AU$24b Litigation Funding Industry drives demand for Sequince Capital

High demand for litigation funding capital in the UK continues to drive results and investor interest in Sequince Capital’s exclusive UK High Yield Income Fund, which targets net annual income returns of 10%.

Sequince Capital’s exclusive wholesale UK High Yield Income Fund deploys secured and insured debt into UK Litigation Funding for PPI claims and targets a net income return to investors of 10% pa, paid quarterly.

• As of August 2020, the total claim book to date for PPI in the UK is estimated to be GBP £38bn (AU$72b).
• Approximately one-third of this claim book was funded via Litigation Funding, which is the primary destination for capital from Sequince Capital’s Exclusive UK High Yield Income Fund; IE – circa GBP £12.7bn (AU24bn)
• Across all law firms in the UK, approximately 200-300,000 PPI claims are being run every month, with that volume expected to be maintained for 9+ years. After which time there are many other systemic occurrences of mis-selling and miscalculation of fees/interest that will sustain this type of litigation and funding for much longer.
• Litigation Funding attracts a premium rate of interest and associated financing fees which in turn allows Sequince Capital to target a high, consistent income return for its investors.
• The demand for litigation funding in the UK exceeds available capital which creates a unique investment opportunity for Sequince Capital investors. 
• Capital preservation mechanisms are built into the underlying investment structure
• There is a low correlation to other typical asset classes like shares, listed property, fixed income bonds or other alternatives; meaning the Fund could serve as an effective diversification and hedging strategy while also throwing off exceptional, regular target income.

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What is PPI and how do we make money?

PPI, which stands for Payment Protection Insurance, was a financial product that was mis-sold by the lenders to their customers who had any loans, credit cards, mortgages, and other types of credit too, like car finance or catalogue accounts. PPI was put in place in the event you could not make the repayments (for example, because you were ill or made redundant, then you could have made a claim with that insurer to cover those repayments)

• The PPI claims saga has been ongoing in the UK since 2008 with a deadline to claim being set in 2019
• Due to PPI being mis-sold by the lender, any customer that was mis-sold could claim back the amount that was paid for PPI.
• Since the deadline to claim mis-sold PPI came to an end in 2019, there has been a new court ruling made in 2020 involving hidden commissions, meaning that even if you were not mis-sold PPI, you can now make a claim because commissions were never disclosed to the customer. This new claim type has been given the ingenious name of PPI 2. This new court ruling has reopened the whole PPI claims market to an even larger audience that was sold PPI, meaning lenders are having to pay out even more money to their customers. This means you could be owed compensation even if you have previously claimed, were declined, or knowingly had PPI on any credit card, loan, or mortgage.
• If there was more litigation funding available in the market, law firms could run even more cases.

Commentary from Jonathan Chadwick – Director – Global Finance Platform (UK Litigation Funding partner) 

“The UK PPI market was a booming market for many years generating £billions worth of claims until the deadline closed in 2019. Since the new court ruling was made in 2020 where a new precedent was set creating PPI 2, the floodgates have opened up even wider allowing more customers to claim all of their money back. Each claim requires funding for the law firm to process the case, in order to receive a settlement from the lender. The more funding that is raised, the more cases that can be processed, providing a great secure return to the investors. The investors are investing in legal cases where a precedent has been set, so there is a very slim risk of any case losing, and even if that happens, we have insured every case for that eventuality to cover any risk.”

Jonathan Chadwick

Director 

Global Finance Platform

Our UK Litigation Funding Partners’ figures over the 6 months to January 2022:

• Their partner law firms have engaged with 45,676 clients who have instructed them to request data from the banks and verify whether they have a claim to make 
• The estimated conversion rate of those engagements into cases that will go to litigation is approximately 20% (circa 9135 cases) 
• The number of cases that can be litigated will increase considerably as funding increases
• The average win rate on those cases that proceed to litigation is >95%
• Even though the win rate is exceptionally high, all cases are fully insured in the event of a loss outcome for further safety and security and to mitigate any potential risk

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