A topic that invariably comes up in discussions is the common case of wide dispersion between gross and net returns in commercial litigation finance (this is not typically an issue within consumer litigation finance). It’s a problem that is somewhat unavoidable and somewhat explainable!

In the first article of this two-part series, I provided an overview of some of the issues related to duration in the litigation finance asset class. In this article, I discuss some of the ways in which investors can manage duration risk, both before they invest and after they have invested.

When you are speaking to an institutional investor about litigation, it doesn’t take long until the concept of “duration risk” enters the discussion. Everyone seems to have a story about that one piece of patent litigation or commercial dispute that went on for over a decade that seems to have marked them for life even though they weren’t in any way involved.

In Part 1 of this article, I introduced the concept of Event Driven Litigation Centric (EDLC) investing and started exploring some of the ways in which it differs from Commercial Litigation Finance (CLF) investing. In this article we will dive deeper into some case studies and discuss some of the relative benefits and the return attributes of the asset class.

As I interface with investors and fund managers in the legal finance market, I am constantly on the lookout for new investing strategies that can either provide a better risk-reward outcome than traditional legal finance investments, or add an element of ‘edge’.

In part one of this two-part series, we explored the importance of partnerships and we started to discuss elements of portfolio construction.  In part two, we further delve into portfolio construction issues and then discuss the appropriateness of utilizing debt within the context of commercial litigation finance.

A number of years have passed since the commercial litigation finance industry was established in the UK, USA & Australia (the more mature markets of the global industry), and so I thought it appropriate to reflect on some of the lessons learned within the industry to extract insights both for investors and fund managers.

In part 1 of this article I explored some of the basic concepts of secondary investing, specifically in the context of the commercial litigation finance asset class. This article continues the discussion and explores some of the unique aspects and characteristic of the ‘tail’ of a litigation finance portfolio, why now is a particularly good time for secondary transactions and other investment considerations with respect to secondary investing.

In my discussions with litigation finance institutional investors, the topic of secondary investments has been raised a number of times by those who understand the economics of the asset class and are seeking to take advantage of some of the longer duration cases and portfolios in existence. In this article, I explore why there is interest in the secondary market, why now, and how best to approach investing in secondary investments, as well as some watch-outs.

In the first part of this two-part series, the relatively nascent asset class of Intellectual Property Private Credit (“IP Credit”) was introduced. That article explored the basic premise of the asset class, discussed some of the financiers in the space and reviewed some of the nuances inherent in the asset class. In this part, we take all of the knowledge gained in part one and apply it to a specific example by exploring a publicly traded company, which used IP Credit on a couple of different occasions with great success.

One of the areas in which I am intrigued, is the application of credit to intellectual property (“IP”) and using the value of patents (amongst other forms of intellectual property) as security for the loan, the so-called Intellectual Property Private Credit (“IP Credit”) asset class. While this is strictly speaking a credit asset class as you will see from this article, it sits adjacent to and sometimes crosses over with commercial litigation finance.

In the past, I have written about the importance of diversification, the applicability of portfolio theory (articles one, two & three), and the perils of fund concentration; but I also believe that investors in the asset class should understand the perils of relying on outliers to drive fund performance.

I recently moderated Litigation Finance Journal’s digital conference entitled Investor Insights into Litigation Funding, and the panelists delivered a clear message that the asset class needs to be more transparent.  Accordingly, I decided to pen this article to explore the more opaque aspects of the asset class and the reasons underlying that opacity, and what this means for investors, as well as provide some “watch-outs” for those looking to invest in the industry. 

In Part 1 of this two-part series, I compared litigation finance to private equity (i.e. leveraged buy-out) and the deployment problem endemic to litigation finance and the impact it has on the effective cost of management fees. In Part 2, I drill deeper into the operating costs inherent in running a litigation finance strategy.

In Part 1 of this two-part series, I compared litigation finance to private equity (i.e. leveraged buy-out) and the deployment problem endemic to litigation finance and the impact it has on the effective cost of management fees. In Part 2, I drill deeper into the operating costs inherent in running a litigation finance strategy.

Any fund operating model needs to be designed taking into consideration all of the operating costs inherent in the manager’s operational model in the context of expected returns and timing thereof.

Over the past few years, I have noticed a distinct change in the appetite of litigation funders when it comes to getting involved in patent litigations. It used to be the case that patent litigation was viewed negatively by the litigation funding community…

In the capital markets industry, there is a concept referred to as “edge”, which can be defined as any legal form of information, insight or proprietary process or knowledge which an investor possesses that allows him or her to outperform peers and generate alpha.

The Covid-19 pandemic is forcing many industries to adapt to new realities. The litigation finance industry is no different. As new realities emerge, so do new opportunities, and as the dust settles, we anticipate certain developments

As with any new industry, there is much risk and trepidation with respect to whether (i) the concept will work, (ii) the concept will be profitable, (iii) the concept will be scalable and (iv) the concept will attract investment support. Oh, and in the case of litigation finance, (v) whether the concept is in fact legal.

As Covid-19 has taken the planet and the legal community by surprise, I think there are some lessons learned from private equity that can be applied to litigation finance. In short, focus on cash – its collection, generation, distribution and availability.

From the first time I was introduced to litigation finance, be it consumer or commercial, I was quite surprised by the case studies.  What surprised me was not the outcome or the quantum of damages or the amount of profit being made by lawyers or litigation funders.

The interesting aspect of Indemnities is in trying to estimate the returns inherent in providing the protection.  Different than most traditional litigation finance which requires the funder to finance hard costs …