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2020 Co-Investment Survey Results

The following article is part of an ongoing column titled ‘Investor Insights.’ 

Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance. 

EXECUTIVE SUMARY

  • Survey suggests the litigation finance industry has demand for co-investment capital
  • Speed to commitment and having a fully funded commitment ranked highest in terms of co-investor characteristics
  • Most funders expect a co-investment commitment within less than 4 weeks

INVESTOR INSIGHTS

  • While investors might be attracted to co-investment opportunities, diversification is a strong component to successful long-term investing in commercial litigation finance
  • Co-investing should only be considered in the context of creating a portfolio, or to add specific exposures to an existing portfolio, but should never be viewed as a single investment

Slingshot Capital and Litigation Finance Journal recently undertook a survey of commercial litigation finance participants to obtain a deeper understanding of the extent to which there is demand for third-party co-investment capital.

The survey was distributed globally, with the majority of responses coming from constituents in the USA (50%) and UK (18%) markets, or from funders that invested globally (18%).  Of the responses, 22% were from advisors/intermediaries and 78% were from funders (with the vast majority of funders having dedicated litigation finance funds).

Co-Investment in Litigation Finance

 Co-investment opportunities are an attractive sub-set of opportunities for many investors in a variety of asset classes, with particular appeal for private equity (buy-out, growth equity, real estate and venture capital) asset classes.  However, in the context of litigation finance, an investor needs to take a different perspective when considering co-investment opportunities.

Whereas it may be perfectly acceptable for a family office, endowment or pension plan to co-invest in a specific private equity opportunity as part of their larger portfolio, the quasi-binary nature of litigation finance should make investors think twice about how they approach investing in litigation finance.  The key difference lies in the probability weighted set of outcomes accorded to each asset class. In a private equity buy-out transaction, a high number produce positive results, and the results vary across a spectrum of potential return outcomes (from 1+ X original investment, to a 5+ X original investment).

In litigation finance, even though many cases settle before going to court, there tends to be two outcomes – a win or a loss.  The wins are allocated across a tighter spectrum than private equity, and the losses tend to be absolute (with exceptions).  Accordingly, due to the quasi-binary nature of the outcomes of litigation finance, co-investing should only be considered where the investors are committed to assembling a portfolio of such co-investment opportunities, and have the ability to assess the fundamental aspects of litigation finance.  Alternatively, to the extent an investor has existing investments in litigation finance, but is looking to round out his or her portfolio with specific case exposures to achieve a particular portfolio objective, co-investment opportunities may play a role in that investor’s portfolio construction approach.

2020 Co-Investment Survey results are summarized below:

Demand

Of the 23 respondents, 70% stated they had a need for co-investment capital, whereas 30% did not.  However, 13% indicated that the need for co-investment was occasional, and that sometimes their LPs had pre-emptive rights with respect to investing in those opportunities.

Frequency

In terms of frequency of co-investment opportunities, almost 50% of respondents indicated they have from 1 to 5 opportunities in a given year, with just over 20% in the 6-10 range, and a few managers indicating they had 20 such opportunities in a given year.  The number of opportunities directly correlated with the size of the funder and the size of the cases they typically finance.

Co-Investor Characteristics

Regarding the characteristics that are most important in a co-investment partner, speed to commitment and having a funded capital source ranked the highest, with responsiveness and understanding complex litigation also ranking highly.  However, there was not a huge disparity in terms of the importance of the six criteria listed, suggesting that all criteria were factored into their decision-making process. Keep in mind that the compilation of rankings on the chart below is an average of the six criteria, so a high number on the chart should be viewed as being more important (even though that answer drew more 1’s and 2’s), whereas a low number on the chart should be viewed as less important. For example, ‘Speed to Commitment’ and ‘Having a Funding Capital Source’ both received the most 1’s and 2’s, but their average ranking is the highest and therefore most important.  ‘Flexible Capital’ received the most 6’s, but has the lowest average score, and is therefore the least important metric.

When we dive further into the ‘speed to commitment’ characteristic, we find the vast majority of respondents expect a commitment within 3-4 weeks.  It remains to be seen if expectations and reality are in alignment, a good question to include in the next survey.

