Rising economic pressures, slow-moving cases, and regulatory uncertainty have pushed litigation funders to adopt more cautious strategies this year. Sources across the industry report a clear shift away from high-risk, single-case investments toward safer portfolio deals and credit-style opportunities.<\/p>\n\n\n\n
A tight macroeconomic environment, regulatory uncertainty and investments running far longer than expected drove a shift in risk calculus among litigation funders this year.<\/p>\n\n\n\n
Funders, lawyers, brokers and insurance professionals told us litigation finance firms have adopted a more conservative investment strategy, turning away from high-risk single-case investments to relatively safer portfolio deals and credit-like opportunities.<\/p>\n\n\n\n\n\n
Several interviewees pointed to a tricky macroeconomic environment as a key reason as to why funders were less likely to take risky bets. \u201cThere is less liquidity,\u201d said one source in the UK; \u201cfunders have less money to invest, as a general rule, which has meant that doing good deals is harder.\u201d<\/p>\n\n\n\n
Raising external capital was said to be particularly challenging. There was the sense among some that potential backers were retreating from litigation finance: \u201cBecause of wider macroeconomic conditions, there is so much instability. Litigation funding is still very niche and it\u2019s risky [\u2026] there has been a bit of challenge in the past year to get large cases funded because there isn\u2019t a huge amount of dry powder.\u201d<\/p>\n\n\n\n
Macroeconomic conditions were compounded by the length of time cases, particularly large group actions, have been taking to progress through courts. \u201cCases are taking a lot longer to resolve than expected, which impacts the pricing model for funders and insurers,\u201d noted one broker.<\/p>\n\n\n\n
One funder, commenting on the Dutch collective action regime, elaborates: \u201cThe cases are taking a long, long time [\u2026] there are still a lot of unresolved issues.\u201d Another was even more pointed: \u201clegal proceedings in the Netherlands take forever.\u201d<\/p>\n\n\n\n
Similarly in the UK, the slow progress of cases through the Competition Appeal Tribunal (CAT) raised anxieties among those who had heavily invested in these claims. Funders could find little reassurance in the outcome of the first case certified under the UK\u2019s collective action regime. Merricks v. Mastercard, <\/em>funded by Innsworth, ended eight years after it was first filed. The case\u2019s \u00a3200 million settlement a far cry from the \u00a314 billion quoted as the original value of the claim, leading to a public war of words between funder, litigation counsel and class representative.[1]<\/sup><\/a><\/p>\n\n\n\n Regulatory uncertainly was another key factor adding to funders\u2019 hesitancy. In the UK, the fallout from the PACCAR<\/em> Supreme Court decision was still being felt keenly.[2]<\/sup><\/a> \u201cEveryone is still waiting for PACCAR<\/em> to be sorted out\u201d before making any more big bets, said one source. The delayed publication of the Civil Justice Council\u2019s (CJC) review of litigation funding added to the sense of unease. \u201cBetween the [CJC] review and various appeals,\u201d said another interviewee, \u201cthere is a lot of uncertainty between what is and isn’t permissible.\u201d<\/p>\n\n\n\n [1]<\/sup><\/a> https:\/\/www.lawgazette.co.uk\/news\/funder-to-challenge-premature-mastercard-case-settlement\/5121721.article<\/p>\n\n\n\n [2]<\/sup><\/a> https:\/\/www.lawgazette.co.uk\/practice-points\/why-paccar-is-a-catastrophic-decision\/5117468.article<\/p>\n\n\n\n To mitigate these risks, we saw many funders shift emphasis away from high risk, potentially high reward single-case opportunities, to relatively lower risk lending more palatable to investors and insurers. Portfolio deals, claim monetisation matters and law firm finance arrangements were three popular strategies employed. <\/p>\n\n\n\n Portfolio deals were the hottest. \u201cEveryone is doing portfolios,\u201d said one funder. Another agreed, noting that cases that would once have been taken on their own were being wrapped up in portfolio deals: \u201cThere is a move toward larger portfolios [\u2026] if there is a single case, it gets pushed into a portfolio.\u201d <\/p>\n\n\n\n Others spoke of monetisation opportunities to be found, particularly for savvy corporates keen to take legal spend off-balance sheet: \u201cAt least 50% of sophisticated companies are looking to use capital to litigate claims they have.