The Changing Face Of Private Investment
The 2008 economic turmoil turned the world of investments on its head, and as a result a whole new era of fresh opportunities has been born. No longer is the pool of profit wholly dependent on the worldwide equity markets.
Europe is hiding in the closet trying to prop up the European Union, the USA market is looking longer and longer term to produce a ‘recovery’. Printing money to cover your back is only a temporary solution.
Even popular global economists are spieling about buying property in the US- and that is definitely a long term view!
Asia is looking buoyant and very hopeful, and if it can turn a lot of its production into local consumption the Asian economies will flourish.
The emerging large markets like Brazil, Russia, India and China, (The Brics-now adding South Africa as hot with growth), are poised to change from jogging to a long sprint down the economic growth track into a booming future.
The good news about the 2008 crunch, crash, confusion, and fall is that there are a number of “new kids on the block”. Sophisticated investments that are unrelated to equities, non-correlated, have bounced into view for the private investor.
There are several unrelated structures that have sprung into view. One in particular has caught a lot of attention.
A New Brand:
Litigation Funding: Capital Protected Investments
Litigation Funding is an Alternative Asset Class, previously only offered to large institutional investors.
It is nothing new, having been available to Hedge Funds, Investment Banks and Insurance Companies for more than 30 years. About 12 years ago a parliamentary act was passed that finally made this lucrative investment vehicle accessible to the retail sector.
It involves investors funding handpicked litigation Cases, with a very high probability of success that are also insured against loss, in return for an agreed share of the settlement figure once the Case settles successfully.
Ethically, this investment vehicle is unquestionable, on a number of levels:
Firstly it enables everyone to pursue a strong, sound legal Case that would not have been afforded to them otherwise. A recent study in the UK indicated that the number one reason why legitimate law suits were not initiated was because of the costs involved. Litigation Funding fundamentally removes the risks to the Litigant wanting to pursue a Case enabling them to have access to justice that they would not normally have had.
Secondly, the vast majority of Cases that are funded never actually go to court. Rather, they are settled by way of mediation, essentially freeing up the Courts that were previously clogged with seemingly frivolous claims and appeals. One thing is obvious with Litigation, in many situations it is not about who is right or wrong, but rather who has the deepest pockets and who can drag the Case out the longest, causing the other party to eventually run out of money and having no choice but to abandon proceedings.
When a Case is chosen for funding money is allocated to that Case considering the matter will go to trial and “go the distance”. No longer can large companies and institutions bully smaller businesses or individuals. Litigation Funding: Levels The Playing Field.
Furthermore, Solicitors and Barristers no longer charge the client an hourly monetary rate, but rather enter into a fixed price agreement between themselves and the Litigant. Previously some unscrupulous Solicitors may have “dragged” a legal matter out, longer than necessary on the premise that the longer the Case went, the more the Solicitor would get. By entering into a fixed price agreement it is no longer in the best interest of the Solicitor to continue to prolong the matter longer than necessary. Rather, an expedited settlement is more preferable, ensuring peace of mind for the Litigant.
Each Case that requests funding must pass a stringent due diligence process before an Independent Legal Review Panel (ILRP) of legal experts. If every member on the panel assesses the Case and deems it to have a highly probable chance of success then the Case is again scrutinized by a minimum “A” rated insurer. It is only once the Case has met the selection criteria of both the ILRP and the minimum “A” rated insurance company, that has insured the Case against loss, that it is approved for funding.
Importantly, the returns on offer to investor are well above average, with an IRR of around 25%pa, coupled with complete Capital Protection by way of the attached insurance policy.
In this world of economic uncertainty one of the most attractive features about this investment is the fact that it is completely uncorrelated to the volatility of the share and property market. Whether equities are bull or bear or the property sector is boom or bust your asset (your invested Case) will still proceed, as normal, completely unscathed by other global economic factors.
This is a serious investment that offers serious and safe returns. The tiers of security placed upon all invested money are unparalleled, making this an extremely low risk investment. It has a proven, strong track record in excess of 30 years and is now offered at a relatively low entry level.
Litigation Funding should be considered by any astute investor looking to diversify their investment portfolio.
Please contact the Author for more detail.
This can be seen as an astute way of diversifying a portfolio, spreading the risk, including a bigger jigsaw of investment exposures, and it looks like a pretty good source of alternative capital and income growth, or preservation of capital in the later years of life.