Most investors haven’t heard of litigation finance yet, but awareness is rapidly growing as more people discover its potential as a high-yield alternative investment.

Litigation finance is an alternative investment class that has been gaining significant momentum in recent years. It attracts institutions and high-net-worth individuals seeking consistent, market-independent returns. Leading investment firms like Fortress Investment Group have already committed to this space, raising $1 billion for a dedicated litigation finance fund. With the global litigation finance market projected to grow at double-digit rates annually, it is expected to reach $67.2 billion by 2038.

This growing sector offers steady returns and is becoming increasingly recognised by investors worldwide.

What is Litigation Finance?

Legal cases often involve high upfront costs, which can be a major barrier for claimants and law firms alike. Litigation finance provides a solution by offering third-party capital to cover legal fees and disbursements. When a case is successful, the funder receives a share of the proceeds or a predetermined return.

As legal expenses continue to rise, more law firms, particularly in the UK, where many operate on a no-win, no-fee basis are turning to litigation finance because traditional bank loans are often unavailable. This growing demand extends beyond law firms to investors seeking strong, stable returns by backing promising legal cases.

Litigation funding supports a wide range of cases, from small consumer claims to large class action lawsuits. It helps law firms manage the financial risk of uncertain outcomes, free up capital to expand their business, and pursue the best possible results without the pressure to settle prematurely.

Well-known companies like Volkswagen, Uber, and Facebook (now Meta) have had lawsuits backed by litigation finance. For funders, returns vary depending on the case type, some earn a percentage of the case proceeds, others receive fixed repayments based on the loan size, or a combination of both, depending on whether the case is “small-ticket” or “large-ticket.”

Specialised litigation finance providers like Fenchurch Legal play a crucial role in funding cases that might otherwise never reach the courtroom, creating opportunities for investors and enabling fair access to justice.

Understanding Small-Ticket vs Large-Ticket Litigation Finance

Litigation finance varies depending on the case type and investment strategy. Some litigation funders specialise in small-ticket cases, which involve a high volume of lower-value legal claims such as personal injury, fraud, or housing disputes. These cases typically follow established legal precedents and have a strong probability of success. Because funders invest across multiple firms and many cases, the risk is diversified, meaning no single case significantly impacts the overall portfolio.

In contrast, other funders focus on large-ticket litigation finance, which involves high-stakes, high-cost lawsuits like mass torts and class action lawsuits. These cases offer the potential for significant payouts but also come with a higher risk of complete loss if the case fails.

For investors, small-ticket litigation finance acts more like a secured fixed-income investment. It provides steadier returns with lower risk and greater consistency. Large-ticket litigation finance, on the other hand, resembles venture capital investing. It carries higher risk but offers the potential for substantial rewards, making it more suitable for investors willing to take bigger bets on fewer cases.

Why Consider Litigation Finance as an Investment Opportunity?

Litigation finance is a unique alternative investment because its returns depend on the outcomes of legal cases rather than broader market fluctuations. This makes it a truly uncorrelated asset class, unaffected by economic downturns or stock market volatility. For investors seeking portfolio diversification and attractive risk-adjusted returns, litigation finance offers a compelling option.

A critical component in litigation finance is After-the-Event (ATE) insurance. Commonly used in small-ticket litigation funding, ATE insurance covers legal fees, disbursements, and adverse costs if a claim is unsuccessful. In contrast, large-ticket litigation cases may use ATE insurance more selectively, typically covering only disbursements or some legal expenses. When cases fail, law firms can recover costs through ATE insurance, reducing downside risk for investors. Because larger cases carry higher risk, their ATE premiums tend to be higher, reflecting increased coverage costs.

Small-ticket litigation finance often provides steady double-digit returns. By diversifying investments across many cases and leveraging ATE insurance protection, investors can carefully manage risk. Returns generally come from loan interest payments, positioning small-ticket litigation finance as a fixed income-style investment with returns independent of market swings. However, the high minimum investment requirements in this asset class can pose challenges for everyday investors seeking exposure.

How Can You Invest in Litigation Finance?

While litigation finance offers strong, uncorrelated returns, it’s typically out of reach for everyday investors due to high entry barriers.

To make this opportunity more accessible, we launched our Legal Finance Token ( ALFI) — a tokenised legal finance product that allows investors to access small-ticket litigation funding with ease. Developed in partnership with Fenchurch Legal, a leading UK-based litigation funder, ALFI gives you exposure to a diversified portfolio of vetted consumer legal claims. Each case is protected by After-the-Event (ATE) insurance, helping to reduce downside risk and enhance capital protection.

With ALFI, you get access to real-world legal finance combined with the flexibility of tokenisation. This lets you invest fractionally while maintaining full transparency and investor protection. ALFI is not a cryptocurrency. It is a regulated investment product that offers fixed-income-style returns, fully uncorrelated with traditional markets.

If you’re looking to earn alternative income through real assets, ALFI makes it possible.

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