AxiaFunder has launched a new litigation finance portfolio product, enabling investors to diversify their funds across up to 90 cases while targeting returns of up to 28 per cent.
The UK-based litigation funding platform has had a busy three months, having raised £600,000 for the new portfolio funding product, while it continues to scale up.
AxiaFunder typically funded one commercial litigation case at a time, sometimes going up to three, so the new product offers far greater diversification across cases.
Read more: Litigation finance special report
It is also the first time that AxiaFunder is taking partial assignment of a law firm’s revenue rather than entering into a contract directly with the claimants.
The underlying assets for the first portfolio funding deals were housing disrepair claims. 85 per cent of investors’ principal was insured. The underlying claims have an expected average duration of nine to 15 months, with only five per cent expected to progress to trial. It is envisaged that capital and returns for the underlying cases will be paid to investors as and when each case settles. AxiaFunder uses IT to directly monitor each individual case and plans to audit the law firms running the cases every three months to manage the operational and counterparty risk.
“We expect to expand the portfolio product into other case-types,” the company said. “More broadly, the platform mission is to offer a combination of higher risk, higher return commercial cases alongside a series of portfolio funding opportunities.”
AxiaFunder uniquely connects investors with pre-vetted litigation opportunities in the UK and internationally, taking advantage of one of the few truly uncorrelated asset classes with the potential to consistently generate attractive inflation-adjusted returns.
It is one of the few established litigation platforms offering retail and smaller professional investors access to litigation finance where the majority of the return is paid to the investor. Other litigation platforms accessible by retail investors take the majority of the upside as fees, leaving investors with only single-digit annualised returns. By contrast, AxiaFunder targets investor annual returns of 25-28 per cent per annum net of fees.
After launching the litigation fund product, AxiaFunder is eyeing greater lending volumes.
“Given the level of investor demand and the available vetted assets, we see no reason why volumes won’t increase significantly and are therefore increasingly focused on sourcing institutional capital, although we will of course maintain an allocation for our existing retail investors” AxiaFunder said.
“Our existing law firm partners can generate at least £1m to £2m of assets per month, and therefore we are optimistic that this investment opportunity can scale subject to investor demand. With equities looking vulnerable, as central banks are focused on restraining inflation and while both bonds and property look expensive in our view, we would anticipate that many investors may view the AxiaFunder product as a logical addition to their investment portfolios.”
Besides housing disrepair, AxiaFunder is actively evaluating various commercial cases including an offshore group litigation with several thousand claimants, some UK-based unfair prejudice claims and is also evaluating participation in a large arbitration. If launched, these claims, although higher risk, will potentially offer investors more upside.
AxiaFunder vets all cases on 10 criteria: Are the underlying merits of the case strong? Will the defendant pay? Is the claim large enough relative to the cost? Is there adverse cost risk insurance? Is the claimant legal team capable and experienced? Is the law firm aligned and incentivised to win the case? Is third-party funding legal in the jurisdiction? Does the case have sufficient financing to the end of trial? Is the risk of security for costs properly addressed? Are investors being sufficiently compensated for risk? Only cases that screen positively on these factors reach the platform for investment.
The AxiaFunder team is confident that the housing disrepair claim portfolios, which were funded in the second quarter, screen strongly across each of these 10 criteria, making them a potentially attractive investment.
In general, AxiaFunder aims to be as transparent as possible to investors who have signed a confidentiality agreement and shows the output of its assessment in a detailed 40-page offer document along with a data room for each investment offer. For each investment offer, a video profile of the case, or cases, is presented to investors on the website.
AxiaFunder launched its first cases in 2019 and to date has funded 14 commercial cases of which six have resolved positively. The average returns on resolved cases are 48 per cent per annum, although past returns are no guarantee of future performance.
The AxiaFunder team comprises two senior lawyers each with over 12 years of post-qualification experience and an investment banker with over 25 years of markets and investment research and structuring experience.
Each offer is structured as a separate class of a tax-transparent limited partnership.
The offers can be accessed via https://www.axiafunder.com/investments by eligible retail investors in most countries.
AxiaFunder is an appointed representative of a Financial Conduct Authority-regulated firm.
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 or high-net-worth investors.