\u201d This was a trend noted across all jurisdictions according to another source: \u201clitigation finance is shifting from parties struggling for capital to big monetisations. Fortune 500 companies recognise they can be using litigation finance as a tool like a loan.\u201d <\/p>\n\n\n\n Litigation funders providing direct finance for law firms, an ongoing trend, gathered pace last year. \u201cWhat we have seen is more credit style opportunities,\u201d said one, \u201cfor example, providing facilities to law firms. It is not unusual in a place where interest rates are quite high.\u201d This source also suggested, though, that funders engaging in this kind of lending may find themselves undercut by better-capitalised competitors such as banks and credit funds: \u201cnow that interest rate environment is reducing [\u2026] there will be more opportunities for [law firm] founders where banks offer lower rates.\u201d<\/p>\n\n\n\n In the next article in this series, we will look at these new competitors entering the litigation funding market, and where opportunities are still to be found for specialist funders.<\/p>\n","protected":false},"featured_media":0,"parent":0,"template":"","categories":[],"tags":[],"publication":[],"blocks":[{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Rising economic pressures, slow-moving cases, and regulatory uncertainty have pushed litigation funders to adopt more cautious strategies this year. Sources across the industry report a clear shift away from high-risk, single-case investments toward safer portfolio deals and credit-style opportunities.<\/p>\n","innerContent":["\n Rising economic pressures, slow-moving cases, and regulatory uncertainty have pushed litigation funders to adopt more cautious strategies this year. Sources across the industry report a clear shift away from high-risk, single-case investments toward safer portfolio deals and credit-style opportunities.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n A tight macroeconomic environment, regulatory uncertainty and investments running far longer than expected drove a shift in risk calculus among litigation funders this year.<\/p>\n","innerContent":["\n A tight macroeconomic environment, regulatory uncertainty and investments running far longer than expected drove a shift in risk calculus among litigation funders this year.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Funders, lawyers, brokers and insurance professionals told us litigation finance firms have adopted a more conservative investment strategy, turning away from high-risk single-case investments to relatively safer portfolio deals and credit-like opportunities.<\/p>\n","innerContent":["\n Funders, lawyers, brokers and insurance professionals told us litigation finance firms have adopted a more conservative investment strategy, turning away from high-risk single-case investments to relatively safer portfolio deals and credit-like opportunities.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"lazyblock\/chambers-header","attrs":{"header":"Reasons for conservatism","headerLevel":"3","blockId":"2np4xN","blockUniqueClass":"lazyblock-chambers-header-2np4xN"},"innerBlocks":[],"innerHTML":"","innerContent":[]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Several interviewees pointed to a tricky macroeconomic environment as a key reason as to why funders were less likely to take risky bets. \u201cThere is less liquidity,\u201d said one source in the UK; \u201cfunders have less money to invest, as a general rule, which has meant that doing good deals is harder.\u201d<\/p>\n","innerContent":["\n Several interviewees pointed to a tricky macroeconomic environment as a key reason as to why funders were less likely to take risky bets. \u201cThere is less liquidity,\u201d said one source in the UK; \u201cfunders have less money to invest, as a general rule, which has meant that doing good deals is harder.\u201d<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Raising external capital was said to be particularly challenging. There was the sense among some that potential backers were retreating from litigation finance: \u201cBecause of wider macroeconomic conditions, there is so much instability. Litigation funding is still very niche and it\u2019s risky [\u2026] there has been a bit of challenge in the past year to get large cases funded because there isn\u2019t a huge amount of dry powder.\u201d<\/p>\n","innerContent":["\n Raising external capital was said to be particularly challenging. There was the sense among some that potential backers were retreating from litigation finance: \u201cBecause of wider macroeconomic conditions, there is so much instability. Litigation funding is still very niche and it\u2019s risky [\u2026] there has been a bit of challenge in the past year to get large cases funded because there isn\u2019t a huge amount of dry powder.