, for a change that requires positive or negative surprises from current and expected fundamental statistics.

Reporänta

(source Bloomberg)

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/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.

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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