An alternative asset class in making in India, this asset class is mainstream in USA/UK/Australia/Canada but in India it all started with HCC selling their stakes to Blackrock in 1750 crores rupees.
While in India there is a misconception about Litigation Funding/third Party Funding, there are many international funds are investing in these claims. A case being funded validates the claimant’s position and most of the time lead to settlement as opposite party knows that before funding the case, funders have conducted a very stringent due diligence.
What if you get a piece of legal settlement without ever being a part of a lawsuit It comes from investing in so called litigation finance, a strategy that generally involves providing cash to litigants or lawyers to fund their case in exchange of recovery.
If experts are right this market is poised for growth. As investors search for returns uncorrelated to markets. this largely unknown investment market will beckon. Demand of litigation funders is going to rise as COVID has created economic fallouts and surge in commercial litigations.
Unlike other developed countries, in India any one can invest in litigation claims, you don’t have to be an accredited investor. This asset class provides extremely lucrative returns with ROI as high as 40% annually.
it’s quite possible that more retail investors will end up putting money into this strategy given the volatility in the market. If the equity markets started trending south again, there could be a re-evaluation of uncorrelated assets and litigation financing typically has fit that bill.
Litigation Finance companies reduces the risk by identifying right kind of case with higher probability of WIN. These companies have expert lawyers who can assess the merits of a case and its chance of success along with investment professionals who handle the finance side of things (i.e., structuring each deal).
The benefits of investing in Litigation Claims are that-
- Invested in legal claims generally do not depend on capital markets or broader macroeconomic factors
- Litigation funding gives higher return than other asset class. Historical track record in other countries
- Unlike other asset classes where monetisation events are uncertain, legal claim investments are assured realisation event
Commercial cases currently grab most of the action due to their performance in Indian courts, as per data these cases get settled within 3 years in High courts, 16 months in Supreme Court while NCLT it is around 12 months. Often, the deals are structured so that the longer the case takes, the higher your pay-out. At LegalPay, we undertake a thorough due diligence on all case requests that we receive for funding requests and after the process is finished less than 1% cases actually end up qualifying for funding eliminating the risk for case investors.