Do we realise the potential of the Legal asset class as an investment?

The world has entered a phase where we cannot rule out the possibility of a global recession. The global economy has slowed down due to the compounding damage done by the covid 19 and the outbreak of the Russian-Ukraine war. As the capital markets are falling and inflation is rising, we need to realise that our money's value is depreciating daily. Many investors across the world have started to take a shift from traditional ways of investing to alternative investment opportunities. Alternative investments are non-conventional financial assets. Stocks, bonds, and cash are common. Private equity, venture money, hedge funds, managed futures, art, antiques, commodities, and derivatives are alternative investments.

With their complicated nature and high degree of risk, most alternative investments are owned by institutional investors or high-net-worth individuals. Compared to mutual funds and exchange-traded funds, many alternative investments have higher minimum investments and fees (ETFs). These investments, on the other hand, don't have as much chance to publicise their results and attract new investors.

litigation financing

With emergence of alternative investments one opportunity to look forward to, is the legal and debt asset classes. The legal and debt assets hold a high value of ROI and are not affected my external market factors but based on strategic and diligent investing. In India, litigation financing is becoming more popular. People and companies worldwide turn to litigation finance as a well-established sector for help paying for their legal battles. Claims are financed by third-party financiers, who provide the money to the plaintiff so that they may present their arguments in court or before an arbitration panel. The return on investment for the financier is a specified percentage of the monetary relief the claimant obtains due to the legal or settlement procedure.

To understand how these investments work, one needs to know that the outcome of the investment is not based on the dynamic economic environment but is based on the due diligence done by the funder. This due diligence and risk assessment is a multi-level process in which the case's viability is checked based on legal merits, financial potentiality, and operational costs. Once the case fulfils all the pre requisites, it is deemed fit to be funded. Litigation in India is costly, and only institutional investors can afford to invest.

To invite retail investors in investing into such an asset class has emerged LegalPay. Legalpay is an alternative investment platform for retail and institutional investors who want to invest their money in legal and debt assets. The company is involved in third party financing, where it allocates funds in financing commercial litigations and arbitrations cases that are found to be funded and take pre-determined fees on successful litigation.

One other tangent of such asset class is investing in interim finance. It is nothing but a short-term, highly secured loan of six to twelve months issued to enterprises experiencing insolvency and is used to cover urgent operating expenditures, such as payments to professionals, staff, security personnel and so on. Legalpay made its first and highly successful exit from financing Yashomati Hospital which was facing insolvency. Interim finance was provided by Legalpay for bearing the operational costs, which kept things running until the resolution of insolvency. This exit came with the revival of the hospital and high returns for the investors.

Investing in such kind of alternate investments helps in the protection of portfolios. One can protect their investments by diversifying their investment into various alternatives to mitigate the risk of losing money. Third party financing has turned out to be a great success in the European market where funders are not only thriving but competing in maximising their returns. India is on the emerge to observe the potentiality of the legal and debt asset class, what it holds in the future and why it is a great way of investing.


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