Investing in legal finance, and private credit as an asset class, involves three main risks:
Default Risk
This occurs if the borrower, Fenchurch Legal, is unable to repay its loan due to case outcomes or financial instability. To mitigate this, Fenchurch Legal issues senior loans, ensuring they are first in line for repayment if a law firm faces trouble. All loans are secured by the underlying legal cases and director guarantees from the borrowing law firms. Additionally, Fenchurch Legal mandates After-the-Event (ATE) insurance, which covers all disbursements and fully reimburses Fenchurch Legal in the event of an unsuccessful case. By diversifying across numerous firms and cases, the impact of a single default is further reduced.
Liquidity Risk
Since ALFI tokens are not traded on a public market, there is a risk that your 14-day redemption notice may not be approved, potentially locking up your investment for longer than expected. Altify mitigates this by closely managing the issuance of ALFI tokens, ensuring new tokens are only created with matching demand. This allows Altify’s investment team to monitor and meet liquidity reserve requirements effectively.
Insolvency Risk
If Altify were to close, there is a risk since ALFI tokens are a liability on Altify’s balance sheet. However, this is mitigated by fully segregating client and operational capital, and by maintaining a 1:1 ratio of ALFI tokens to Fenchurch Legal bonds on the balance sheet. In the event of a closure, the corresponding bonds would be transferred to ALFI token holders on a 1:1 USD basis.
Additionally, the ALFI tokens are digital asset securities. Every investment in such financial instruments, whether tokenised or non-tokenised, is associated with certain risks, such as - but not limited to - risks inherent to regulatory changes, taxation risks, investment-specific risks, market risks, insolvency risks. Risks may arise individually or cumulatively, and, in the worst case, the investor may lose the entire value of their investments. Please consult your investment advisor before making any investment decisions. It's important to carefully assess your risk tolerance and fully understand the potential consequences of investing in digital asset securities like ALFI tokens. Altify does not provide financial advice, and all investors are encouraged to seek professional guidance tailored to their individual financial situations before proceeding with any investment.
Please refer to our Private Credit Risk Disclosures as well as our General Risk Disclosures.