Taurus Capital CEO unpacks litigation funding & opportunities in Africa

Litigation funding, an alternative asset class in South Africa, is gaining traction among investors seeking non-correlated opportunities with the potential for high returns. Taurus Capital, a legal finance firm, is at the forefront of this emerging trend, providing non-recourse funding to individuals looking to pursue meritorious litigation against entities like listed companies or government institutions. Elad Smadja, the CEO of Taurus Capital, sheds light on this unique investment vehicle that offers investors a chance to participate in large commercial claims while sharing a percentage of the successful claim. The nature of litigation funding is inherently risky, with the possibility of either a significant payoff or a total loss. To mitigate this risk, Taurus Capital conducts thorough due diligence, both legally and financially, to ensure the viability of the claims they choose to fund. By pooling investments into a fund structure, Taurus Capital aims to spread the risk across multiple claims, increasing the likelihood of overall positive returns for investors. While the potential for high returns is enticing, Smadja emphasizes that litigation funding is not suitable for all investors. This investment avenue is tailored for high-net-worth individuals and institutional investors with a higher risk appetite and a mandate to explore alternative, non-correlated assets. Unlike traditional investments that rely on underlying economic conditions, litigation funding is driven by legal intricacies and the merits of individual claims, offering a unique source of alpha. When compared to traditional assets like stocks, bonds, and commodities, litigation funding stands out for its non-correlated nature, making it a valuable addition to a diversified investment portfolio. Despite the lengthy timelines associated with large-scale litigation, Smadja notes that legal claims eventually reach a conclusion, providing investors with a definite endpoint, unlike other investment vehicles like private equity that require exit strategies. Investors in litigation funding can expect to benchmark their returns against a hurdle rate of 15% and target multiple returns on their investment. While the time horizons for these investments can be extended, requiring patience and long-term commitment, the potential for substantial gains makes it a compelling option for those willing to venture into this nascent investment frontier.