In a recent ION Influencers Fireside Chat, Cesar Bello, Partner at Corbin Capital Partners, shared his expert perspective on the evolving landscape of litigation finance. The conversation delved into the nuances of this niche yet rapidly maturing asset class, offering a rare insider’s view into its opportunities, challenges, and future trajectory.

Key Highlights from the Conversation

Litigation Finance as a Distinct Asset Class

• Uncorrelated Returns: Bello emphasized litigation finance’s appeal lies in its uncorrelated nature and potential for attractive returns.
• Evolution of the Market: From single-case investments to structured portfolios, the asset class has matured significantly, with increasing involvement from AmLaw 100 firms and institutional players.

 Market Dynamics & Ecosystem

• Diverse Players: The space includes publicly listed funders like Burford, hedge funds, and dedicated litigation financiers.
• Middle-Market Focus: Corbin Capital targets mid-sized, off-the-run opportunities, avoiding the scalability constraints of mega-deals.

Specialization vs. Generalization

• While many funders specialize in areas like mass torts, IP, or antitrust, Corbin adopts a generalist approach, partnering with best-in-class specialists to diversify and strengthen its portfolio.

 Strategic Partnerships & Deal Sourcing

• Symbiotic Relationships: Corbin leverages long-standing industry relationships for both deal origination and underwriting support.
• Collaborative Underwriting: Partners contribute niche expertise, enhancing due diligence and risk assessment.

The Art of Structuring

• Structuring is Key: Beyond legal diligence, deal structuring is where value is created or lost.
• Portfolio Approach: Moving away from single-case funding allows for cross-collateralization and better risk alignment.

Opportunities & Risks

• Selective Investing: While the market is rich with opportunities, Bello notes that only 30% of deals merit serious consideration.
• Underwriting Law Firms: Evaluating the financial health and operational maturity of law firms is crucial, especially in the plaintiff space.

  Regulatory Landscape

• Jurisdictional Nuances: Differences between the US and Europe, such as the UK’s loser-pays model, significantly impact strategy.
• Adaptability: Regulatory shifts, like the UK’s Paccar ruling, require funders to restructure agreements and reassess market viability.

Recovery & Enforcement

• Collection is Critical: Winning a case is only half the battle—enforcement and recovery strategies are essential, especially in sovereign disputes.

 Investor Concerns & Market Maturity

• Duration Risk: Investors are wary of long timelines; Corbin mitigates this by entering deals in later stages.
• Growing Competition: As more traditional players enter, pricing pressure and client education become key challenges.

 Industry Outlook

• Consolidation & Growth: While some consolidation is occurring, the bigger trend is new entrants and market expansion.
• Secondary & Securitization Markets: These are slowly emerging, signaling a maturing asset class.

Talent & Team Composition

• Multidisciplinary Teams: Success in litigation finance requires a blend of legal, financial, and interpersonal skills.
• High-Touch Business: Despite its financial nature, the industry remains relationship-driven and trust-based.

Key timestamps:

00:06 Introduction to Litigation Finance
01:32 Trends in Litigation Finance
04:01 The Evolving Ecosystem of Litigation Finance
05:38 Market Specialization vs. Generalization
08:52 The Importance of Structuring in Financing
10:52 Opportunities and Challenges in the Asset Class
13:24 Regulatory Implications on Litigation Funding
15:14 Comparative Analysis of US and European Regulations
16:39 Understanding Recovery Rates in Litigation Finance
18:41 Investor Concerns in Litigation Finance
19:25 Market Competition and Liquidity Providers
20:10 Industry Consolidation and Market Dynamics
21:07 Skills Needed for a Competitive Market
21:54 Conclusion and Acknowledgments