Litigation Capital Management Limited (AIM:LIT), a leading international provider of litigation financing solutions, is pleased to announce the first close of a new third party fund of up to US$150 million, LCM Global Alternative Returns Fund (the Fund). In accordance with the Company’s strategy and as previously communicated to the market, the close of this Fund marks LCM’s return to managing third-party funds, following the building of a permanent source of balance sheet capital through the equity markets.
Managed by LCM, the Fund will supplement the deployment of capital from LCM’s own balance sheet, significantly increasing its ability to invest in new opportunities in line with its stated strategy. The Fund will target global dispute finance investments including both single disputes and corporate portfolio transactions, further detail on the investment pipeline is set out below.
Fund participants
- The Fund’s cornerstone investors include firstly the large endowment of a US University and secondly, the asset management division of a large global investment bank. Both have extensive experience of investing in the litigation finance asset class and entrenched rights to participate in future funds raised by LCM, demonstrating their commitment to LCM and also to the asset class more widely.
- Three further participants in the Fund include: a further US-based university endowment, a Swiss-based fund manager specialising in investing in litigation finance and a substantial European family office with significant investment experience in litigation finance.
Structure
- The Fund will co-invest with investments from LCM’s balance sheet on a 75:25 basis
- LCM’s balance sheet contribution (25%) will be invested and advanced on a monthly basis over the term of each investment, no upfront contribution will be required
- Performance fees will be payable to LCM as fund manager on the basis of a deal by deal waterfall
- In addition to receiving its 25% share of any profit from each investment from its co-investment, for the provision of its management services LCM will also receive:
– 25% of profit on each Fund investment as and when it matures over a soft return hurdle (full catch up) of 8%; and
– an outperformance return of 35% for all Fund returns over an IRR of 20%.
- The Fund has a term of six years including an inception period of two years during which investments can be entered into (the Inception Period)
The Fund as at first close has raised US$140 million, leaving a balance of up to US$10 million to be raised in due course. The decision to hold a first close of the Fund before all commitments were ready to be made, was driven by a strong pipeline of quality investment opportunities with which the Fund could be seeded. The Fund will be seeded with nine single-case investments which include international arbitrations, class actions, commercial litigation and investor state treaty claims. These investments are not being seeded from LCM’s existing balance sheet portfolio which it will continue to manage. The total capital commitment of the seeded investments amounts to approximately US$33 million representing a total commitment of 22% of the Fund upon inception. LCM is confident that the Fund will be fully committed comfortably inside the two-year Inception Period.
Patrick Moloney, CEO of LCM, commented: “The entry into this external fund provides a significant increase to our available capital and a boost to our investment capability, enabling us to broaden and accelerate the expansion of our portfolio with a view to ultimately delivering greater returns for shareholders.
“It also constitutes the first step towards LCM operating a funds management business. Indeed, future funds will be underpinned by the entrenched rights of our cornerstone investors.
“It is testament to our disciplined approach and track record that the Fund attracted such significant international investment in the sector, giving us scope to accept investment from only the very best and most experienced global providers of third-party capital into the asset class.”
Nick Rowles-Davies, Executive Vice-Chairman of LCM, added: “The fact such high-calibre investors have insisted upon entrenched contribution rights in future funds is a very valuable endorsement of LCM’s ability to attract blue chip investment capital on a global scale.
“We are delighted to welcome our new partners and look forward to working closely with them to capitalise on the growing number of attractive opportunities available in the global litigation finance space.”
Further updates with respect to the Fund commitment and its performance will be made as appropriate.
LCM Contact:
Angela Bilbow
Global Head of Communications abilbow@lcmfinance.com
+44 (0)7469 816818
NOTES
Litigation Capital Management (LCM) is a leading international provider of litigation financing solutions. This includes single-case and portfolios across; class actions, commercial claims, claims arising out of insolvency and international arbitration. LCM has an unparalleled track record, driven by effective project selection, active project management and robust risk management.
Headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT.
