A multi-billion-dollarindustry, lawfirm funding has experienced substantial growth in recent years. As aresult, people looking for alternative investment options are increasinglyturning to law firmfunding. Law firm funding offers the potential for high yields and shorter,more defined time to liquidity than traditional investment options. Funds comprisedof legal cases are a highly attractive investment opportunity for those seekinghigh returns and a relatively short period for the commitment of capital.
Law firms havetheir reasonsfor turning to law firm funding rather than traditional forms of financing,and investors encounter many of the same considerations when deciding to investin alternative investment options. When deciding how to grow their money,investors consider interest rates, banking regulations, legislation, and data analytics.But the bottom line for investors is the same: what is the risk versus thereward. With law firm funding, the reward can be very rewarding indeed.
Flexibility in Investing in Law Firm Funding
Choosing investmentsrequires consideration of the investor’s need for flexibility. In recent years,a growing number of investors have found that alternativeinvestment options like law firm funding provide the flexibility they seek.
Law firmfunding offers flexibility in the size of the investment. As equities,investors can choose to invest a little or a lot.
Investors arealso showing more interest in impact investing. A law firm funding investmentcan support a particular area of law, a particular type of client, or both. Whilelaw firm funding has tended toward large and commercial litigation for the lastcouple of decades, today law firm funding investment opportunities includecases in a variety of practice areas:
- Commerciallitigation funding;
- Class actionlegal financing;
- DIP financing for Chapter11 bankruptcies;
- Insolvencylitigation financing;
- Internationalarbitration funding;
- Lawfirm litigation, operations, and growth expenses;
- Patent litigationexpenses;
- Securities andshareholder litigation financing; and
- Competitionand antitrust litigation financing.
Additionally, lawfirm fund investments generally have a shorter time to liquidity than othertypes of funds. Often having a life of 36 to 48 months, matching the terms ofthe loans, investors enjoy the benefit of the potential for high return withthe knowledge that they don’t have to wait to an open date for returns.
Confidence from Investment in a Non-Correlated Investment Alternatives
Law firm funds offera non-correlatedinvestment alternative because the resolution of the cases in the fund is nottied to fluctuations in economic markets. As such, investors often use them tohedge against market fluctuations. These funds bear only the risk tied to theoutcome of the cases pledged to the fund. While case outcomes are notguaranteed, each case is accepted only after a rigorous evaluation of themerits and the law by an experienced team of attorney underwriters. So, forexample, Pravatifunds have performed very well, ranking high globally.
When the Stars Align: Why Investors Choose Law Firm Funding
Timing is everything.Right now, the stars are aligned to make law firm funding a logical choice fordiscerning investors. Investors are in a prime position to make the most oftheir investment dollars due to the following:
- Recession-proof option: With the fearof recession looming, investors need alternatives that are not tied tocapital markets or fluctuations. Law firm funding is chief among thosealternatives.
- Decreased banking resources: Changes in bankingregulations have led to banks being less likely to provide traditional lendingfor litigation purposes. The timing is good for investors to step in to providefunding to fill this void.
- Judicial reform: Thanks to judicial reformefforts, frivolous lawsuits don’t make it very far. Law firm funding investorscan have a sense of increased confidence, therefore, in the viability of the lawsuitspledged to a fund.
- Trending consumer litigation: Litigation trendsreveal a definite direction toward consumer litigation, offering moreinvestment options in law firm funding securities.
If the timingseems right for you to consider investing in law firm funding, partner with Pravati Capital today to analyze youroptions. Pravati Capital can help you determine which alternative investmentoption is most appealing to you. Complete our onlinecontact form or call us at 844-772-8284 for more information about law firmfunding investment opportunities.
