ThoughtsonLitigationFinance:ANon-CorrelatedSourceofReturnforPensionAllocators
Litigation finance was a niche legal strategy but is now gaining meaningful attention from institutional investors, particularly pension plans seeking non-correlated, asymmetric return sources. By providing capital to fund legal claims in exchange for a portion of potential settlements or judgments, litigation finance offers access to returns unlinked to market cycles, interest rates, or traditional risk factors. This report explores litigation finance as an institutional-grade asset class, its evolving structures, risk-return profile, manager landscape, and suitability within a modern pension portfolio. We find that while litigation finance presents binary outcome risks and legal complexity, it can also deliver attractive gross IRRs (20–30%) on a case basis; 10–15% net at the portfolio level), uncorrelated exposure, and growing institutionalization. It may merit a modest allocation, particularly through diversified portfolio strategies or hybrid capital structures within the broader alternative sleeve.