A multi-billion-dollar industry, law firm funding has experienced substantial growth in recent years. As a result, people looking for alternative investment options are increasingly turning to law firm funding. Law firm funding offers the potential for high yields and shorter, more defined time to liquidity than traditional investment options. Funds comprised of legal cases are a highly attractive investment opportunity for those seeking high returns and a relatively short period for the commitment of capital.
Reasons to Invest in Law Firm Funding: Options, Confidence, and Timing
Law firms have their reasons for turning to law firm funding rather than traditional forms of financing, and investors encounter many of the same considerations when deciding to invest in 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 the reward. With law firm funding, the reward can be very rewarding indeed.
Flexibility in Investing in Law Firm Funding
Choosing investments requires consideration of the investor’s need for flexibility. In recent years, a growing number of investors have found that alternative investment options like law firm funding provide the flexibility they seek.
Law firm funding offers flexibility in the size of the investment. As equities, investors can choose to invest a little or a lot.
Investors are also showing more interest in impact investing. A law firm funding investment can support a particular area of law, a particular type of client, or both. While law firm funding has tended toward large and commercial litigation for the last couple of decades, today law firm funding investment opportunities include cases in a variety of practice areas:
- Commercial litigation funding;
- Class action legal financing;
- DIP financing for Chapter 11 bankruptcies;
- Insolvency litigation financing;
- International arbitration funding;
- Law firm litigation, operations, and growth expenses;
- Patent litigation expenses;
- Securities and shareholder litigation financing; and
- Competition and antitrust litigation financing.
Additionally, law firm fund investments generally have a shorter time to liquidity than other types of funds. Often having a life of 36 to 48 months, matching the terms of the loans, investors enjoy the benefit of the potential for high return with the 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 offer a non-correlated investment alternative because the resolution of the cases in the fund is not tied to fluctuations in economic markets. As such, investors often use them to hedge against market fluctuations. These funds bear only the risk tied to the outcome of the cases pledged to the fund. While case outcomes are not guaranteed, each case is accepted only after a rigorous evaluation of the merits and the law by an experienced team of attorney underwriters. So, for example, Pravati funds 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 for discerning investors. Investors are in a prime position to make the most of their investment dollars due to the following:
- Recession-proof option: With the fear of recession looming, investors need alternatives that are not tied to capital markets or fluctuations. Law firm funding is chief among those alternatives.
- Decreased banking resources: Changes in banking regulations have led to banks being less likely to provide traditional lending for litigation purposes. The timing is good for investors to step in to provide funding to fill this void.
- Judicial reform: Thanks to judicial reform efforts, frivolous lawsuits don’t make it very far. Law firm funding investors can have a sense of increased confidence, therefore, in the viability of the lawsuits pledged to a fund.
- Trending consumer litigation: Litigation trends reveal a definite direction toward consumer litigation, offering more investment options in law firm funding securities.
If the timing seems right for you to consider investing in law firm funding, partner with Pravati Capital today to analyze your options. Pravati Capital can help you determine which alternative investment option is most appealing to you. Complete our online contact form or call us at 844-772-8284 for more information about law firm funding investment opportunities.