Expected Duration

With respect to the underwritten expected duration, most fall within the 12-36 month range, which is consistent with duration expectations for the industry as a whole.  However, 30% of respondents did indicate that duration was a function of the type of case being underwritten, with certain case types (patent, international arbitration, etc.) having longer durations and appeal cases having shorter durations.

Co-Investment Structuring

In terms of insight into how these co-investment transactions are typically structured, the responses varied.  In the ‘other’ category, some respondents indicated they have used a variety of the choices offered, whereas one respondent stated that they received a specified interest in the profits produced by the investment.

Current Co-Investors

As it relates to where the current co-investment opportunities are being offered, the majority were offered to other funders, suggesting there is a fair amount of cooperation in the litigation finance marketplace.  However, within the ‘other’ category, most respondents suggested it was a combination of all of the choices listed.

This brings to a close the results of our first commercial litigation finance co-investment survey.  Slingshot Capital and Litigation Finance Journal would like to thank those that participated in the survey for their time and feedback.

Our next survey will cover fundraising initiatives by fund managers in the commercial litigation finance sector. We anticipate making the fundraising survey an annual survey so we can track fundraising activities over time.

If you would like to participate in future surveys, please contact Ed Truant here to register your interest.

Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry.

Commercial

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Community Spotlights

Community Spotlight: James Koutoulas, CEO, JurisTrade & Typhon Capital Management

James Koutoulas is the CEO of JurisTrade as well its asset management affiliate, Typhon Capital Management, which is a multi-strategy hedge fund with US and Cayman private fund platforms. He is also Managing Member of Koutoulas Law, LLC, a law firm specializing in high-profile financial services litigation.

James founded Typhon in 2008 and it has since grown to 25 staff members, 15 (including many award-winning) trading strategies with operations in 4 countries and 8 cities. While running Typhon, he served as lead customer counsel in the MF Global bankruptcy, leading the recovery of all $6.7 billion in customer assets.

He has successfully litigated a multi-billion cryptocurrency fraud class action, a statistical arbitrage IP theft arbitration, a breach of contract jury trial against a billion-dollar asset management, and a capacity-rights guarantee contract dispute against a quantitative hedge fund. He is a frequent contributor to CNBC, thestreet.com, CoinDesk, and other prominent media outlets. He served on the Board and Executive Committee of the National Futures Association, the derivatives self-regulatory organization, where he helped implement the Dodd-Frank rules on the multi-trillion-dollar swaps market and has advised Congress on commodity and bankruptcy laws and regulations.

James has a JD from the Northwestern University School of Law with a securities concentration.

Company Name and Description: JurisTrade has designed a Litigation Asset Marketplace (operated by trading affiliate, Typhon Capital Management) to package and/or securitize litigation finance solutions to law firms, owners of bankruptcy, mass tort, and other litigation claims, and third-party investors looking for exposure to the asset class. JurisTrade offers a new and disruptive solution: it allows law firms, plaintiffs, and/or those with a financial interest in litigation the opportunity to sell or assign an interest in litigation outcomes to qualified investors in a much more efficient manner than is currently available.

Typhon Capital Management is a multi-strategy hedge fund specializing in tactical trading strategies designed to be uncorrelated to traditional markets under most market conditions and have strong negative correlation during periods of stress. Typhon dedicates itself to developing unique strategies that are truly differentiated and perform when almost everything else fails. Typhon uses unique, modular strategies as building blocks to design bespoke products to meet each investor’s individual needs.

Company Website: https://juristrade.com/ & https://typhoncap.com/

Year Founded: JurisTrade – 2023 & Typhon - 2008  

Headquarters:  1691 Michigan Ave Suite 200, Miami Beach, FL 33139

Area of Focus:  JurisTrade – Litigation Finance & Typhon Capital Management – Finance, Alternative Investments

Member Quote: “By adding standardization, liquidity, and transparency to the nascent but growing litigation finance market, we will institutionalize one of the final frontiers in asset management.”

Announcements Commercial Deals

Angeion Group Expands Mass Tort Litigation Management Capabilities Through Merger with Case Works

By Harry Moran and 4 others |

Angeion Group (“Angeion”), the industry leader in end-to-end group litigation support, announced today its merger with Case Works, a premier provider of case data management solutions, including client engagement, medical record retrieval, medical review, and inventory analysis. Neutral, but never passive, this strategic integration of Case Works reinforces Angeion’s forward thinking approach to providing seamless tech-enabled support for complex litigation firms and leading law departments, with efficiency and precision.

