Litigation Finance Investing: Alternative Investment Returns in the Presence of Information Asymmetry
25 Pages Posted: 1 Jun 2021
Date Written: May 28, 2021
Litigation finance is a rapidly growing niche asset class focused on debt and equity investments in litigation claims and law firms. We find that in-sample returns in the space have been in excess of 20% annually with limited correlation to other investment areas. This apparent excess return may be due to information asymmetry and barriers to entry in the space. Our findings highlight the opportunities and risks for investors in this nascent asset classes and suggest such excess returns are due in part to limits to the speed with which efficient markets take hold.
Keywords: Litigation finance, litigation funding, legal funding, alternative investments, asset pricing, hedge funds
JEL Classification: G10; G12
Suggested Citation: Suggested Citation