AxiaFunder, is a litigation funding platform that provides individual and institutional investors with the ability to directly invest in a range of litigation cases.
AxiaFunder was established after Founder Cormac Leech’s personal experience within litigation funding found that while there was a substantial market for litigation funding, until AxiaFunder there hasn’t been a platform that provided the means for investors to invest in specific cases directly.
Companies such as Burford Capital have carved themselves out a business model with litigation funding at the centre of their operations.
However, while shares in companies such as Burford Capital provide exposure to litigation funding, the options for investors to invest directly into individual cases is limited.
And when observing the substantial profits listed companies are making from litigation funding, it is easy to understand why private investors would want to gain direct exposure to cases.
AxiaFunder highlights the potential for high returns through litigation funding with a 20%+ targeted return on a portfolio of cases accessed through their investment platform.
An individual case can yield as much as 70% per annum for investors via the AxiaFunder platform, if successful.
Many cases are settled before they go to trial so investors can potentially enjoy returns in less than a year in some circumstances.
A successful case on the AxiaFunder platform was settled within just 7 months and returned investors 32% after a breach of contract case was mediated. Of course, as the AxiaFunder team point out, past performance is never a guarantee of future results.
Litigation Funding as a new asset class
One of the standout attractions of litigation funding is the absence of correlation with the broad economic environment.
Litigation, and the need to pursue litigation, is not largely impacted by economic growth in the same way traditional assets such as equities and bonds are.
Indeed, there is an argument that litigation funding provides investors with an attractive alternative in times of economic uncertainty.
With equities at multiyear highs many investors may think it is a good time to diversify out of equities, and litigation funding will be an option for some high net worth and sophisticated investors to consider.
There is also an absence of correlation in returns between individual cases which contrasts to equities, for example.
If shares in a UK bank fell due to bad earnings or a deterioration in the broad economic landscape, you’d expect shares of other bank shares to react in a similar way.
This isn’t the situation with litigation funding as each case is entirely unconnected with another. If an investor was to fund the pursuit of justice for Party A against Party B, it would have absolutely no impact on the funding of another case. It should be noted, however, that investment in litigation funding does carry certain risks as we discuss in more depth below.
Why Litigation Funding?
Whilst investing through AxiaFunder provides ESG characteristics in the form of promoting social justice, it goes without saying that the primary objective of an investment is a potential financial return and litigation funding provides plenty of opportunity for just that.
Typically. AxiaFunder places a 70-75% probability of any case winning (although it does vary depending on the facts) either via a pre-trial settlement, which occurs at least 80% of the time, or at trial. AxiaFunder investors generally get paid first from any proceeds and therefore any settlement is generally a win for investors.
The probability of a case winning is assessed using a stringent process employed by AxiaFunder before an investment opportunity goes live on the platform.
Of the cases reviewed by the team at AxiaFunder, approximately 1 out of 20 actually make it on to the platform.
The high level of vetting is the consequence of a multi-staged assessment made by a team of litigation professionals to ensure only cases which they believe have a strong chance of success make it on to AxiaFunder’s investment platform.
As with all investments, there is the risk of loss of your capital when investing in litigation funding.
The risk of loss when investing in litigation funding stems from the failure of success in any one case resulting in the loss of capital used to fund the litigation.
However, cases available to investors through the AxiaFunder platform are subject to a number of procedures to help mitigate any losses.
The foremost arrangement is the implementation of various insurances help reduce any liabilities of a failed case.
ATE (After the Event) insurance is required for all cases on the AxiaFunder platform, where there is adverse cost risk, which insures investors against having to pay any additional fees for a lost case.
Some cases, but not all, have insurance covering losses to investors’ own capital, typically protecting 50-80% of the invested capital.
Adding additional support for a successful outcome for investors is the circumstance of the solicitors involved in the cases taking the case on a partial or sometimes full CFA (conditional fee agreement) basis.
A conditional fee agreement means the lawyer will fund their own expense during the litigation process and will only receive a fee, often with some increased uplift, if they win the case. This means the lawyer’s interests are aligned with those of the investors that are funding the case.
To date AxiaFunder has won 5 cases with zero losses and 7 cases still underway. In the last 3 months there has been a flurry of new cases launched, with offers launched with total requirement of £1.3m, including the platform’s first international case– a software theft case in Barcelona. Some of these are not yet fully funded.
There are currently 2 cases available for investment on the platform, one of which has over 50% of investors’ capital covered by insurance. If this pace of case launches is maintained, investors should be able to build a diversified portfolio of cases in the months ahead.
Capital is at risk and returns are not guaranteed and investments are not covered by the Financial Services Compensation Scheme (FSCS). More information on the risks involved in investing can be found in AxiaFunder’s risk warning on https://www.axiafunder.com/risk.
Type: Breach of Contract
Litigation funding, of approximately £24,000, was required to fund a breach of contract claim. The claim was initiated by the liquidator of a construction company who built a substantial new house for an individual in the South West of England who subsequently refused to pay for it. The construction company ultimately went into liquidation as a result of the defendant’s failure to pay the contractor anything towards the draft final account figure. In this case, the funding was required to fund the court issue and counsel fees.
The Claim Form has been issued immediately after the fund raise. This prompted the Defendant to get engaged on the claim – the Defendant’s Protocol response has been received the following month. Consequently, an agreement to mediate later that year has been reached. Following the mediation, the parties have agreed to a settlement that enabled the Company to pay investors back just over £31,000 for a 32% investment gain after just 7 months. Please note that past performance is not a guarantee of future results.