After forecasting strong growth for the litigation finance industry last year, several funders have halted capital raising and are seeking alternative cash sources as hedge funds and private investors retreat from the $20bn sector, according to a report by Bloomberg.
Harbour Litigation Funding CIO Ellora MacPherson said investors now want “more predictable outcomes” and insurance-backed structures to reduce risk.
In the UK, new recommendations from the Civil Justice Council would introduce regulatory oversight of funders, following a 2023 Supreme Court decision preventing profit shares based on damages.
Group actions filed in the Competition Appeal Tribunal have dropped sharply — four this year versus 11 in 2024. In the US, efforts to revive a 41% tax on industry profits are back on the agenda, while EU lawmakers have curtailed the scope of the Corporate Sustainability Due Diligence Directive.
Managers are adjusting to these changes. UK-based Therium Capital Management has handed day-to-day oversight of part of its portfolio to Fortress Investment Group and launched an advisory business, while Australia’s Litigation Capital Management paused marketing for a new fund in June.
Larger firms are also feeling pressure, with Burford Capital shares down more than 25% this year, with a $16bn award in a case relating to the nationalisation of Argentine YPF SA remaining stalled in US courts.
