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In for a penny

As a tentative market for funding smaller cases develops,
James Delaney advises lawyers to look for the opportunities and remember that a return is every investor’s goal

8 March 2013

Litigation funding for larger value cases is in good supply at present. Indeed, the prospectuses for any litigation fund in their fundraising stage reveal that the statistics and assumptions applied to their anticipated portfolio relate to large disputes where the funding returns are significant.

However, at the other end of the dispute resolution spectrum capital demand is high but supply is low. Three main reasons account for the shortage. The economics do not fit with the funder’s model. For example, if the damages are worth £4m and the funding requirement is £750,000, a funder charging a 2.5x multiple on their investment (i.e. £1.875m) still leaves the client with just over half their damages. Whereas if the case is valued at £300,000 and the funding requirement is say £100,000, a 2.5x multiple would leave the client with £50,000 which is very little by way of recovery.
The economics would clearly be unac...

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