While many industry observers have noted that the current state of the market (inflation, rising interest rates) may result in higher levels of litigation and associated funding activity, there will no doubt be difficulties for funders who struggle to raise capital in this environment.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
While many industry observers have noted that the current state of the market (inflation, rising interest rates) may result in higher levels of litigation and associated funding activity, there will no doubt be difficulties for funders who struggle to raise capital in this environment.
Speaking in an article for Law 360, Edwin Coe’s head of class action and financial litigation, David Greene, discussed the potential impact of the challenging economic circumstances and rise in interest rates on litigation funders. Greene acknowledged that certain funders have come under increasing pressure from the lack of available capital, without which they cannot make new investments to fuel future returns.
Greene highlighted that with interest rates on the rise, alternative investments such as litigation finance may not be perceived in such a favourable light, resulting in funders needing to achieve higher levels of returns on investments to accommodate the increased risk. As a result, Greene suggests that we will continue to see funders take a more selective approach to the cases they invest in, as those with a lower ROI will simply not be able to provide adequate returns to justify the risk of lost capital.
