Finserve launches SICAV-RAIF structure in Luxembourg of the Nordic Factoring Fund

Since 2016, Swedish asset manager Finserve has successfully offered its range of Direct Lending funds exclusively targeting the Nordic region for retail investors in its home country. With a new RAIF structure, Finserve now targets the European investor with its Nordic Factoring Fund (NFF), a fund that taps the Nordic market for factoring loans.

Nordic Factoring Fund was launched in June 2019 attracting around SEK 1.5 billion from local investors. Given its consistent and solid risk-adjusted performance, there has been strong demand from institutional investors outside Sweden to access the fund, which will now be serviced through the new RAIF structure.

Purchase of invoices at a discount

Factoring is a means for companies to strengthen their liquidity in the short term by selling their outstanding receivables (invoices) to a third party. For example, a company with strong seasonal effects on earnings can smooth revenue streams by selling its invoices to free up cash.
The price for receiving the money now, rather than later, is the interest paid to the buyer (the factoring company), which translates into the invoice being sold at a discount. The factoring company is then responsible for collecting the payments in full, usually assuming the credit risk in the transaction.

NFF follows the same business model used by traditional factoring companies, but instead of acting as a direct counterparty to the seller of the invoices, the fund uses factoring companies as an intermediary to generate returns.

The returns generated in the fund can be explained in a five-step model

To control the underlying credit risks in the portfolio, the fund has exposure to a large number of smaller individual bills with a short duration. The asset management team, led by Konstantino, continually assesses the credit quality of its counterparties, something that has become increasingly important in light of the tough economic conditions.

Finserve's Head of Institutional Sales in Spain and Portugal is Niclas Gutenbrink.