Fenchurch Legal Ltd have a loan note, and I will be reviewing it during this article.
If you have proposed this investment and want a second opinion, email me (advice@adamfayed.com) or contact me here.
We can sometimes offer enhanced returns and other benefits if you want to invest in this option, compared to many other providers, or introduce alternatives which might be better for your situation.
You are also welcome to contact me if you are an advisor or introducer looking to distribute Fenchurch or want to understand more about the terms. We co-operate with several people globally on alternative investments.
This investment review should be considered for the UK non market, rather than for people based in the UK.
Where is the investment sold and what are the main features?
This investment can be sold globally but is especially popular in expat-focused markets like the UAE
Fenchurch focuses on litigation financing. They finance small and medium-sized UK law firms.
Litigation funding is a growing market in the UK because the banks don’t usually want to lend money for long and costly legal cases.
Even in the cases where they do, the time it takes to secure funding is not ideal for firms looking for flexibility. Additional financing allows firms to take on more cases than they otherwise would.
This investment is two- or three-year, with most clients prefer the two-year offering.
The investment offers a return slightly more than double the current US base rates (as of December 2023), and is for qualified or sophisticated investors only.
How is the risk managed?
Some safeguards have been put in place for this investment including:
- After the event (ATE) insurance is an insurance policy that covers the legal costs and expenses incurred during the legal case. If the law firm loses the case, they can claim on the insurance to claim back their legal expenses.
- They fund small ticket cases rather than large ones, to limit the risk that one big loss could harm the entire portfolio. The average loan is only 3,000 GBP (about $3,800).
- There is a legal charge given by the law firm over the case proceeds.
- There are also enhanced protections available on cases above 40,000 GBP ($50,000).
What are the positives associated with this investment?
The main positives are
- Litigation financing is a significant and growing market in the UK.
- The investment gives higher returns than most in the market, but the risk is still mitigated.
- There are no additional fees to pay with the product as they are all embedded into the solution.
- The model of litigation funding is tried and tested. Many other alternative investment providers have succeeded in this space long-term.
- They only lend to firms in the UK, in one jurisdiction, which reduces the risk.
- The investment is available in multiple currencies and not just British Pounds.
What are the main drawbacks with this investment?
What are the main drawbacks?
The main drawbacks are
- Clients with a low-risk appetite might be worried about a default, despite the safeguards put in place.
- Like almost all products like this, Fenchurch goes through advisors. This makes sense, but it also means that you are reliant on your advisor to assess your risk appetite appropriately
- With interest rates now higher, some A-rated options in the market pay 7.5%-8.8%, and they are often linked to household-named companies. This isn’t a reason not to make alternative investments; it merely means that you should carefully asses the risk-adjusted returns.
- Like all private investments, there is always less transparency than publicly listed ones, even though the people behind this investment have been more transparent than others I have seen.
Conclusion
This can be a good investment for people looking to diversify in the alternative asset space.
However, you should ensure you are working with a professional advisor who understands your wider needs and risk appetite.
This is because investments like this can always default.
If you are looking for a second opinion you can contact me.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
