Update 1.10.19: This review was written when FLF Litigation Services was known as Fortress Legal Finance. The company changed its name (again) in September 2019. The original review follows.
Fortress Legal Finance offers unregulated bonds paying 7.12% per year for a 3 year term and 11.5% per year for a 5 year term.
Funds raised are used to invest in litigation funding.
Investors in Allansons (an unrelated litigation funding scheme that collapsed earlier this year) have reported being cold-called with an offer to invest in Fortress paying 12% “guaranteed” over a 6 month period.
Who are Fortress Legal Finance?
Fortress Legal Finance was incorporated in 2015 as Robert Dodd Watches Limited. According to its last filed accounts, it was dormant as at 31 December 2017. In November 2017 it was renamed Litigate Aid Limited, and then a month later to Fortress Legal Finance. In February 2018 Andrew Lynch took over as sole director and controlling owner.
Fortress is yet to file accounts as an actively trading company.
Fortress Legal Finance is currently owned 70% by Andrew Lynch and 30% by Berriblue Limited. Berriblue is owned 55% by Andrew Lynch and 45% by Tracey Lynch.
Fortress Legal Finance’s promotions are signed off by First Financial Advisers Limited. Fortress Legal Finance’s Twitter feed states that it obtained Section 21 approval – allowing its bonds to be promoted – in December 2018.
How safe is the investment?
Fortress Legal Finance is promoted by unregulated introducer Michael Beyer as offering “an investment that is unaffected by market conditions, recession or BREXIT.” and “ability to reduce overall portfolio risk”.
The reality is that these are loans to a small start-up company and carry an inherent risk of 100% loss. For the vast majority of investors holding either cash or regulated investments, investing any amount in unregulated bonds certainly does not reduce overall portfolio risk.
Fortress Legal Finance represents that it will have After The Event insurance in place, which covers it in the event that the cases it funds are unsuccessful.
This does not mean that the investment is risk-free. A document on Fortress’ website states that After The Event insurance typically covers 30 – 40% of the total amount spent on a case.
For the investment to succeed, it is not enough for Fortress just to get its money back (let alone 30-40% of it); Fortress needs to be able to consistently generate up to 11.5% from successful cases after all costs (including the costs of any commissions paid to unregulated introducers such as Michael Beyer to source investment).
Should it fail to do so – an inherent risk with lending money to any small startup – investors risk losing up to 100% of their investment.
Should I invest in Fortress Legal Finance?
This blog does not give financial advice. The following are statements of publicly available facts or widely accepted investment principles, not a personalised recommendation. Investors should consult a regulated independent financial adviser if they are in any doubt.
As with any individual loan note to an unlisted micro-cap company, this investment is only suitable for sophisticated and/or high net worth investors who have a substantial existing portfolio and are prepared to risk 100% loss of their money.
Any investment offering returns of up to 11.5% per year is inherently very high risk. As an individual, illiquid security with a risk of total and permanent loss, Fortress Legal Finance’s loan notes are much higher risk than a mainstream diversified stockmarket fund.
Before investing investors should ask themselves:
- How would I feel if the investment defaulted and I lost 100% of my money?
- Do I have a sufficiently large portfolio that the loss of 100% of my investment would not damage me financially?
The investment may be suitable for high net worth and sophisticated investors who will already be well aware of all of the above risks, are looking to invest a small part of their assets in corporate lending, have done sufficient due diligence, and feel that the return on offer is sufficient for the risks involved in lending to a small company.
If you are looking for a “guaranteed” investment, you should not invest in corporate loans with a risk of 100% loss.