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Capital markets: Litigation funding finds its feet

Litigation funding has surged in recent years. The asset class is catnip to yield-hungry investors, with funders expanding from their roots in Australia and the UK to tap new markets from Germany to Brazil and the US.

Lady justice. Statue of Justice in library

Nick Rowles-Davies has been called a few things in his career, but the one that comes directly to mind involves a throwaway line by a member of the Fourth Estate.

“I was once described by a journalist as being a ‘pinstriped ambulance chaser’,” he says. “I took exception to that. I have never owned a pinstriped suit.”

The choice of insult makes sense once you know what he does. Rowles-Davies, a cheery Englishman, is the executive vice-chairman of Sydney-based LCM Finance, one of the world’s oldest litigation finance companies.

Also known as litigation funding, it is an uncorrelated asset class that has been around for a few decades, growing at a steady pace without ever quite catching fire. But given what it offers – outsized returns at a time of super-low yields on judiciously placed investments – is this its moment in the sun?

At its heart, litigation finance is the process of investing in or buying up – both terms work just as well – outstanding legal claims, then working to profit from them through settlement out of court or adjudication in it. Hence the ‘ambulance chaser’ jibe.

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