Case in point

“Even the intelligent investor is going to need considerable willpower to keep from following the crowd.” Ben Graham

We always believed that there are substantial growth opportunities in litigation finance regardless of what everyone else is doing.

Not too long ago, we shared a blog on the increased interest in litigation finance, mainly because of its countercyclical nature. Not only is the asset uncorrelated to the stock market and the factors which affect it, but times of financial stress tend to cause a spike in legal cases as companies use litigation to recover potential losses they may have suffered. This is excellent news for those investigating and investing in litigation finance.

The increasing availability of third-party litigation funders allows more companies and individuals to pursue litigation to recover losses suffered during financial crises, especially after the global lockdowns in 2020 and 2021.

It’s important when investing, to know what you’re investing in. Litigation finance has a strong and growing track record, and despite its relatively young age, the global market for litigation finance is already large and growing fast.

Cases involving up to nine-figure sums often contribute materially to the generation of such impressive growth. For example, IMF Bentham staked roughly $25 million into covering the costs of a class action lawsuit on behalf of 6,800 plaintiffs seeking damages over the failure of the Wivenhoe dams, which caused the Brisbane floods in 2011. At the time, after the judge presiding over the case ruled in favour of the plaintiffs, IMF Bentham forecasted returns of $100-$130 million against their investment.

However, estimating the litigation finance market’s size has always been challenging, given the privacy surrounding many cases and the different methods of valuing the market across different territories. A 2018 report by Absolute Market Insights valued the global market at $10.9 billion and forecasted an annual growth rate of 8.3% to take the market to $22,3 billion by 2027.

The report was even published in February 2020, before the full extent of the COVID-19 pandemic had caused global markets to crash in March, and it makes a case of reiterating that litigation finance “may be inversely correlated to financial markets, as litigations may increase in recession time due to the high number of insolvencies”.

What is clear, though, is the wealth of investment opportunities as one of the best short-term, high-yield investments that exist within the sector.

To learn more about how you can benefit from diversified investments and the current boom in litigation finance, please feel free to get in touch with our team to discuss your requirements.