Divorce fund taps into UK marriage crises

Novitas has launched a Divorce Litigation fund which aims to “cover the rising costs of divorce” in an environment where traditional bank lending is still hard to come by.

The idea is that the fund offers a valuable alternative lending source for people struggling to find the cash for legal fees and other costs associated with divorce. For those with a spare £20,000 to meet the minimum investment level, the fund promises an annual return of 8% to investors. 

Novitas says the number of divorces in the UK is on the rise, with 120,000 in 2010, a 5% increase on the previous year. The total size of the divorce lending market in the UK is an estimated £100m a year, while the cost of legal fees in London especially are huge – Novitas estimates £40,000 per side compared to £13,000 outside the capital.

“The reduction in banking credit, coupled with the government cut-backs to legal aid, means people seeking a divorce can face a hefty financial burden. We are aiming to provide an alternative lending source to help divorcing couples,” said fund manager Jason Reeve.

“People who do not have sufficient cash to meet the legal costs of divorce often find themselves needing to borrow money to pay their solicitor. It is all about cashflow ahead of the division of the matrimonial assets.”

The group said since the fund issued its first loan in 2011, it has lent several million pounds, and has no defaults on its current loan book.

The divorce fund joins the ranks of a range of depressing investment ideas, such as traded life policies or ‘death bonds’; vice funds investing in weapons and tobacco; or catastrophe bonds which allow investors to make money from natural disasters. Inventive these concepts may be, but heart-warming they are not.

However, this latest offering from Novitas is a helpful reminder to follow the celebrities and get a pre-nup before you walk down the aisle to prevent costly legal wrangling in the event love’s young dream is not all it seems.

 

This article was first published on Investment Week

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