RT Journal Article
SR Electronic
T1 Practical Applications of Litigation Finance Investing: Alternative Investment Returns in the Presence of Information Asymmetry
JF Practical Applications
FD Institutional Investor Journals
SP pa.2022.jaipa059
DO 10.3905/pa.2022.jaipa059
A1 Thomas Healey
A1 Michael B. McDonald
A1 Thea S. Haley
YR 2022
UL https://pm-research.com/content/early/2022/05/04/pa.2022.jaipa059.abstract
AB In Litigation Finance Investing: Alternative Investment Returns in the Presence of Information Asymmetry, from the Spring 2022 issue of The Journal of Alternative Investments, Thomas Healey of Harvard Kennedy School, Michael McDonald of Morning Investments, and Thea Haley of Glen Avenue Communications describe the development, structure, and risk–return characteristics of litigation funding—a small and controversial, but growing and lucrative market. On the one hand, third-party financing could promote frivolous litigation and burden the court system. On the other hand, it can permit plaintiffs to retain legal representation they otherwise could not afford. The litigation funding market is not widely understood, with both high information asymmetry and high potential returns, and losses can be extreme. The authors discuss methods of mitigating risk with diversified portfolios. They provide a picture of the various segments of the market, their features, and the potential to structure deals with desired investment horizon, risk, and return preferences.