LCM raises additional $200 million

Litigation Capital Management has raised US $200 million of its targeted $300 million for its LCM Global Alternative Returns Fund II and brings LCM’s total assets under management to US $450 million. The capital is coming primarily from existing investors, which includes a large endowment of a US University and the asset management division of a large global investment bank.

The Fund II structure is very similar to Fund I and is detailed as follows:

  • Fund II 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 is 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 direct investment from its co-investment, the fund will pay performance fees to LCM as fund manager as follows:
    • 25% of profit on each Fund II 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 II returns which achieve a return over an IRR of 20%
  • Fund II has a term of six years including a commitment period of two years during which investments can be entered into (the Inception Period)
  • Fund II, as with Fund I, will target global dispute finance investments including both single disputes and corporate portfolio transactions.
  • At first close Fund II has raised US$200 million, leaving a balance of up to US$100 million to be raised in the subsequent months. The combination of the pace of committing Fund I, which is currently at 91%, a pipeline of quality investments and strong support from existing investors, meant LCM was well placed to commence the raise of a second fund and complete a first close.

Patrick Moloney, CEO of LCM, commented: “We are very pleased with the progress in terms of commitments for Fund I which have now reached 91%, particularly as this level of commitment has been achieved in markets which have experienced considerable disruption from COVID.

Achieving such a significant first close of Fund II is a major milestone and achievement for LCM. We were delighted at the endorsement from all existing investors in our first fund, who are predominantly participating for increased commitments in our second fund, demonstrating both investor commitment and confidence in LCMs attractive investment proposition. The first close of Fund II enables LCM to accelerate its growth strategy and provides us with increased flexibility of capital to allocate into markets which are very conducive to the litigation finance industry.”

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LCM investment yields 195% IRR

LCM has announced the delivery of an award in favour of the funded party in an international arbitration, under the LCIA (London Court of International Arbitration) rules. The arbitration, seated in London and brought under the rules of the LCIA was for the determination of a construction dispute relating to a development in the Middle East. The investment forms part of LCM’s Direct Investment Portfolio and was 100% funded from the company’s balance sheet. The investment produced approximately £9.8 million in revenue and produced a 255% ROIC and a 195% IRR. The life of the investment was 26 months.

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