\u201d<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Macroeconomic conditions were compounded by the length of time cases, particularly large group actions, have been taking to progress through courts. \u201cCases are taking a lot longer to resolve than expected, which impacts the pricing model for funders and insurers,\u201d noted one broker.<\/p>\n","innerContent":["\n Macroeconomic conditions were compounded by the length of time cases, particularly large group actions, have been taking to progress through courts. \u201cCases are taking a lot longer to resolve than expected, which impacts the pricing model for funders and insurers,\u201d noted one broker.<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n One funder, commenting on the Dutch collective action regime, elaborates: \u201cThe cases are taking a long, long time [\u2026] there are still a lot of unresolved issues.\u201d Another was even more pointed: \u201clegal proceedings in the Netherlands take forever.\u201d<\/p>\n","innerContent":["\n One funder, commenting on the Dutch collective action regime, elaborates: \u201cThe cases are taking a long, long time [\u2026] there are still a lot of unresolved issues.\u201d Another was even more pointed: \u201clegal proceedings in the Netherlands take forever.\u201d<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Similarly in the UK, the slow progress of cases through the Competition Appeal Tribunal (CAT) raised anxieties among those who had heavily invested in these claims. Funders could find little reassurance in the outcome of the first case certified under the UK\u2019s collective action regime. Merricks v. Mastercard, <\/em>funded by Innsworth, ended eight years after it was first filed. The case\u2019s \u00a3200 million settlement a far cry from the \u00a314 billion quoted as the original value of the claim, leading to a public war of words between funder, litigation counsel and class representative.[1]<\/sup><\/a><\/p>\n","innerContent":["\n Similarly in the UK, the slow progress of cases through the Competition Appeal Tribunal (CAT) raised anxieties among those who had heavily invested in these claims. Funders could find little reassurance in the outcome of the first case certified under the UK\u2019s collective action regime. Merricks v. Mastercard, <\/em>funded by Innsworth, ended eight years after it was first filed. The case\u2019s \u00a3200 million settlement a far cry from the \u00a314 billion quoted as the original value of the claim, leading to a public war of words between funder, litigation counsel and class representative.[1]<\/sup><\/a><\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n Regulatory uncertainly was another key factor adding to funders\u2019 hesitancy. In the UK, the fallout from the PACCAR<\/em> Supreme Court decision was still being felt keenly.[2]<\/sup><\/a> \u201cEveryone is still waiting for PACCAR<\/em> to be sorted out\u201d before making any more big bets, said one source. The delayed publication of the Civil Justice Council\u2019s (CJC) review of litigation funding added to the sense of unease. \u201cBetween the [CJC] review and various appeals,\u201d said another interviewee, \u201cthere is a lot of uncertainty between what is and isn't permissible.\u201d<\/p>\n","innerContent":["\n Regulatory uncertainly was another key factor adding to funders\u2019 hesitancy. In the UK, the fallout from the PACCAR<\/em> Supreme Court decision was still being felt keenly.[2]<\/sup><\/a> \u201cEveryone is still waiting for PACCAR<\/em> to be sorted out\u201d before making any more big bets, said one source. The delayed publication of the Civil Justice Council\u2019s (CJC) review of litigation funding added to the sense of unease. \u201cBetween the [CJC] review and various appeals,\u201d said another interviewee, \u201cthere is a lot of uncertainty between what is and isn't permissible.\u201d<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/separator","attrs":[],"innerBlocks":[],"innerHTML":"\n [1]<\/sup><\/a> https:\/\/www.lawgazette.co.uk\/news\/funder-to-challenge-premature-mastercard-case-settlement\/5121721.article<\/p>\n","innerContent":["\n [1]<\/sup><\/a> https:\/\/www.lawgazette.co.uk\/news\/funder-to-challenge-premature-mastercard-case-settlement\/5121721.article<\/p>\n"]},{"blockName":null,"attrs":[],"innerBlocks":[],"innerHTML":"\n\n","innerContent":["\n\n"]},{"blockName":"core\/paragraph","attrs":[],"innerBlocks":[],"innerHTML":"\n
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