The director believes an investment in the Fund may be subject to a number of risks. Before making an investment decision prospective investor should carefully consider all of the information set out in this Information Memorandum and the risks attaching to an investment in to the Fund and in particular the risks described below.
Additional risks and uncertainty that are not presently known to the director or which the director currently deems immaterial may also have an adverse effect upon the Company. Moreover, the list below may not be exhaustive.
Prospective investors should carefully consider whether investment in the Fund is suitable for them in the light of information in this Investment Memorandum and their personal circumstances.
Fortress Legal Finance Limited, its affiliates and subsidiaries (if any from time-to-time) are exposed to operational risk. Operational risk is the risk of losses that may arise as a result of system international law, inefficiencies, breakdown in interaction between internal and external processes, human error or the effect of any external negative factor. There can be no assurance that the Company will be able to prevent operational risks materialising, or mitigate the damage caused should such operational risks materialise.
The director considers that the Company will have adequate working capital to implement its current business plan for twelve months from the date of this Information Memorandum. However, the operational performance of the Company may require more working capital than is envisaged. There can be no assurance that the Company will have sufficient financial resources or be able to raise further capital on acceptable terms.
Reliance on Key Staff
The continued success of the Company will depend in large part upon the skill and expertise of the Company’s director and senior management. There is no assurance that the principals or other key members of that management will continue to be employed for any period. In the event of the death, disability or departure of any of such individuals, the business and the performance of the Company may be adversely affected.
Liquidity and Rights of Redemption
Unitholders will not be able to redeem any funds until the five-year fixed period. Redemptions will only be available after the five-year period. Early redemptions after year three are subject to the discretion of the manager. The Manager reserves the right to suspend or limit the rights of Unitholders to redeem all or part of their Units and/or receive all or part of their redemption payments with respect to redemption notices previously submitted at any time in the Manager’s sole discretion. In addition, the Fund may also withhold a portion or all of any proceeds of redemption if necessary, to comply with applicable legal, tax or regulatory requirements.
Current Market for Transactions
The business of identifying and structuring litigation investment involves a degree of uncertainty. There is no assurance that the Fund will be able to invest all of its committed capital or that suitable investment opportunities will be identified which satisfy the Fund’s investment objectives.
Lack of Liquidity of Investments
The Manager will endeavour to hold up to 15 per cent of the Net Asset Value of the Fund in cash and/or liquid investments to meet redemptions. However, Unitholders should note that there may be circumstances where the Manager will be unable to hold sufficient cash to meet redemption proceeds or where the Manager is unable to liquidate investments of the Fund in an orderly manner, in order to enable the Fund to pay any redemption proceeds, in which case the Fund may take longer than the time periods disclosed herein to effect settlements of redemptions; in addition, Unitholders may not be able to redeem all or any of the Units.
The Litigation cases will be illiquid. It may take considerable time to dispose or complete Litigation investments.
Lack of Geographical Diversification
The Fund will only invest in UK Litigation cases. This is a concentrated geographical sector and market and therefore the success of the Fund is directly dependent on the state of the UK Litigation market which may undergo its own unique market cycles independent of other litigation markets.
No Secondary Market for Interests
There is expected to be a limited secondary market in the Units outside of the ability of Unitholders to redeem their Units in accordance with the procedure set out under the section headed “Redemption”
Use of Side Letters and Modification of Terms
The Manager may in its absolute discretion agree with any introducer/intermediary and/or existing and/or potential investor in the Fund to waive or modify the application of any of the terms described herein or in any document governing such investor’s investment in the Fund or to grant to such investor additional rights and/or access to more information than is granted, or provided, to other investors. The Fund may be subject to increases in operating and other expenses.
The Fund’s operating and other expenses could increase without a corresponding increase in turnover or reimbursements of operating and other costs. Factors which could increase operating and other expenses include:
(a) increases in the rate of inflation and currency fluctuation;
(b) increases in taxes and other statutory charges;
(c) changes in laws, regulations or government policies (including those relating to health and safety and environmental compliance) which increase the costs of compliance with such laws, regulations or policies;
(d) increases in insurance premiums;
(e) unforeseen increases in the costs to the Fund of maintaining cases; and unforeseen capital expenditure may arise as a result of defects affecting the cases which need to be funded, failure to perform by contractors or increases in operating costs.
Manager & Advisors
The success of the Fund will be dependent on the performance of the Manager and its advisers. No assurance can be given that they will succeed in meeting the Fund’s investment objective or that their assessments of the short-term or long-term prospects, volatility and correlation of the types of investments referred to in this document will prove accurate.
After the Event Insurance Policy (ATE).
Every individual case within the fund will benefit from an after the event insurance policy. We work closely with Quantum Legal Costs Cover and JLT Specialty. Before any insurance policies are underwritten our providers will conduct a very detailed analysis and review of each case. Whilst the scope of coverage provided by this form of Insurance is wide, this insurance will always provide indemnification for any adverse cost awards as made by the Court in favour of any Defendant. The main policy sought will provide coverage for Fortress Legal Finance legal costs and other disbursements (such as Expert’s and so on) directly connected with the Litigation process of every case itself. Typically, this sort of policy will provide coverage of a minimum of 30-40% dependent on the merits of each case. In the event that any case receives an unfavourable judgement all funds recovered from the ATE insurance will be reinvested within the Fortress Legal Finance Fund.