So, what is litigation finance and why is it gaining momentum today?
In a world where the financial markets are crumbling, inflation is rising and a recession is looming, resorting to uncorrelated alternative investments is rising in popularity.
Quite unheard of until today, litigation finance fits the bill.
Litigation finance, otherwise referred to as litigation funding or third-party funding (“TPF”) is when a third-party that is not involved in a dispute pays for all or part of the costs of a party to the dispute in exchange for an agreed return. This form of financing is often non-recourse, meaning that the funder bears all the risk if the case is lost. On the other hand, if the case is won, the funder obtains an important part of the damages that are awarded (on average about 30% or 4x the funder’s investment).
Usually structured as close-ended private-equity type funds, litigation funds invest their capital in single-case funding, portfolio funding, or law firm lending. The duration of the fund and the returns will depend on the specific strategy that is chosen by the funder. Fund durations can vary from 3 to 10 years, with some very few funds being open-ended with a certain liquidity. Returns are in the double-digits.
Over the next couple of months, we will be posting a series of articles on a variety of topics relating to litigation finance. Notably, we will touch upon: the rationale and benefits of litigation funding, the different forms of litigation funding, litigation funding and ESG, the state of the litigation funding market, etc.
Interested in litigation funds? Do not hesitate to contact us at Blue Lakes Advisors
11.01.2023
Laureen Moret,
Litigation Finance Specialist, Lawyer, LL.M.
Galerie Jean-Malbuisson 15
1204 Geneva M +41 79 659 15 95
Switzerland F +41 22 552 09 26
laureen.moret@bluelakesadvisors.com