The merger of Angeion and Case Works follows majority investments into both companies by private equity firm Renovus Capital Partners (“Renovus”) in 2024. Angeion also acquired bankruptcy administration solutions provider Donlin Recano in late 2024. Renovus worked alongside the companies’ founders and management teams to unify the businesses and deliver a seamless experience for clients and employees throughout the integration.

Case Works has earned a reputation of excellence by ensuring accuracy, completeness, and applicability of case data to support legal requirements. By combining their core capabilities with Angeion’s advanced technology and data-driven approach, this merger further solidifies Angeion’s position as the most trusted partner for navigating complex, high-stakes litigation and settlements.

Effective large-scale litigation and settlements rely on comprehensive, well-organized data and the ability to apply that data effectively within the context of a particular project. Combining Case Works’ proven excellence in capturing and managing critical case information with Angeion Group’s expertise in technology, process efficiency and claims management, provides a more structured, more transparent, and more effective approach to large-scale litigation and settlement management.

“Case Works brings deep expertise and a proven track record of supporting firms with large data and medical record retrieval needs. They are known for their dedication to precision, care and bedside manner,” said Steven Weisbrot, CEO of Angeion Group. “Together, we are raising the bar for what clients can expect—faster, more accurate processes and a commitment to white glove service.”

Angeion Group and Case Works share a common vision: to set the new standard for how large-scale litigation and group settlement support can combine technological efficiency with thoughtful human interaction. Both organizations are driven by a commitment to innovation, precision, and efficiency and are mindful that litigants should expect and receive compassion and respect throughout the group litigation process. This merger will elevate industry standards and ensure that all parties, their council, and the courts benefit from a more streamlined, thoughtful and effective process.

“We’re excited to join forces with Angeion Group,” said Susan Barfield, Founder of Case Works. “Their commitment to innovation and client service aligns perfectly with our own, and we look forward to delivering even greater value to the firms and clients we support.”

“We’re honored to have partnered with these leading companies, building upon our strong track record in tech-enabled legal services,” added Lee Minkoff, Managing Director at Renovus. “We’d also like to thank founders Steve Weisbrot and Susan Barfield for their leadership throughout this game changing merger for the group litigation support industry.”

Angeion remains steadfast in its mission to completely modernize and optimize complex litigation management to the benefit of all stakeholders.

About Case Works

Case Works is the leading provider of tech-enabled litigation support solutions to the country’s premier plaintiff law firms. Based in Austin, Texas, the Company was created with a single mission: To Help Lawyers Help People. Case Works provides a full suite of case management services including claims qualification, intake, medical records retrieval & review, case development, and ongoing plaintiff engagement.

About Angeion Group

Angeion Group is a leading provider of legal notice and settlement administration services, leveraging advanced technology, proven best practices, and expert consulting to manage class actions, mass torts, and collective redress administration. Recognized for its innovation, efficiency, and unwavering client commitment, Angeion Group continues to redefine industry standards.

Commercial Fundraising

Nicola Horlick Pauses Digital Bank Launch to Raise Funds for Motor Finance Claims

By Harry Moran and 4 others |

As LFJ covered last week, the group proceedings being brought against motor finance providers over commissions paid to dealers is attracting a significant amount of interest across the legal funding industry, with the possibility of lucrative settlements to come. 

An article in Financial News features an interview with investment fund manager Nicola Horlick, who discusses her focus on litigation funding for the high-profile motor finance claims in the UK. Horlick, founder and CEO of Money&Co, explained that her company is currently raising funds to lend to law firms that are working on the car finance commission claims. Speaking about the significance of these claims to the wider legal funding industry, Horlick argued that “this is the biggest thing that is likely to happen in litigation funding in the next 15 years.”

The emphasis placed on raising funds for these claims has caused Horlick to pause her plans to launch a digital bank in 2025, with the fund manager explaining that they “don’t have the bandwidth to do the fundraise for that and the bank”. Horlick went on to state that fundraising for the claims “has to be the priority”, and that in the time before these claims begin to reach settlements, “we need to help clients amass as many claims as possible.”