How does litigation finance work for investors?

Investors put money into a funder, usually through a private fund or by owning a listed funder's shares. The funder pays legal fees and costs on a case, or advances cash against its expected value, and is repaid from the settlement or judgment, typically as a multiple of what it put in, a percentage of the recovery, or a rate of return, per GAO (December 2022). If the case loses, the funder recovers nothing from that case, so the investor's return depends on the funder's win rate, the size of wins and how long cases take.

Who can invest in litigation finance?

Mostly institutions and wealthy investors. AltStreet's reviews found Omni Bridgeway's funds limited to non-retail investors with a US$1 million minimum on its US adviser's Form ADV, and Legalist's litigation funds at a $1 million minimum for endowments, foundations and family offices. Individuals can buy listed funders' shares, such as Burford Capital (BUR). LexShares, the retail platform, entered harvest mode in August 2024 and is not accepting new investors.

What returns have funders reported?

Wide ranges, on different bases. Burford reports an 81% ROIC and 25% IRR on concluded balance-sheet assets as of September 30, 2026; Omni Bridgeway reports 2.4x gross on 822 completed investments, unaudited and before fees; LexShares' Fund I has tracked roughly 4% net IRR on resolved cases. Concluded-case figures exclude pending cases and, for Burford, fair value changes, so they are not fund returns to an outside investor.

How long does money stay tied up?

Years, and longer than planned in many cases. Burford's concluded assets had a weighted average life of 2.7 years (weighted by realizations) at September 30, 2026. Omni Bridgeway's average time to completion by completion year rose from 2.7 years in FY2019 to 4.6 years in FY2026, per AltStreet's review. Burford's 2025 10-K says court backlogs slowed some matters and 'extensions of expected duration reduced the fair value of certain assets.'

Is litigation finance regulated?

Not as a category under federal law. GAO found that 'the third-party litigation financing industry is not specifically regulated under U.S. federal law,' while some states regulate consumer funding, for example by capping fees, and there is no nationwide requirement to disclose funding agreements in federal litigation. Funds that sell interests to investors are still subject to securities law: AltStreet's reviews found Legalist's litigation funds offered under Rule 506(b).

Does the funder control the case?

Commercial funders say no. Burford states that its agreements 'explicitly state that control of litigation and arbitration decision-making remains with the client' except in extraordinary circumstances agreed in advance, and all seven commercial funders GAO interviewed said they did not make decisions about litigation strategy. Agreements can still require consent or notice for settlement, so the terms matter.

Litigation Finance

Litigation Finance & Legal Claims

Definition

Litigation finance, also called litigation funding, legal finance or third-party funding, is capital provided to a claimant or a law firm by a party that is not in the lawsuit, in exchange for a share of any recovery. GAO describes it as funding that 'the litigant or law firm does not have to repay' if the lawsuit is not successful. Burford Capital's 2025 Form 10-K defines legal finance as 'the provision of capital against the underlying value of litigation and legal assets.'

Why it matters

Litigation finance is one of the few return streams whose outcome depends on courts rather than markets, which is why it is marketed as uncorrelated. The risks are different, not absent: a case can lose outright, a large judgment can be reversed years later, and duration can double. AltStreet's reviews show how far headline numbers can sit from what an investor received, from LexShares' 47% marketed IRR against about 4% on Fund I's resolved cases to Burford's YPF assets falling from $2.6 billion to $145.9 million after an appeal. Before investing, ask what basis a track record is on (concluded cases or the whole fund, gross or net), how concentrated the book is, and what the expected duration is. Then compare the fee and carry terms against the outcomes a single loss can produce.

Common misconceptions

•Non-recourse does not mean low risk for the investor, because the funder's capital in a losing case is lost in full and only winners pay back the losers.
•A concluded-case ROIC is not a fund return, because it leaves out pending cases, fees and carried interest paid by outside investors, and the time capital waited before deployment.
•Uncorrelated with markets does not mean diversified, because one large case or one legal theory can dominate a portfolio, as Burford's YPF assets did at 46% of capital provision assets at the end of 2025.
•A large judgment is not cash, because appeals, enforcement and collection come after it, and Burford's $16.1 billion YPF judgment was reversed on appeal in March 2026.
•Funders do not usually run the case, because commercial agreements leave strategy with the client and the lawyers, which is why counsel quality is a core underwriting factor.

Technical details

Worked example (illustrative): a single funded case

Funder deploys $5.0 million for legal fees and costs.

Terms: the greater of 3.0x deployed or 25% of proceeds.

Settles for $40 million: 3.0x = $15.0 million, 25% = $10.0 million, so the funder receives $15.0 million and the claimant $25.0 million.

Case loses: funder receives $0; the claimant owes nothing on the funding.

At a 60% chance of the settlement outcome, expected proceeds are $9.0 million, 1.8x. Over 3 years that is about 21.6% a year; if the case takes 5 years, about 12.5%.

How the money moves

Investors commit capital to a funder's fund or buy a listed funder's shares.

