Background
Securities fraud cases are complex and require substantial financial resources to navigate successfully. This case study explores how ALFA provided litigation financing to a ...
Key Advantages
- High Returns: Litigation financing can yield significant returns, often exceeding those of traditional investments. Investors typically receive a multiple of their investment upon successful resolution of a case.
- Non-Correlation: Returns from litigation financing are generally independent of market movements, providing a hedge against economic downturns.
- Social Impact: By funding meritorious cases, investors can contribute to access to justice and support for underfunded litigants.
- Risk Mitigation: Non-recourse funding means investors only recover their investment if the case is successful, mitigating the risk of total loss.
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Return Profile of a Diverse Collection of 15 Non-Recourse Cases
Assumptions:
- Initial investment per case: $2,000,000
- Total investment: $30,000,000
- Success rate: 75%
- Average return on successful cases: 3x the investment
- Total duration: 3 years
Investment Breakdown:
- Successful cases: 11
- Unsuccessful cases: 4
Returns Calculation:
- Total investment in successful cases: $22,000,000
- Total return from successful cases: $22,000,000 * 3 = $66,000,000
- Loss from unsuccessful cases: $8,000,000
Risk Management
- Diversification: Investing in a portfolio of 15 cases spreads the risk, reducing the impact of any single case's outcome.
- Thorough Due Diligence: Rigorous case selection criteria and comprehensive due diligence processes enhance the likelihood of funding successful cases.
- Monitoring and Management: Active monitoring and strategic management of funded cases can further improve success rates and returns.
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Conclusion
Adding litigation financing to your investment portfolio can provide substantial benefits, including high returns, diversification, and positive social impact. By investing in a diverse collection of 15 non-recourse cases, investors can achieve an attractive annualized return of approximately 30.1%, with managed risks through diversification and diligent case selection. This alternative asset class offers a compelling opportunity for investors seeking to enhance their portfolios with uncorrelated, high-return investments.
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