Funding Litigation through Private Debt

Why is Private Debt the ideal model for Litigation Funding?


Our Litigation Funding deploys capital into short-term funding in the most liquid area within Private Debt with strong capital guarantees:

Protection

Our Private Debt structures come with protection; collaterals, guarantees and insurance.

Liquidity

Private debt is more liquid than private equity, with an investment duration of up to one-year.

Predictability

Our Private debt structures generate predictable positive performance with minimal volatility irrespective of the current economic cycle.

Yield

Using Private Debt for funding litigation generates yields highly superior to bonds of the same level of risk, even in times of recession.

Litigation funding is growing in prominence across the legal industry and is embraced not just by lawyers and their firms but also, increasingly, by the courts by way of providing access to justice and from a professional investor perspective, litigation funding provides uncorrelated and stable returns and is quickly becoming an asset class of its own. As a result, the demand for funding has increased considerably as lawyers, claim holders and investors who have all come to understand the utility and flexibility of litigation funding.


What is Litigation Funding?


Litigation funding is where a third party provides the financial resources to enable costly litigation or arbitration cases to proceed.


A funder provides the financial resources to support a claimant in a legal dispute for an agreed share of the returns. Litigation funding offers the prospect of higher returns than traditional asset classes and returns that are truly uncorrelated to equity markets, which is particularly attractive during times of financial crisis, market downturn and volatility.




  • Funders pay for the legal costs associated with a commercial dispute in return for a portion of the proceeds if successful.


  • It is a relatively new and maturing asset class, as it was inexistent outside the US until about 20 years ago.


  • It provides access to an uncorrelated asset class and an attractive risk adjusted return profile.


Established Litigation Funding Markets

The Need for Litigation Funding

The benefits of litigation funding are multifarious, especially in the sphere of consumer litigation, where it allows individuals to get access to higher quality counsel often against powerful counterparties and helps to reduce the pressure on claimants to settle prematurely. For the law firm, it frees up working capital during litigation whilst allowing the firm to litigate more claims, essentially funding growth; it affords the claimant access to higher quality counsel; and for the funder the economics are uniquely attractive with high returns multiples on costs being achieved.


Litigation finance has its roots in antiquity, however, investing in litigation was commonly known as the legal doctrine of 'Champerty', which was long seen as an unlawful taboo. Today, however, where there is a strong rule of law in developed countries, funding litigation is seen as a powerful force that allows claimants, who lack the financial resources, to bring about claims against powerful counterparties and seek justice. And in the UK there has been widespread recognition that litigation funding promotes access to justice by enabling litigants to manage their exposure to costs, when the Jackson reforms of English commercial litigation came into force on 1 April 2013.


When considering funding claims in litigation there are a number of factors that need to be considered; jurisdiction and legal framework are very important. The US market tends to be overcrowded with more regulatory challenges, which makes the risk/return much less attractive when compared to the UK market. Additionally, funding should focus on a sufficiently large number of claims to ensure enough diversification. Our statistics show that portfolios with a large number of claims can lead to a normal distribution of return, thus eliminating the binary risk.


CWC focuses on multiple small claims with short settlement timeframes and high returns, backed by precedent law and ATE insurance that protects capital. CWC’s litigation funding is a strong and niche alternative to traditional asset classes due to its non-correlation and double digits returns.

Funding claims in litigation: Our litigation funding model offers diversified access to short-duration small claims


CWC focuses on the funding of high volumes of smaller claims, which means we are more diversified, offering clients the privileged access to a large number of verified legal cases with low credit risks, such as, claims against large financial institutions, government authorities or quasi-government entities.

Since 2008, regulation and capital requirements have curtailed banks’ ability to lend.  This shortage of capital has created a very compelling investment opportunity in liquid private debt.  By many metrics, private debt is the most compelling asset class since the 1930s, providing investors with strong and stable risk-adjusted returns and low volatility.


One of the safest and most liquid forms of Private Debt is Litigation Funding.


From our Mayfair office in London, we fund legal cases across consumer litigation. CWC focuses on niche areas of litigation that offer attractive yields with strong downside protection through After The Event insurance and other guarantees afforded to the investor whilst counting on our strong expertise in funding litigation. Our focus is in consumer litigation in the United Kingdom and the funding of claims that are smaller, simpler and more liquid (months) and diversified (thousands of individual claims) when compared to typical litigation funding.


Our precedent led - high volume case strategies with strong case law and short settlement time frames provide a niche funding solution.


