If I can find my notes we'll have another post on the good, bad and ugly of the trend.
From Bloomberg via The gulf Times:
The billionaire George Soros has found a new way to make money from personal-injury lawsuits.
Soros Fund Management is pushing into a branch of litigation finance that few hedge funds have entered. His family office is bankrolling a company that’s creating investment portfolios out of lawsuits, according to a May regulatory filing.
The development is the latest twist on the litigation funding market, which has drawn criticism for monetising and encouraging the lawsuit culture in the US. The firm Soros is backing, Mighty Group, bundles cash advances that small shops extend to plaintiffs in personal injury suits in return for a cut of future settlements. Mighty Group’s approach opens the door to another potential development: securitising individual lawsuit bets for sale to other investors.
“There are all the ingredients there to securitise these things,” said Adrian Chopin, a managing director at legal finance firm Bench Walk Advisors. “A diversified, granular pool with predictable outcomes. The problem is, you can’t yet get these things rated” by credit agencies.
Wall Street has been betting for a while on commercial litigation, which provides financing of big corporate suits with millions or even billions of dollars at stake. Soros is focused on the consumer side, where plaintiffs receive advances of $2,000 on average for legal claims typically tied to auto and construction accidents. The advances are used to cover personal expenses, such as medical bills and rent.
Soros along with Apollo Capital Management are among the first money managers to jump into this niche of the lawsuit- funding market. It offers steady and predictable returns, which historically have averaged about 20% a year at relatively low risk, said Chopin of Bench Walk.
“Everybody is looking for yield, and people are also looking for assets that are not correlated with the major equity and debt markets,” said Christopher Gillock, a managing director at Colonnade Advisors, an investment bank that specialises in financial services. “Litigation funding falls into that category.”The ABA Journal adds:
Joshua Schwadron, a co-founder of Mighty, declined to comment on the firm’s investors. Michael Vachon, a spokesman for Soros Fund Management, the billionaire’s New York-based family office, declined to comment....MORE
Hedge funds and private equity firms are jumping into another aspect of litigation finance with loans that finance mass tort cases against drug companies and medical device manufacturers.
One hedge fund getting involved is EJF Capital, which hopes to raise an additional $300 million for an investment vehicle for mass tort cases, the New York Times reports. Other established hedge funds have lent money to mass tort law firms, while “a slew of newer firms” that specialize in mass-tort lending are emerging.
According to the New York Times, litigation finance has been around for a long time, but it has mostly focused on financing complex, long-term commercial litigation. Lending money for consumer suits could be even more profitable....MORE