Demand for law firm funding is growing. As more attorneys and firms recognize the business and legal advantages of this type of financing, investors are discovering the benefits of investments in law firm funding.
Why Investors Are Interested in Law Firm Funding
Many financial products on the market are subject to economic downturns, cycles, and events, but funds in the law firm financing market enjoy relative independence from those factors. Savvy investors recognize the benefits of these non-correlated investments.
Some investors also appreciate the social impact of litigation finance funds. By making advances to pay for litigation costs and other expenses possible, investors can help businesses and law firms properly pursue or defend claims in particular areas.
Non-Correlated Investments with High Returns
In 2008, the United States plunged into a recession. Many investors suffered significant losses in stock market, real estate, and other correlated investments. Meanwhile, case assets underwritten by Pravati Capital at the time were unaffected by the economic downturn. This disconnection from traditional markets is a substantial advantage of litigation finance funds.
Another benefit is a higher rate of return on investment over a generally shorter duration than traditional investments. Litigation finance funds statistically outperform S&P 500 stocks, government bonds, mutual funds, and real estate investment trusts (REITs).
Portfolio Diversification and Generation of Income
Many investors in law firm funding are seeking to diversify their portfolios, and these investments provide that opportunity. Litigation funding clients include the following groups:
- Law firms and solo attorneys;
- Government entities; and
- In-house Counsel.
Diversification of the assets within the litigation finance funds offered by a funding company can further reduce risk and improve returns to investors.
Litigation finance funds are also appealing because they can generate income for investors, sometimes offering fixed regular returns as well as equity payments after settlement or resolution of cases.
The Social Impact of Investments in Law Firm Funding
Interest in impact investing has grown over the last ten years in the US. Many investors like the idea of driving social change with strategic investments that also generate financial returns. Investments in law firm funding provide opportunities for investors to positively impact the power structure of legal disputes within the ethical boundaries of the law.
Law firm funding allows clients and attorneys to pursue cases of merit without concerns about cash flow. It gives corporate legal departments the working capital to advance a valuable claim that would otherwise be too detrimental to the bottom line to pursue.
This funding can also be used by defense firms[. In these cases, careful evaluation and sharing of risk gives law firms and businesses the structure and stability needed to fully defend a case and see it through to rightful verdict, rather than settling out of fear of potential damages.
Investing with Pravati Capital
The skilled underwriters of Pravati Capital have the legal and financial experience required to assess the potential outcome and value of cases. The cases we support are packaged into diversified funds that are available to investors who want to benefit financially while making positive change in the legal system and business culture.