Hedge Funds Showing Increased Interest in Litigation Claims

It’s no secret that over the last several years, Wall Street has been pouring money into the litigation space – whether indirectly by capitalizing litigation funders, or directly via their own investments into the space.

However, the recent revelation of Baupost Group’s $1 billion purchase of legal claims against utility company PG&E illustrates both the scope and scale of the hedge fund world’s interest in the legal sector.

Litigation Finance Shows No Sign of Slowing Due to COVID-19

Litigation finance is a business model designed to flourish during tough times. When courts are slow, postponements are omnipresent, and everyone is tightening their belts—the litigation funding community is enjoying boom times.

As an investment industry, litigation finance is a niche market with particular appeal for new investors. Anticipating future increases in litigation, many litigation funders are far busier than they’ve ever been.

Why Invest in Specialty Finance?

Following the 2008 GFC, banks and larger financial institutions were forced by a combination of market conditions and increased regulations to significantly tighten their lending standards.

This financial conservatism has essentially closed off the traditional credit market to smallercompanies. This has opened the door to specialty finance firms to play a larger role in providing structured finance options.

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