UK litigation finance firms see assets rise to £1.9bn
UK litigation finance firms increased assets to £1.9bn ($2.4bn) during 2019, up 46% from 2018's figures. Litigation finance firms pay the costs of legal claims in exchange for a share of awarded damages in the event a case is successful. Private equity, hedge funds and family offices are among those starting to invest more heavily in the asset class.
UK litigation funders boost assets to £1.9bn

UK litigation funders increased assets to £1.9bn in 2019, an increase of 46 per cent on the previous year.

Analysis of the balance sheets of the UK’s top 15 litigation funders by law firm RPC found a jump in asset value from £1.3bn in 2017-18 to £1.9bn last year.

Assets held by litigation funders have increased 400 per cent over five years from £378m in 2014-15.

Litigation funders pay the costs of legal claims in exchange for a share of any damages awarded.

Growth in litigation funding comes as private equity, hedge funds and family offices have invested more heavily in the asset class.

A key attraction is that returns from litigation funding are uncorrelated with mainstream assets, such as equities or bonds, which helps to diversify portfolios.

Geraldine Elliott, partner at RPC, said: “There is growing recognition amongst businesses of the benefits of partnering with a litigation funder. Funding deals allow claimants to pursue a claim with limited financial downside.

“But the growing amount of capital litigation funders now have to deploy means they are running out of more obvious cases to fund.

“As a result, they are interested in kick starting cases from scratch.

“This can involve funders looking for a potential group action that they get off the ground, using heavy publicising of that case in order to gather more claimants.”

Last year London litigation funder Augusta Ventures set up a team to focus on consumer class actions.

Litigation funders are also focusing heavily on follow on damages claims after companies have breached competition law or data protection rules.

Elliott said: “Litigation funders have plenty of new firepower, but many suffer the same problem – not enough cases to finance.

“In order to satisfy that demand for cases, litigation funders and law firms are now looking at areas where large financial damages can be shown to have been caused by the wrongful actions of deep-pocketed corporates – such as price fixing by a cartel.

“For corporates who might face these claims, this is an innovation they need to bear in mind.”