The funder signs a funding agreement with a claimant or a law firm, after diligence; GAO found about 5% of formal requests at two funders became agreements.

Capital pays lawyers, experts and costs, or goes to the client as a monetization advance.

On settlement or judgment, proceeds pass through the agreement's waterfall: the funder's return, then the client.

The fund passes realizations to investors after its own fees and carried interest.

What AltStreet's reviews and filings show

Burford's Form 10-Q for September 30, 2026 reports an 81% ROIC and a 25% IRR on its concluded and partially concluded balance-sheet assets since inception, on $4.01 billion of cumulative realizations across 303 concluded assets, with a weighted average life of 2.7 years weighted by realizations.

AltStreet's Omni Bridgeway review (October 31, 2026) reports the company's own figures: 2.4x gross on 822 completed investments at June 30, 2026, unaudited and before fees, excluding the 12 investments over A$20 million, which returned 1.54x; 179 of the 822 lost, recovering 0.15x.

AltStreet's Legalist review (updated August 19, 2026): $2 billion of AUM across litigation, DIP and government receivables, 248 realizations with a two-thirds win rate, case sizes of $50,000 to $5 million, $1 million minimum.

AltStreet's LexShares review (updated August 19, 2026) contrasts a 47% median net IRR marketed at the Fund II launch with roughly 4% net IRR on Fund I's resolved cases, and found carry charged deal by deal; Fund III was canceled in August 2024.

Burford's YPF-related assets rested on a $16.1 billion judgment against Argentina entered September 15, 2023; the Second Circuit reversed it on March 27, 2026, and the assets' consolidated fair value fell from $2.6 billion at December 31, 2025 to $145.9 million at September 30, 2026.

Questions before investing

Is the track record on concluded cases or on all capital, and gross or net of fees and carry?

What share of the book is in the largest case, defendant or legal theory?

What are the expected and the historical durations, and what happens to returns if cases run longer?

Is carry charged across the fund or deal by deal?

What are the minimum, the lock-up and the eligibility tests (accredited investor, qualified purchaser)?

How investors apply the term

Investors usually apply this term by tying the definition back to the controlling documents and then asking which cash flows, rights, restrictions, or valuation assumptions it changes. A useful review looks at the term alongside fees, leverage, liquidity, reporting frequency, and manager discretion rather than treating it as a standalone concept.

The practical diligence test is simple: identify who benefits if the assumption is wrong, who has control when conditions change, and what evidence the investor receives after closing. Terms that cannot be reconciled to documents, cash movements, and monitoring data should be treated as marketing shorthand until proven otherwise.

Frequently asked questions

How does litigation finance work for investors?: Investors put money into a funder, usually through a private fund or by owning a listed funder's shares. The funder pays legal fees and costs on a case, or advances cash against its expected value, and is repaid from the settlement or judgment, typically as a multiple of what it put in, a percentage of the recovery, or a rate of return, per GAO (December 2022). If the case loses, the funder recovers nothing from that case, so the investor's return depends on the funder's win rate, the size of wins and how long cases take.
Who can invest in litigation finance?: Mostly institutions and wealthy investors. AltStreet's reviews found Omni Bridgeway's funds limited to non-retail investors with a US$1 million minimum on its US adviser's Form ADV, and Legalist's litigation funds at a $1 million minimum for endowments, foundations and family offices. Individuals can buy listed funders' shares, such as Burford Capital (BUR). LexShares, the retail platform, entered harvest mode in August 2024 and is not accepting new investors.
What returns have funders reported?: Wide ranges, on different bases. Burford reports an 81% ROIC and 25% IRR on concluded balance-sheet assets as of September 30, 2026; Omni Bridgeway reports 2.4x gross on 822 completed investments, unaudited and before fees; LexShares' Fund I has tracked roughly 4% net IRR on resolved cases. Concluded-case figures exclude pending cases and, for Burford, fair value changes, so they are not fund returns to an outside investor.
How long does money stay tied up?: Years, and longer than planned in many cases. Burford's concluded assets had a weighted average life of 2.7 years (weighted by realizations) at September 30, 2026. Omni Bridgeway's average time to completion by completion year rose from 2.7 years in FY2019 to 4.6 years in FY2026, per AltStreet's review. Burford's 2025 10-K says court backlogs slowed some matters and 'extensions of expected duration reduced the fair value of certain assets.'
Is litigation finance regulated?: Not as a category under federal law. GAO found that 'the third-party litigation financing industry is not specifically regulated under U.S. federal law,' while some states regulate consumer funding, for example by capping fees, and there is no nationwide requirement to disclose funding agreements in federal litigation. Funds that sell interests to investors are still subject to securities law: AltStreet's reviews found Legalist's litigation funds offered under Rule 506(b).
Does the funder control the case?: Commercial funders say no. Burford states that its agreements 'explicitly state that control of litigation and arbitration decision-making remains with the client' except in extraordinary circumstances agreed in advance, and all seven commercial funders GAO interviewed said they did not make decisions about litigation strategy. Agreements can still require consent or notice for settlement, so the terms matter.