Private investors commit another £8m to third party litigation funding via Connection Capital as appetite grows.
- Third Therium investment is Connection Capital’s biggest ever fund-raise
- Recent high-profile cases raise awareness of increasingly mainstream asset class
Private investors have committed another £8million to a third party commercial litigation funding through Connection Capital, the specialist private client investment business, in its third such deal in four years.
The investment is Connection Capital’s biggest ever fund-raise – highlighting the scale of demand for the asset class.
The funding will be advised by leading commercial litigation funder Therium Capital Management, with Connection Capital clients investing in tranches of £25,000. It will bring the total of Connection Capital client investment in litigation funding via Therium to £16million, having completed previous deals in 2013 and 2016.
Connection Capital says investor appetite is growing for several reasons:
Increasingly mainstream asset class - several recent high-profile legal cases have raised awareness of commercial litigation funding. Major cases funded by Therium include class actions against VW over the emissions scandal, a £300m competition damages claim against MasterCard and Visa on behalf of a group of 27 UK high street retailers as well as shareholder action against Lloyds Bank over the ill-fated HBOS takeover during the 2008 financial crisis.
Impressive returns potential and attractive market supply/demand dynamics - potential money multiple returns are similar to private equity but are expected to be generated within a shorter timeframe. Therium’s historic average case length is 2.2 years.
Access to an “uncorrelated” asset - which can help to enhance performance and reduce volatility in investment portfolios. Since cases are decided by the courts, litigation funding provides investors with exposure to a non-cyclical, alternative asset, which is unrelated to stock market movements or economic developments, and which can deliver attractive risk adjusted returns.
Track record – Therium has led the way in the commercial litigation funding sector since it was set up by a team of experienced lawyers in 2009. It has developed strong relationships with law firms and established a robust case pipeline, underpinned by skilful case assessment and a balanced portfolio approach to mitigate risk. It is also one of the best-resourced litigation funders globally, meaning it has the financial firepower to fund major high value cases.
Litigation funding involves a third party providing the financial resources to help claimants meet the cost of commercial litigation or arbitration cases in return for an agreed share of the proceeds of any successful claim.
It can increase access to justice because not all law firms can take on cases on a no-win, no-fee basis, and some claimants could be dissuaded from pursuing meritorious claims due to the often prohibitively expensive and uncertain costs involved.
Therium covers commercial litigation funding across a variety of industry sectors, and cases can range from international corporate disputes to shareholder class actions to smaller claims involving tax, trusts, IP, competition, professional negligence or insurance – and more.
Claire Madden, Partner at Connection Capital, says “Commercial litigation funding is fast gaining traction as a highly attractive component of a diversified investment portfolio.”
“Institutional investors are seeing the value of the asset class, but it can be very difficult for private investors to get in on the act, so we are delighted to have been able to offer them yet another opportunity to do so.”
“Investors are drawn by the potential to generate attractive returns while providing a hedge against exposure to more mainstream investment classes such as stock or bond markets or developments in the wider economy.”
“Our private investor clients have been very impressed by the Therium proposition: its market-leading position, its ability to source and fund high-quality cases, its portfolio spread across number, size, type and maturity of case, and its approach to capital deployment.”