Litigation finance is fast becoming the most relied-upon way for attorneys and plaintiffs to get the financial backing they need to fight cases. In 2018, the ABA Journal reported that one-third of lawyers surveyed had relied on litigation finance to help fund cases, and 70 percent of firms indicated that they are likely to rely on it within the next two years.
While that represents a 237 percent increase in the number of private practice lawyers using litigation funding in 2012, we believe that this multi-billion-dollar market has barely scratched the surface of the $110 billion generated annually by the top 200 US law firms.
The combination of this rising popularity combined with the relatively untouched amount of potential prompted Pravati Capital to introduce Pravati investment funds.
As with any alternative investment, it’s important that investors understand the unique risks involved as well as weighing the potential benefits against those risks and understanding the risk hedging measures taken by fund managers.
Pravati Investment Fund IV, LP is conducting a 506(c) offering solely to qualified and Eligible Investors. We anticipate providing investors with the opportunity to participate in a well-diversified fund dedicated to litigation funding and seek commitments of up to $100M.
Pravati Investment Fund IV, LP is a non-correlated alternative investment vehicle which offers dual streams of income. The first is a fixed quarterly preferred return. The second income component is an equity payment that is triggered after portfolio assets are settled. Pravati Investment Fund IV, LP is backed by the power and experience of the Pravati Capital team, which has a 17-year history of successfully underwriting and funding litigation.
Rather than relying on the strength of a single case to deliver results to our investors, Pravati Investment Fund IV, LP keeps multiple, thoroughly-vetted cases within the fund. We believe that this approach to risk mitigation creates a fundamental fund diversification that complements the built-in equity buffer created by Pravati’s limiting funding to a percentage of anticipated case award.
Fund managers for Pravati Investment Fund IV, LP look at multiple factors before deciding whether a case is qualified to fit in the fund. Not only do we look for high-probability cases, but we look for those with a variety of elements and estimated maturity dates. That means our fund intends to hold a combination of personal, commercial, and mass tort cases from all over the country for a diverse set of possible judgments and timelines.
While litigation finance has enjoyed decades as a popular investment opportunity in countries like Australia and the U.K., it’s a relatively new industry opening up for investors in the United States.
The concept of litigation finance is grounded in the desire to create returns for investors while leveling the playing field for plaintiffs and lawyers going up against multi-national corporations. Because the strengths of this type of non-recourse funding is reliant on the success of the cases, only strong cases are funded.
Since its start in the 1990s, the United States litigation finance market has seen growth of $3 billion, as reported by The New Yorker. Understanding that some form of oversight is beneficial to all parties involved, the industry began to regulate itself through organizations like the American Legal Finance Association, an organization that Pravati Capital’s CEO served three years on the executive council.
The litigation finance industry has grown significantly in recent years and only shows signs of continuing to expand.