Litigation finance has come of age in a strong economy, but the circumstances may be changing. Speculation on an impending recession has been rumbling for a while now, fueled by nearly two years of market volatility. Conventional wisdom holds that law (and, by extension, litigation finance) is insulated from such conditions. A down economy, after all, often results in a spike in litigation — at least that’s the long-time talking point. And with funding more available now than ever before, it could mean upside in down times.
But is that really true?
Since the Great Recession a lot has changed. Litigation finance has grown from a nascent niche to a thriving industry, drawing increased attention from legislators and regulators (as we explored in our previous feature). It’s also continued to evolve as an asset class, which has fueled competition and more scrutiny from increasingly discerning investors.
This could be an important test. Would a harsh economy separate the wheat from the chaff, or lead to consolidation? Many of the early investments in litigation finance have matured. The vines are ripening, but how sweet are the grapes? We may be set to find out.
In this issue of LINE we’ll speak with experts in law, economics, and investment to see whether they expect that old conventional wisdom will hold true for litigation finance, or if we’re looking at a brave new world.
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