Alternative Investments in Litigation Finance
Litigation finance unlocks the value of legal claims by providing capital to plaintiffs before their cases are resolved. Litigation finance investments have zero correlation with other asset classes and payouts from lawsuits bear no relation to interest-rate rises or stock market swings.
Litigation finance is still a relatively new asset class with room for growth. Cases frequently take three to five years to reach a settlement, and the secondary market is still developing. The growing popularity of litigation finance has been fueled by billions of dollars from hedge funds, private equity and other institutional investors.
In our opinion, these investments perform much like distressed debt combined with venture capital. Some cases will exceed the litigation funders expectations, while some will be total losses, and others will come in closer to the ex-ante expected return. A diversified portfolio including multiple cases can produce much more predictable returns.
Ashton Global Litigation Finance Fund
About Litigation Finance
Litigation finance (also called litigation funding) is the practice of providing capital to a plaintiff involved in litigation in return for a portion of any financial recovery from the lawsuit.
Most litigants cannot afford to wait for settlement and investors can receive high returns for simply waiting.
Recoveries are hard to model which provide for returns as high as 10x.
Litigation finance investments have zero correlation with other asset classes.
Ashton Global Litigation Finance Fund
The fund is focused on identifying litigation-related investments that offer significant upside with defined risk. Capital is provided in exchange for a portion of the recoveries tied to various cases. The fund’s investments are supported by interests in legal recoveries and settlements due to plaintiffs.
Our team uses a network of hedge fund managers, journalists, fraud examiners, and attorneys to generate alpha through litigation-related special situations. Scenario and probability analysis are used to size the portfolio’s positions to provide a balance of income generation and capital appreciation. Payouts from lawsuits bear no relation to interest-rate rises or stock market swings. Average investment holding period is expected to be between three and five years.
Ashton Global Litigation Finance Fund
Investment Strategy
Our investments are sourced via a network of fraud examiners, attorneys, hedge fund managers, and investigative journalists.
We perform rigorous due diligence on the parties involved and the potential for asset recoveries.
Our deals are structured with little downside and significant potential for high returns because of the conservative estimates used for time horizon and recovery.
We have a robust investment pipeline with a large number of high-quality cases with the potential for large recoveries.
Ashton Global Litigation Finance Fund
How can the risks be minimized?
Risks can be reduced through underwriting, structuring, oversight, choice of attorneys, diversification, and choice of jurisdictions.
Proper underwriting protects investors from adverse selection and moral hazard by selecting only sound cases for investment purposes. Structuring and oversight also minimize conflicts of interest.
Attorneys with histories of acting in good faith in the litigation finance industry are even more important.
Experienced attorneys with good access and relationships with regulators is also an edge that can help to improve returns.
Long time horizons and diversified portfolios can help investors to decrease risks related to low liquidity.
Long-Term and Uncorrelated Returns
Why should investors be interested?
Returns from litigation finance have been strong and uncorrelated with the broader market.
The returns for litigation finance depend on the outcomes of particular court cases, which are unaffected by market movements.
Cases frequently take three to five years to reach a settlement which provides nice yield duration for a funding portfolio.
Ashton Global Litigation Finance Fund
Contact us for more information about our litigation finance strategy.
Litigation finance is most appropriate for institutional investors and high-net-worth individuals because of low liquidity and other risk factors. Litigation finance is considered high-risk because the entire initial investment is usually lost if the plaintiff loses the case. An investor should consider the fund’s investment objectives, risks, charges and expenses carefully before investing or sending money. This and other important information about the fund can be found in the fund’s prospectus, or, if applicable, the summary prospectus. Any decision to invest in Ashton Global funds should be made on the basis of the current prospectus, which is available on request at info@ashtonglobal.com. Read the prospectus carefully before investing. All investing involves risk, including potential loss of principal. There is no guarantee that the fund will achieve its objective.
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