Litigation finance comes of age

This article was originally posted on CityAM and the views expressed are those of the author (not affiliated with AxiaFunder). 

Emily Perryman reports for CityAM on how the UK’s first litigation crowdfunding platform, AxiaFunder is enabling private investors to invest in litigation finance, an area previously only open to hedge funds and other large institutions. 

She discusses: 

1. Axia’s record in raising funds for its first three cases
2. The potential risks and rewards of investing in litigation 
3. AxiaFunder’s selective approach in choosing which cases to offer on its platform. 

AxiaFunder is the UK’s first litigation crowdfunding platform. AxiaFunder, which launched in January allows primarily high net-worth and sophisticated investors to provide funding for claimants who otherwise could not afford the costs of their legal disputes.  Investors receive a fixed return on their capital if the case wins, which on average (allowing for some losses) will be between 25% and 30%. As each case has a binary outcome it is important that investors spread the risk by diversifying their portfolio and spreading investments across multiple cases. The risks of litigation funding lie in the fact that the loan to the claimant is provided on a “non-recourse” basis.

So if the case loses at trial the investors will not recover any of their initial investment. However there are many measures in place to reduce the risk to investors. AxiaFunder takes a very strict approach to assessing potential claims and only targets cases with at least 60% probability of winning if the case were to go to trial. Furthermore over 80% of cases settle before trial (source: Solomonic Litigation Analytics) and in the case of settlement AxiaFunder investors normally get paid in full. In addition to the claim having strong legal merit, the estimated damages of claims approved by AxiaFunder are typically over five times the costs of taking the case to trial with an expected time to resolution of less than three years. AxiaFunder also insists on having ATE after-the-event insurance providing protection against the claimant having to pay the opponent’s legal costs if the case is lost. 

To read the full article, visit https://www.cityam.com/litigation-finance-comes-of-age.

Originally published in CITYA.M. written by Emily Perryman, on 24 October 2019.