Litigation Funding Matures as an Industry

The litigation funding landscape is expanding to accommodate an ever-increasing number of players. Increased regulation, professional organizations, and a push for standardized funding agreements indicate a maturing industry that’s become an integral part of the legal world.

Law Gazette details how capital is rushing into litigation funding. This has prompted funders to become more proactive in instigating new litigation—class action cases in particular. Funders are in stiff competition with each other for valuable claimant groups and actions against deep pockets.

Legal funding is an attractive investment due to its reputation for high payouts and a lack of correlation with larger economic conditions. Investment funds that once focused on real estate or other more tangible investments are now moving their money to legal funding. Augusta Ventures raised GBP 250 million in its new fund—and now has assets under management totaling GBP 585 million.

Opt-out class action regimes are a key factor in many funded collective cases. A case with millions of potential claimants can be represented by a single individual. Claimants and funders form a symbiotic relationship—this according to Neil Purslow, CIO of Therium Capital Management.

Still, collective actions are expensive, often complex, and take years to reach a conclusion. If successful, they can mean a big payday for funders, and justice for those impacted. If not, losses to funders and investors can be significant.

Addleshaw Goddard partner Richard Wise explains a new tactic picking up steam among funders. It regards issues-based cases and involves highlighting a legal trend and then seeking out clients who are impacted by it. This could be an investor action related to share prices, environmental or sustainability issues, or other ESG matters.