Market Disruptor, AxiaFunder Launches New Litigation Finance Product
Litigation funding is the financing of legal cases by third parties in return for a defined share of the proceeds. It is one of the few truly uncorrelated asset classes that has the potential to generate inflation-beating returns. Investor interest in this asset class has rocketed as the UK faces double-digit inflation for the first time in decades, as well as a record-high number of legal proceedings commencing in the Civil Courts. AxiaFunder is the first online litigation funding platform in Europe with unique features that set it apart from its competitors.
AxiaFunder's market position
We are unaware of any other funder, outside the United States, offering direct access to the litigation market to high-net-worth sophisticated retail investors, as well as professional investors. AxiaFunder uniquely connects investors with pre-vetted litigation opportunities not only in the UK but also overseas.
The company targets an ROI of 25-28% per annum, in contrast to high single-digit returns offered by many of its direct competitors.
AxiaFunder has recently launched a new portfolio litigation product offering a greater diversification across a larger number of cases and an enhanced risk-reward profile.
The new portfolio litigation investment product
AxiaFunder successfully raised £815,000 for three portfolios comprising 244 housing disrepair claims in the past three months. AxiaFunder's in-house experts are reporting that 85% of the investors' principal is insured, with disputes expected to resolve within 9 to 15 months on average. Pay-outs are expected to be made as and when each case settles. AxiaFunder closely monitors the progress of each case using a claim monitoring system and has already engaged external specialists to periodically audit how the portfolios of cases are being litigated.
AxiaFunder expects the portfolio funding product to scale on their platform given the ever-increasing investor demand, as well as AxiaFunder's ability to identify opportunities that are suitable for funding. There is potentially at least £2m of assets available for investment each month.
With the vulnerability of traditional asset classes such as equities and bonds as well as the volatile cryptocurrency market discouraging investors, portfolio litigation compares favourably- being uncorrelated and diversified.
Whilst the investment risk is diversified through a larger number of cases in a portfolio, the case assessment stage is primarily where the risk-reward ratio is improved.
The AxiaFunder team comprises 3 senior lawyers each with over 12 years of post-qualification experience and an investment banker with over 25 years of markets, investment research, and structuring experience. The team applies a strict 10 criteria case assessment method to ensure a high success rate.
The criteria include:
1. How strong are the underlying merits of the case?
2. Does the defendant have the means to pay the settlement/award?
3. Is the claim economically viable given its value to cost ratio?
4. Is there an adverse cost insurance in place?
5. How skilled and experienced is the claimant's legal team?
6. Do all claimant-side parties have aligned interests and are incentivised to win?
7. Is the third-party funding allowed within the jurisdiction?
8. Is the legal budget adequate and funding sufficient to take the case to trial?
9. Is the security for costs issue addressed?
10. Does the ROI appropriately compensate investors' risk?
Only investments satisfying all of these criteria can be presented to the potential investors.
Past performance and assurance
AxiaFunder launched its first case in 2019 and to date has funded 14 commercial cases of which 6 have successfully resolved. While historical returns cannot be indicative of future returns, the reported average IRR on resolved cases is 48% per annum. Over the long run, AxiaFunder targets a more conservative IRR of 20-30% per annum.
AxiaFunder is confident that the three portfolios funded to date will perform strongly, making them, in our view, a relatively attractive investment. Each offer is structured as a separate class of a tax-transparent limited partnership. The company will offer a combination of higher risk-return commercial cases alongside a series of portfolio funding opportunities.
AxiaFunder is an appointed representative of an FCA-regulated firm. It has a transparent funding process - for each offer, an in-depth output of the team's case assessment is shared with investors, who also have access to a data room. All sensitive case-related information is being made available to investors subject to executing a confidentiality agreement.
Whilst AxiaFunder has made the litigation funding market more accessible, investment opportunities are only available to high-net-worth sophisticated retail investors and professional investors, given the complexity and risk of the product.
Capital at risk. Returns not guaranteed. There is a significant risk of losing your entire investment if the case fails. Please read the full risk warning before deciding to invest.
The investments offered by AxiaFunder are relatively complex and relatively high risk. For regulatory reasons they are only suitable for Sophisticated High Net Worth Investors.