Litigation funding platform AxiaFunder launches automated Secondary Market
AxiaFunder has launched its automated Secondary Market operating as a Bulletin Board (Secondary Market), offering investors secondary trading functionality. The technology was developed by ShareIn Ltd.
This facility will provide sellers with the potential to reduce their minimum holding periods on investments which would otherwise typically take two to three years to reach an exit. It will also help sellers to manage liquidity and risk. Buyers will be able to access cases that are already funded – enabling increased portfolio diversification.
For claimants, AxiaFunder expects that the Secondary Market will in time become more liquid, which should tend to increase the availability of litigation funding while also lowering its cost.
The AxiaFunder Secondary Market will be carefully supervised. It will be important to ensure equal disclosure of information to buyers and sellers. It will not be possible to trade case investments close to key case events such as, for example, a mediation process or court hearing. Confidentiality of case information will be protected through the execution of non-disclosure agreements by all prospective investors.
AxiaFunder will monitor the proposed selling price for each investment. The sale price will depend on several factors including the contractual entitlement of the security over time if the case wins; the prospect of success; and the liquidity & risk preferences of the seller.
Cormac Leech, CEO of AxiaFunder, says: “Because litigation funding is relatively high risk, the AxiaFunder platform is only suitable for sophisticated and high net worth investors. Investors should also be aware that Capital is at risk and returns are not guaranteed, and past performance is not a guarantee of futures results. Potential investors should also carefully read and understand the risk warnings before participating." The AxiaFunder platform’s onboarding process includes a risk-based questionnaire which is to ensure the investors are fully aware of the potential risks involved in litigation investment.
AxiaFunder has to date, funded 13 cases with a total amount invested of cGBP1.9 million. We expect to close 2 more offers in the coming weeks, which will increase the total funded to GBP2.5 million. So far, five cases have resolved with an average annualised return for investors of 55 per cent. Eight cases are ongoing. In the long term, adjusted for losses, we expect the platform will generate average investor returns of at least 20 per cent per annum. Case investments are uncorrelated with each other. There are therefore substantial benefits from building a diversified portfolio. Case investments are also of course uncorrelated with other asset classes and the broader economy. Some of the cases are partially principal protected via insurance, mitigating downside risk.