$2.7 Billion of Capital Committed in U.S. Commercial Litigation Finance Industry in 2023

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Mar 27, 2024, 06:00 ET

Westfleet Advisors' 5^th Annual Litigation Finance Market Report Shows a 14% Reduction in New Capital Commitments in a Fluid, Dynamic Industry

NASHVILLE, Tenn., March 27, 2024 /PRNewswire/ -- Providers of commercial litigation financing in the United States committed nearly 14% less capital to new financing deals, and their assets under management remained essentially flat in 2023, according to a new report from leading litigation finance advisory firm, Westfleet Advisors. As reported in The Westfleet Insider: 2023 Litigation Finance Market Report, 39 capital sources were active in the U.S. market in 2023 and managed a combined $15.2 billion in assets allocated to U.S. commercial litigation investments. Broadly, the U.S. commercial litigation finance industry experienced a contraction and significant shake-up last year. However, demand for funding remained robust, and some market participants actually gained strength and momentum during an otherwise tumultuous year.

For the fifth consecutive year, Westfleet analyzed data collected directly from litigation funders as well as from public sources to analyze the state and growth of the U.S. commercial litigation finance market. The most complete and data-driven analysis of this maturing industry, The Westfleet Insider features statistics and commentary on the size, scope, and focus of U.S. commercial litigation finance. This year's report builds on the four prior years' analyses and reveals signs of a resilient industry that experienced some shakeout that many have predicted for some time now. Amidst the contraction, however, many leading litigation funders reported strong, non-correlated investment returns in 2023.

"Last year, we saw the first decline in new capital commitments in the five years since Westfleet began publishing its industry analysis," said Charles Agee, Founder and CEO of Westfleet Advisors. "These results, considered alongside 2022 in which new commitments increased by 16%, suggest a dynamic and highly fluid market. Dozens of litigation finance industry professionals made career moves in 2023, as some capital sources exited the market while others launched new litigation finance businesses. Many litigators learned the hard way in 2023 that it makes more sense to be connected to the broader market rather than to concentrate on a relationship with a single funder."

Notably, the declining pace of new commitments was not uniform across the industry. Indeed, some legal finance providers—particularly experienced incumbents with strong track records and superior access to capital—actually thrived in a contracting market. "We do not see any evidence that last year's decline was demand-driven. Rather, the supply of fresh capital declined substantially, and many funders began rationing their capital," Agee noted. "The fundraising difficulty among many industry participants is attributable primarily to the interest rate environment and trends in the financial markets, not investor aversion to legal finance specifically."

In keeping with trends observed in recent years, utilization of litigation financing by Big Law increased significantly. "Despite the overall decrease in new commitments, we noticed a clear uptick among more sophisticated users and deal structures, with substantial increases in transactions involving Big Law corporate monetizations and portfolios. Agee, an industry veteran, pronounced, "In more than two decades in this asset class, I've never seen the industry in such a state of flux. But I believe the shakeout signals a healthy and functioning market. My colleagues and I actually see a great deal of encouraging news in the data."

About Westfleet Advisors

Westfleet Advisors is a litigation finance advisory firm serving exclusively leading litigators and their clients who wish to explore litigation financing. Westfleet's multidisciplinary team of professionals helps its clients successfully navigate the world of litigation finance. Since its founding in 2013, Westfleet's core mission has been to bring greater transparency and efficiency to the users of litigation finance, thereby maximizing the utility of this vital—and all too often elusive—form of financing.

Media Contact:
Gretchen Lowe
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SOURCE Westfleet Advisors