Changing Investments

I recently found a crowd-sourced lawsuit funding platform called LexShares. LexShares provides corporate litigation finance investments for accredited investors in a variety of products, such as commercial litigation finance, international arbitration, intellectual property, and portfolio financing. Litigation finance is not linked with stock market performance and returns can easily outstrip other investment classes. I see an enormous growth opportunity that I should risk it all and jump in with both feet.

Expected Return

The LexShares team maintains a strong track record in commercial cases with a success rate of little over 90%. The platform posted 32 cases as of April 2017 (102 cases for the underwriting group), and 7 cases reached a finality. The following table shows the investment returns at various success rates.

Success Rate Gross Proceeds Net Proceeds IRR
100% $26,000 $16,000 80%
90% $23,400 $13,400 67%
80% $20,800 $10,800 54%
70% $18,200 $8,200 41%
60% $15,600 $5,600 28%
50% $13,000 $3,000 15%
40% $10,400 $400 2%
30% $7,800 ($2,200) (11%)
  • Projected net return is 80%.
  • The case resolution time is 2 years.

Projections

I will deploy $1m+ capital over the next 3 years. The target IRR is 54% at 80% success rate with the 2-year case resolution time. All profits will be taxed at long-term capital gain rates, and all after-tax returns will be reinvested.

Year New Investment LTCG (After Tax) Reinvestment Current Investments
2017 $400,000 $0 $0 $400,000
2018 $400,000 $0 $0 $800,000
2019 $400,000 $345,600 $745,600 $1,545,600
2020 $0 $345,600 $745,600 $1,891,200
2021 $0 $989,798 $2,135,398 $2,880,998
2022 $0 $644,198 $1,389,798 $3,525,197
2023 $0 $1,844,984 $3,980,383 $5,370,181
2024 $0 $1,200,786 $2,590,584 $6,570,967
2025 $0 $3,439,051 $7,419,433 $10,010,017
2026 $0 $2,238,265 $4,828,849 $12,248,282
  • $400,000 investment per year for 3 years.
  • The target IRR is 54% at 80% success rate.
  • The case resolution time is 2 years.
  • Effective tax rate is 20%
  • All after tax fund will be reinvested.

Final Thoughts

If all goes well, I’ll reach my retirement net worth target of $5m in 5-6 years. IRR may drop over the next few years as the platform loosen case underwriting standards to meet the demand from investors seeking diversification and long-term capital appreciation. Leveraged investing with credit card balance transfers brings higher investment profits. Higher risk equals greater return.