After gaining considerable steam during the economic crisis of 2008, the Litigation Finance industry has only increased in popularity since. Predictions suggest that by 2027, the litigation funding sector will be worth more than double what it is now.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
After gaining considerable steam during the economic crisis of 2008, the Litigation Finance industry has only increased in popularity since. Predictions suggest that by 2027, the litigation funding sector will be worth more than double what it is now.
The Edge Markets explains that lit fin is an attractive option for investors for a few key reasons. First, litigation funding doesn’t correlate with the rest of the market. Individual claims may vary in value—particularly when a defendant’s net worth drops drastically. Litigation funding also has a slower investment cycle, since cases can take years to resolve. At the same time, when funders become involved with cases after specific milestones are met, the time between investment and payout becomes much shorter.
Jay Greenberg of LexShares details that unlike other alternative asset classes, Litigation Finance has a clear resolution and ending. Cases eventually reach a resolution that typically comes down to a clear win or loss.
Litigation funding is generally considered a risky venture—especially if the funding is for a single case or class action. Investing in a litigation portfolio may mitigate this risk, but also limits potential rewards. Funders, by law and ethical standards, do not have a say in decision making in the cases they fund. That means a client may decide to accept a lowball settlement, leaving funders eligible to receive less than they put in.
A trend toward funding for smaller and mid-size cases can also lead to less risk for investors. If this continues, investors may find opportunities to make less risky lit fin investments that still increase access to justice for those who need it most.
