Finserve

Nordic Factoring Fund AB (publ) reports an increase of 0.51% compared to the previous month.
An investment in Finserve Nordic Factoring Fund offers investors access to a well-diversified portfolio with low volatility, consisting of over 250 high-credit counterparts. The fund's portfolio has a low correlation with other asset classes such as interest rates, equities, traditional credits, currencies, and commodities. The fund's volatility is 0.3% on a 12-month rolling basis.
During the past month, the fund has managed to maintain a well-balanced risk level in the portfolio, and the outlook for the future remains stable. The current strategy has proven successful with returns in line with the target return at an attractively low risk level. The Riksbank's decision to cut interest rates in August, as well as the forecast of further cuts in 2024, strengthens the fund's competitiveness in the long term. This makes the fund even more attractive, especially compared to other low-risk investments, which are likely to yield lower returns due to the upcoming interest rate cuts.
No new investments have been made during the period, but the management team is positive about the current portfolio composition ahead of the autumn market development. The current trend of falling interest rates, combined with signs of recovery in certain market segments, creates favorable conditions for factoring as an attractive financing option. This makes factoring an increasingly advantageous solution for companies, which can be effectively integrated with more traditional financing methods.
We believe that the fund has continued good prospects for delivering an attractive risk-adjusted return with low volatility. The underlying counterparts in the portfolio have an average credit rating of A, and the entire portfolio is protected by credit insurance to minimize the risk in the event of any bankruptcies. The low insurance premium indicates that the portfolio composition is considered satisfactory by the insurance companies and reflects the quality of the underlying processes and counterparts.

Forecasts
Inflation continues to decrease and is now approaching the levels targeted by central banks. In several countries, there is also concern that inflation may become too low before the planned interest rate cuts have the intended effect. Despite a generally expected slowdown, the global real economy has shown greater resilience than previously predicted. In the US, however, clearer signs of a slowdown are beginning to emerge, and there is growing concern that the Federal Reserve has been too slow to cut interest rates. This uncertainty created volatility in the financial markets at the beginning of August, as fears of an imminent recession arose. Many, however, see the possibility of a so-called "soft landing" if the Federal Reserve begins to cut interest rate..
Expectations are that the European Central Bank (ECB) will cut interest rates on September 12 to stimulate the economy. Despite decreasing inflation, some underlying factors, such as service inflation, are still at high levels. At the same time, the euro area shows signs of weakness, especially in Germany. The ECB wants to avoid dampening growth too much, and markets expect more central banks to cut interest rates, increasing pressure on the ECB to act to support the economy and avoid a recession.
Sweden is significantly more sensitive to interest rate changes than the US and the rest of Europe. Higher debt levels and a predominance of variable-rate mortgages have made the Swedish economy react quickly to the Riksbank's interest rate hikes. After several years of stagnation, unemployment is now rising, while inflation is below target. There is thus a risk that the Riksbank may also be too late in implementing interest rate cuts, which would require more frequent cuts in the future. To avoid a deeper economic downturn and stimulate the Swedish economy, faster interest rate cuts may be necessary in the future, something the Riksbank also hints at.
Lower interest rates will facilitate sectors and companies dependent on external financing. The factoring market is in a strong growth phase, especially as banks and lending institutions become increasingly restrictive with credits. Factoring offers many companies, both large and small, a more flexible financing option that can support their growth.

IFRS 9
The reserves in the portfolio are very low. 100% of the fund's exposure is in category 1, and the security is based on over 30,000 invoices pledged in favor of the fund. The invoices roll over 30 to 90 days with credit insurance with and without recourse.