Investing in litigation finance: A growing alternative asset class

Litigation poses a unique challenge for insolvent, distressed or cash-poor claimants—but high-value claims can be among their most valuable assets. Legal finance allows stakeholders to pursue valuable claims that otherwise may have to be abandoned or settled—thus maximizing recoveries for debtors and for creditors. A legal finance provider can monetize claims for companies in reorganization, fund liquidations or litigation trusts, provide capital to law firms or insolvency practitioners to pursue matters taken on risk and finance inter-creditor disputes. Litigation finance has become a common and integral aspect of discussions surrounding corporate restructuring. It enables the financing and monetization of litigation rights, treating them as valuable assets that can unlock the value of estate assets for creditors and shareholders. As a result, litigation finance deals are now recognized as a significant alternative investment asset class, offering relatively high and uncorrelated rates of returns. However, it is important to note that investing in legal finance carries its own set of risks.