Claims Bonds – What is the opportunity?
Over the past 7 years or so, third party litigation and claims funding has established itself as an attractive asset class for sophisticated investors looking to diversify their portfolios beyond more traditional financial instruments. By definition, claims funding is the method of purchasing and processing valid legal claims.
Recent investment levels in litigation funding reflect the market’s thrust. Fund raisers in London procured over half a billion pounds sterling in 2015, including £200m by Therium Capital Management, and fund raising into the sector has continued throughout 2016.
A claims bond is one of many ways of accessing this market, and an excellent opportunity for investors. At Centaur we recently launched our own product, the Centaur Claims Bond, which has been designed to be easy for investors to access, with zero volatility and offers a high-yield monthly coupon. The structure is similar to the structure Centaur has used to finance claims management companies via its investment fund since 2012, so it is a space we are very familiar with.
The proceeds of the Centaur Claims Bond are advanced to UK-based claims management companies via secured lending facilities which are then used to finance the claims purchase and processing. The structure is similar to the structure Centaur has used to finance claims management companies via its investment fund since 2012.
Investors that purchase the Centaur Claims Bonds will receive a fixed return ranging from 6.25% to 7.75% per annum for terms ranging from 3 years to 5 years. At the end of the term, investors receive their original investment back. The bond is a non-correlated asset class (which we addressed in our first blog post) and a great way to diversify your investment portfolio away from equity-based assets.