AxiaFunder is planning to launch a secondary market to boost liquidity and move to a limited partnership investment model.
Cormac Leech (pictured), founder and chief executive of the crowdfunding litigation finance funder, said working through a limited partnership is more tax efficient and has the potential to boost investor returns.
The platform, which has been operating an equity model offering shares to investors in a company set up for cases, will switch to a limited partnership model in a few weeks.
This involves investors buying partnership shares rather than equity to become limited partners.
Leech said the partnership is more tax efficient as the limited partnership company does not pay tax, it passes al the earnings to the investors who pay the tax
He added that because the vehicle is not paying tax it tends to boost the net returns for those investors so the platform will become more relevant for institutional investors.
Leech said going forward only registered investors will be able to see live cases on AxiaFunder and the threshold to qualify and pass the test before investing will be slightly higher.
Read more: AxiaFunder launches first international case
“Instead of issuing shares to investors we will start issuing partnership shares in a limited partnership,” said Leech.
“It’s more like equity but is fundamentally a different structure. What you really care about is which structure results in less tax paid and the partnership results in less tax paid in most circumstances.
“It will be a lot more tax efficient for more investors which will drive higher after-tax returns.
“The key thing to focus on is that if it’s tax transparent then it makes our product a lot more interesting to offshore investors, family offices and institutional investors as they are very sensitive to tax.
“Investors should be aware that investments on the AxiaFunder platform are high risk in nature, they can lose their invested capital and returns are not guaranteed. Investment are also not covered by the Financial Services Compensation Scheme.”
Following a soft launch, AxiaFunder plans on introducing a secondary market by the end of this week and will make many of its existing cases eligible for it over the coming months.