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2020 Co-Investment Survey Results

April 24, 2020

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.

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According to figures published by Bristol Law Society, the research was commissioned by customer conversation company Moneypenny and conducted by Censuswide among 2,000 UK consumers between June 8 and June 10, 2026. It examined how receptive people are to AI when dealing with different types of businesses, including legal providers.

Where law firms are concerned, willingness tracks closely with the simplicity of the task. Some 29% of respondents said they would be happy using AI for an initial enquiry and 28% for completing a questionnaire. That figure falls to 22% for receiving a case update and 17% for settling a bill. A substantial 38% said they would not be happy using AI for any legal-related communications at all.

The survey also found pronounced generational and gender divides. Among Baby Boomers, 51% rejected AI for any legal communications, as did 44% of Gen X, compared with 28% of Millennials and 26% of Gen Z. More women than men expressed reluctance, at 43% versus 33%.

Bernadette Bennett, Head of Legal at Moneypenny, said the results point away from a uniform approach. "The best customer experiences will be achieved by blending both tech and human communications seamlessly, with AI handling simple queries quickly and efficiently, but deferring consumers to a real person for sensitive issues," she said.

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Commercial Court Rules Funder Due-Diligence Communications Fall Outside Litigation Privilege

The Commercial Court has ruled that communications created to help a litigation funder decide whether to back a claim do not ordinarily attract litigation privilege, ordering disclosure of exchanges between a law firm and its funder in a long-running dispute against Uber.

As reported by Dorsey & Whitney, the decision in Uber London Ltd & Ors v Garry White & Ors; Mishcon de Reya LLP [2026] EWHC 1610 (Comm) arose from black-cab drivers' claim that Uber engaged in an unlawful conspiracy. Mishcon de Reya assessed the merits of the claim for funder Harbour in late 2017, before beginning to represent the drivers in October 2018. Uber sought disclosure of those pre-engagement communications.

The court held that the dominant purpose of the firm's exchanges with Harbour was to evaluate the claim as an investment, not to conduct litigation, and that such funder-facing material therefore falls outside litigation privilege. It distinguished a funder's investment decision from a litigant's own funding decisions, which the court treated as inseparable from the litigation itself.

The ruling carries practical weight for how funders and their counsel handle diligence. Documents prepared to win financial backing may be disclosable, and a confidentiality arrangement cannot retroactively strip a client of the right to relevant information a firm has already obtained. The decision adds to a growing body of UK authority testing when funding-related communications must be produced, reinforcing that privilege turns on the dominant purpose of each document rather than the mere involvement of a funder.

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The UK government has proposed a wide-ranging overhaul of the opt-out collective actions regime, including lifting the ban on damages-based agreements as a way to fund claims before the Competition Appeal Tribunal.

As reported by Legal Futures, the Department for Business and Trade's consultation would permit DBAs to fund opt-out proceedings, pointing to the Australian state of Victoria, where the government said funding rates have decreased and claimants have received superior returns since a similar change in 2020. The package is intended to broaden the funding options available to class representatives while addressing long-standing criticism that the regime favors funders over consumers.

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