Litigation Finance
Litigation finance transforms legal claims into investable assets. For institutional investors, it offers uncorrelated returns. For law firms and corporates, it provides balance-sheet-neutral access to justice. This guide covers everything from market fundamentals to regulatory frameworks.
What Is Litigation Finance?
Litigation finance — also referred to as litigation funding, third-party funding (TPF), or legal finance — is the investment of capital into legal disputes by specialised funders or institutional investors. It sits at the intersection of law and alternative investments, offering a unique risk-return profile that is uncorrelated to equity, bond, or real estate markets.
Unlike traditional litigation funding which focuses on the claimant experience, litigation finance takes a broader view — encompassing the capital markets, portfolio construction, regulation, and risk management frameworks that underpin the industry.
How Large Is the Litigation Finance Market?
The global litigation finance market has grown from approximately $2.4 billion in assets under management in 2018 to an estimated $15.8 billion+ in 2026. The UK remains Europe's largest market, driven by a favourable common law system, the English language advantage for cross-border disputes, and London's status as a global arbitration hub.
$15.8B+
Global AUM (2026 est.)
20-30%
Target Net IRR
0.05
Correlation to S&P 500
For a detailed breakdown of the UK market, see our guide to litigation finance in the UK.
How Does Litigation Finance Work?
The litigation finance lifecycle follows a structured process from initial case assessment through to resolution and distribution of proceeds:
Case Origination
A law firm, corporate, or advisory (like Audley Capital) identifies a claim and presents it to potential funders.
Due Diligence
The funder's investment team and external counsel assess merits, quantum, defendant solvency, and enforcement risk.
Term Sheet & LFA
If approved, a Litigation Funding Agreement (LFA) is negotiated setting out the budget, return structure, and governance rights.
Capital Deployment
Funds are drawn down in tranches to cover legal fees, disbursements, and ATE insurance premiums.
Resolution & Waterfall
Upon settlement or judgment, proceeds are distributed per the priority of payments ('waterfall') — funder capital, funder return, then claimant.
Who Are the Key Participants in Litigation Finance?
The litigation finance ecosystem involves several interconnected participants:
Litigation Funders
Specialist firms (e.g., Burford, Harbour, Therium) that deploy capital directly into claims.
Advisory Firms
Independent intermediaries like Audley Capital that source, structure, and place claims with appropriate funders.
Institutional Investors
Pension funds, endowments, family offices, and sovereign wealth funds that allocate to litigation finance as an alternative asset.
ATE Insurers
Specialist insurers providing after-the-event cover to protect against adverse costs in funded claims.
Explore Litigation Finance Topics
Deep-dive into each aspect of litigation finance through our specialist guides:
Litigation Finance in the UK
Market size, key players, recent growth trends, and the evolving role of litigation finance in UK commercial disputes.
Read GuideLitigation Finance Returns for Investors
How returns are structured, typical IRRs, risk-adjusted performance, and why litigation finance is an uncorrelated asset class.
Read GuideLitigation Finance Regulation in the UK
The regulatory landscape governing litigation finance: ALF guidelines, PACCAR implications, and proposed reforms.
Read GuideAfter-the-Event Insurance & Litigation Finance
How ATE insurance complements litigation finance, protects against adverse costs, and strengthens funded claims.
Read GuideWhy Does Litigation Finance Matter?
Litigation finance addresses a fundamental market failure: meritorious claims go unpursued because the cost of justice is prohibitive. By providing non-recourse capital, the industry levels the playing field between well-resourced defendants and under-capitalised claimants.
Access to Justice
Enables individuals and SMEs to pursue valid claims against well-funded corporations.
Balance Sheet Protection
Allows corporates to pursue claims without impacting P&L or EBITDA — costs stay off the balance sheet.
Law Firm Growth
Enables firms to offer clients funded arrangements, expanding their book of work without financial risk.
Portfolio Diversification
Provides institutional investors with genuinely uncorrelated returns in a low-yield environment.
Learn more about how law firms are leveraging litigation finance in our guide to litigation funding for law firms, or explore litigation finance returns for investors.
Frequently Asked Questions About Litigation Finance
Explore Litigation Finance Opportunities
Whether you're a law firm seeking funding, a corporate with a meritorious claim, or an investor looking for uncorrelated returns — Audley Capital can help.