We Provide Diversified Access to Funding Claims in Litigation with Legal Insurance

As a specialised litigation funding firm we offer privileged access to a large number of verified legal claims with low credit risk and where our approach to selecting claim types balances strength through legal precedent, financial prudence, time efficiency and high recovery potential to ensure a broad selection of claims for investment. Our litigation funding vehicle offers access to funding claims in litigation with a focus on individual claims and investment in the United Kingdom; where, as an emerging financing solution, it enables parties to pursue their legal claims without having to disburse the cost of the lawsuit.


As specialists in funding litigation, CWC are the executive team and architects of a unique funding solution. A solution that provides privileged and direct access to funding claims across consumer litigation. We fund our law firm partners with decades of experience and clean regulatory records; with members of the Bar; legal executives and paralegals and where the foundation of every claim are based upon Recoverability, Claim Value, Legal Precedent and clear Written Evidence.


Rising investor appetite indicates that consumer litigation is growing fast and as a specialised litigation funding firm we are well-positioned to continue to generate stable double-digit returns.


Our focus and approach to selecting claim types is based upon:

Legal Merit

We prioritise the funding of claims with strong legal foundations, supported by established legal precedents.

LTV

The value of claims must significantly surpass the funding required, ensuring a healthy margin above investment.

Duration

We target claims with short settlement timeframes, typically up to 1 year.

Settlement

The verified counterparties, against which claims are made, are large financial institutions, government or quasi-government entities where credit risk is very low. 

We Protect the Downside


Funding is focused on key strategies of protecting the downside and delivering predictable returns while preserving capital. We achieve this by focusing on the best cases in terms of case investigation, verification and capital protection. Fast moving small claims allow funding to be deployed quickly and the short settlement time frames provide liquidity; all with the benefit of insurance wrappers that preserve capital.


CWC specialise in funding claims in the UK to deliver targeted returns with emphasis on risk and liquidity management; our litigation funding model employs multiple tiers of downside protection to protect capital and safeguard investments:

Segregated Client Account

Funders capital and returns are held in a  segregated client account of our SRA regulated UK law firm.



After the Event (ATE) Insurance

This policy covers the Defendant’s costs and disbursements, as well as the claimants own disbursements. If a claim is unsuccessful, then the funders capital will be secure under the ATE insurance policy.

Assignment of Rights

Funders are assigned, with full title guarantee, the benefits and rights in each claim along with the rights in each policy of ATE insurance.



Collectively, these protective measures enhance the resilience of CWC's litigation funding model against downside risks, along with a low attrition of 2-5% prior to the issue of proceedings - which are replaced by new claims.

  • 100% of claims are sourced in the U.K where competition is less


  • The U.K.s judicial system is considered one of the best in the world


  • Significantly more liquid than larger litigation funds


  • Capital + Returns can be withdrawn or reinvested as claims settle


  • Claims settle from month 9 onwards


Summary


Litigation Funding: An Uncorrelated Asset Class

Investors regularly face uncertainty and challenging market environments. 

Traditional portfolios remain volatile during these times and diversification into alternative asset classes is now more mainstream amongst investors. Litigation funding is one of the most attractive alternative investments and is a fast-growing asset class that is still widely overlooked by investors; this niche area has proven to be recession-proof and offers true uncorrelated returns.

Litigation funding is a financing facility where a third party - a litigation funding firm - provides the financial resources to support a claimant in a legal dispute for an agreed share of the returns. Litigation funding offers the prospect of higher returns than traditional asset classes and returns that are truly uncorrelated to equity markets, which is particularly attractive during times of financial crisis, market downturn and volatility.

The benefits of litigation funding are multifarious, especially in the sphere of consumer litigation, where it allows individuals to get access to higher quality counsel often against powerful counterparties and helps to reduce the pressure on claimants to settle prematurely. Whilst for the law firm, it frees up working capital during litigation and allows for the funding of more claims, creating growth for the firm. And for funders, the economics are uniquely attractive with high returns multiples on costs being achieved. Rising investor appetite indicates that consumer litigation is growing fast and as a specialised litigation funding firm we are well-positioned to continue to generate stable double-digit returns.

CWC focus on the funding of smaller claims, which means we are more diversified and as a specialised litigation funding firm we offer privileged access to a large number of verified legal cases with low credit risks, such as, claims against large financial institutions, government authorities or quasi-government entities. We achieve very attractive yields with strong downside protection, through, After The Event (ATE) Insurance and the assignment of rights in claims amongst other guarantees. In addition, our focus is on a large number of small claims backed by precedent case law that typically settle in a short period of time.

In summary, litigation funding offers truly uncorrelated returns that improve risk-adjusted returns of traditional portfolios considerably, providing a new source of diversification.

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