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Double, Triple (Or Nothing) Your Money With This Offer

4thWay mostly covers opportunities where you can expect to double your money “just” every 8-10 years, when you use a reasonably simple and sensible strategy. (See our 10 Core Guides.)

That’s really good going, considering the level of risk involved. The stock market, which has greater intrinsic risk and higher risk than most 4thWay-reported opportunities, takes 7-10 years, according to The Motley Fool UK, and has taken close to ten years since 1984.

But we do cover the full gamut of risk-reward and one particular provider stands out as the ultra-high reward kind.

AxiaFunder* generally looks for returns that will double your money every three to four years. You do this by financing claimants who are taking legal action and taking a proportion of the awards from the case.

But, for the next 4-5 months, AxiaFunder is offering to fund a special type of case that has prospects even better than that, where you might double your money in two years or even come close to tripling it in three. And that’s after tax.

Before I go on, AxiaFunder is only available to high-net worth individuals or to sophisticated investors. Read more in the AxiaFunder Review.

Funding vehicle owners to get compensation for Dieselgate – for a big pay-off

This is a group legal action against major vehicle manufacturers for their part in Dieselgate, whereby they’re accused of using “defeat devices” to suppress readings of toxic emissions.

In the UK, Volkswagen has apologised more than once for its part in Dieselgate, and settled out of court for £193 million.

There are many thousands of vehicle owners who can make claims, so many of them are bundling up their claims into a single case and fighting as one.

When you fund these particular claims, the results for all of them collectively are more-or-less just binary. You’re likely to either lose all your money or get a very substantial pay-off.

Potentially, you’re looking at around 2.7 times your money if it settles in under two years. I’m no tax specialist, but I think that would be about 2.4 times your money after taxing the 1.7 x gain over your initial stake at the 20% capital-gains tax rate.

That return is after the claimant takes the bulk of the rewards, and after AxiaFunder, the law firms, and other parties, take their cuts.

However, it’s only an estimate based on one scenario, as there are variables that might impact the result and the scale of the award. That is why AxiaFunder* states in its offer documentation that if it takes 42 months your return might be “e.g.” 3.3 times. Take special note of the “e.g.”

One example of how the return could be smaller is if the claimants need to accept a negotiated settlement with a smaller award than the court might set.

If the case is successful, the annualised return (i.e. taking into account not just the size of the return but how long you have to wait for it, so you can actually spend or reinvest) will likely lie between 30% and 90%.

About the prospects of this case

AxiaFunder* provides a huge amount of information about the case in its offer document to you as well as further supporting documents. You’ll also get quarterly reports.

But here’s a brief summary of key points:

Volkswagen paid out £193 million already. Its case was similar in very many respects, but not identical. For example, the defeat devices used are different and the AxiaFunder case is on the way to court, whereas Volkswagen settled pre-trial.

Similar claims have also been settled by several of the same manufacturers in other countries.

The legal counsel gives this good prospects of success.

Two law firms are leading this group action, with support from other firms in a steering committee. One of the two firms in particular specialises closely in this area and also claims to have substantial proven experience in group litigation. Most of their fees are going to be based on successful claims, so they have a lot of skin in the game.

An insurer is also taking part in these claims on a no-win, no fee basis, so it’s tying itself to the results. Its lawyers have assessed these claims and decided prospects are good enough to go ahead.

AxiaFunder* has its own seasoned lead lawyer. It wouldn’t surprise me at all if this one is outside his experience, but his assessment certainly won’t have hurt either.

The defendants are major car manufacturers, so it’s impossible to believe that they won’t be able to pay up. Indeed, many of them have already provisioned to cover the cost of these or other claims, having in many cases paid out elsewhere, and their annual profits are typically many times the likely potential cost of Dieselgate.

Losing more than you put in

With these kinds of cases, there is a slim possibility – based on a series of unfortunate events – where you can end up not just losing your money, but also paying the defendant’s costs on top.

Your main protection from that – other than good prospects for a win – is that an insurer has also had its legal team assess the case, it believes the case is strong, and it’s covering the defence’s costs in the event of a loss in return for a share of the awards at the end.

(I have no sources of information to assess the financial soundness of the insurance company involved, although, even if it was unable to pay out, the claimants could benefit from FSCS cover which in turn protects you. Note that the FSCS is otherwise definitely not going to cover any of your losses through AxiaFunder*.)

You’ll get more information in AxiaFunder’s offer document on the risk of losing more than you put in and how these are minimised. You can also learn something more generally about it in What Are The Risks Facing An Investor In Litigation Funding?

About the disclaimer “A high risk and potentially high return investment.”

Circling back to my opening paragraphs, the statements like “this is a high-risk investment” displayed by the typical, calmer P2P lending that 4thWay covers, as well as the knowledge tests you have to pass, are frankly ludicrous, when you consider that providers of stock-market investments – which on average are riskier, harder and more volatile – aren’t required to put out the same warnings and tests.

Long-term results have shown huge stability that belie the warnings. See P2P Lending Beats The Stock Market, Yet Again, In 2023.

In AxiaFunder’s case, however, its disclaimer of “a high risk and potentially high return investment” is much more reasonable. You can certainly lose all your money on an individual investment and indeed you should expect to do so, some of the time.

How you can contain that risk

Clearly, despite the confidence of a very large collaborating team of solicitors involved here, with the risk not being just a partial loss but full loss of your money, this is not something for you to bet your house on.

My own research correlates with that of AxiaFunder* on success rates when funding legal cases, which is maybe 80%-90%. So they don’t get it right all the time.

While you often get some pretty good downside protection from attached insurance (with some types of cases you even have most of your money reimbursed to you in the event of a loss) the main point is not to pile all your money into one case, so that the big wins more than make up for the losses.

The risks are hugely – hugely – contained if you spread across many different cases. The rewards of successful cases are typically multiples of the amount you put in, so that you can take the hit from some complete losses from time to time. A total loss on one case can often be paid for by just a couple of wins elsewhere.

The point is that even if you’re unlucky and take more than your fair share of cases that fail, you want to expect to still come out with startling returns as a result of diversifying.

How long are you going to wait to find out the result?

You need patience and calm when funding these Dieselgate cases.

The funding being raised here is sufficient to progress these claims to trial. With the first trial date set for autumn next year, it could be over within 18 months. However, a second trial might be needed in late 2026 to decide the amount of any award to claimants, so investors should absolutely be prepared for a longer wait.

Visit AxiaFunder* | Read the AxiaFunder Review.

Independent opinion: 4thWay will help you to identify your options and narrow down your choices. We suggest what you could do, but we won't tell you what to do or where to lend; the decision is yours. We are responsible for the accuracy and quality of the information we provide, but not for any decision you make based on it. The material is for general information and education purposes only.

We are not financial, legal or tax advisors, which means that we don't offer advice or recommendations based on your circumstances and goals.

The opinions expressed are those of the author(s) and not held by 4thWay. 4thWay is not regulated by ESMA or the FCA. All the specialists and researchers who conduct research and write articles for 4thWay are subject to 4thWay's Editorial Code of Practice. For more, please see 4thWay's terms and conditions.

*Commission, fees and impartial research: our service is free to you. 4thWay shows dozens of P2P lending accounts in our accurate comparison tables and we add new ones as they make it through our listing process. We receive compensation from AxiaFunder and other P2P lending companies not mentioned above either when you click through from our website and open accounts with them, or to cover the costs of conducting our calculated stress tests and ratings assessments. We vigorously ensure that this doesn't affect our editorial independence. Read How we earn money fairly with your help.

Sources: The Motley Fool UK on UK equity returns.

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