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“Edge” for Litigation Finance Managers

July 22, 2020

“Edge” for Litigation Finance Managers

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 SUMMARY
  • As the litigation finance industry matures, there will be more competition, more fragmentation and more specialization
  • Competitive advantages will be necessary for managers to differentiate themselves in the marketplace and produce strong risk-adjusted returns
  • Managers should institutionalize their “edge” to create equity value for themselves, and separate the value of their organizations from the principals running it
INVESTOR INSIGHTS
  • Investors should be looking for managers that have some advantage, or “edge” vis-à-vis their competition; an informational advantage is one approach
  • Funders should be open-minded about their diligence process, and experiment with non-conventional approaches to add value to the case
  • Informational advantages may be particularly beneficial in collections and enforcements
In the capital markets industry, there is a concept referred to as “edge”, which can be defined as any legal form of information, insight or proprietary process or knowledge which an investor possesses that allows him or her to outperform peers and generate alpha.  Investors look for managers with “edge” as a point of differentiation, and as a means to lower risk and enhance returns in a given investment strategy. In thinking about how a litigation funder can develop ‘edge’, one option is to acquire an informational advantage that enables the funder to invest where others do not dare to tread, or avoid investing where the path is well worn.  One way to obtain an informational advantage is to look where others are not looking.  Today, we have at our disposal the world’s largest accessible database free for anyone to access – the worldwide web.  We also have the so-called “dark web”, where fewer dare to participate, but which may possess insights nonetheless. In order to get a better perspective on the nuggets of gold that lie within the web, I decided to reach out to Cameron Colquhoun of NEONCentury, a UK-based intelligence firm, to better understand how the litigation finance community may be able to generate edge. The Web…. In some ways, little has changed about our use of the internet in 30 years: we all still use screens, keyboards and mice to open windows and browser pages. What has changed, without exception, is the size of the world behind our screens – which is far bigger than our brains and imaginations can appreciate. As of 2016, Google revealed it knew of 130 trillion web pages, and the real number today is likely to exceed 200 or 300 trillion. To put it another way; as the Head of Security at Twitter pointed out back in 2011, one-in-a-million events happen on the internet every second, and one in a billion events happen almost as frequently. It is a mathematical near-certainty that within all of this data, game-changing intelligence is sitting there, waiting to be found – vital to the success of any litigation. The truth is, very few law firms or investors understand this reality, and therefore rarely ever engage or commission the type of intensive, detailed online investigations that are required to push the confidence intervals of success up by 1, 2, 5, 10 or even 20%. In the biggest cases, this can mean tens if not hundreds of millions of dollars of difference in settlement. …and the Dark Web The dark and unindexed web is another part of the web that is as yet untouched by both law firms and litigation finance. In particular, leaked data and data ‘dump’ sites hold huge amounts of pivotal intelligence. The most prominent case of leaked data to date is of course the Panama Papers, where millions of files belonging to a single Panamanian law firm were leaked online and led to over $1.2bn in recoveries (the real figure is likely to be far higher, as most countries do not make settlement data public). Dozens of prominent individuals had their assets exposed, and with millions of documents available to research – many more hidden assets and frauds are likely to be revealed amongst the 11.5 million files. Every time a new major leak is released online, (more recently BlueLeaks and 29Leaks), law firms or litigation financiers should be feverishly combing through its contents looking for angles. Case Study At NEONCentury, we are often tasked with conducting investigations prior to a potential litigation. In one case, a hedge fund asked for our help as they believed a group of CEOs were meeting in secret, and were considering a litigation. This global company, they suspected, was going to be sold for several billion below market value in some kind of backroom boys club deal. Using our data capabilities, we tracked the private jets owned by those who attended these meetings, but the planes were delisted from public view (this is known as a BARR / LADD request and often used by CEOs and Ultra High Net Worth investors for anonymity). BARR-listed jets do not appear on sites like FlightRadar and FlightAware. However, these aircraft, by law, must emit radio signals (ADS-B) data, and using the right online databases and sources, the aircraft can be tracked and historical manifests can be discovered. We were able to conclusively prove that the private jets belonging to three members of the secret meetings were all on the same runways at multiple times and locations, giving our client a route to a potentially multi-billion dollar litigation. It is difficult to imagine a single law firm on the planet that would have these capabilities in-house, or even understand the ‘art of the possible’ when it comes to open data. Today, litigation financiers allow law firms to manage the research and investigation sides of a case, hoping that either the law firms’ in-house research teams or external corporate intel firms might yield further intelligence to tip the outcome in their favour. Law firms are not known for their technological prowess or understanding of the internet, generally, and therefore the litigation finance world may be missing real value in allowing law firms to manage the technical and cyber side of a case on their behalf. …the “Edge” If investors can accept that game-changing intelligence for any litigation is out there in the public domain, they may be better-prepared to commission this research directly with corporate investigations firms *before* any litigation is even considered. Investors would then be forearmed with a much stronger hand when they engage both law firms and claimants. This approach would greatly improve the ROI of litigation finance, and is analogous with the world of hedge funds and short-sellers. Many of these firms spend months or years investigating a company, searching for hidden value or opportunity. In the case of Wirecard, hedge funds discovered evidence of fraud just by conducting deep online investigations of Wirecard’s clients. Some walked away with billions in returns on this research. There is no reason why the same approach cannot be applied to the world of litigation finance: forward-thinking investors, who understand the power of corporate intelligence and the scale of the internet, can partner with world class investigators, and take these results to the right law firms to alter the course of multimillion and multibillion-dollar litigations. Investor Insights As the litigation finance industry matures, there will be a significant increase in managers who are attracted by the returns inherent in the industry, and the intellectual challenge of applying their litigation craft in another application.  The industry will scale, fragment and specialize.  This will make it more difficult for fund managers to differentiate their approach and value.  Forward-thinking managers should be looking at ways to create “edge” for themselves to attract institutional capital and generate superior risk-adjusted returns.  An informational advantage is one such way to create “edge”. As always, I am open to criticism and other points of view, so feel free to contact me to exchange ideas.  Edward Truant is the founder of Slingshot Capital Inc., an investor in the litigation finance industry (consumer and commercial) and a former partner in a private equity.  Ed is currently designing a new fund focused on institutional investors who are seeking to make allocations to the commercial litigation finance asset class.  Cameron Colquhoun is the founder of Neon Century, a former UK intelligence officer and winner of the Fulbright Award for Cyber Security. Neon Century is an elite corporate intelligence firm based in London, providing clients in the hedge fund, equity and litigation sectors with decisive advantage.

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Commercial Regulatory Issues

Rep. Issa’s Litigation Funding Transparency Effort Falters in House Judiciary Committee

By John Freund |

The latest attempt to legislate transparency in U.S. litigation funding stalled in the House Judiciary Committee this week when the committee considered the Protecting Third Party Litigation Funding From Abuse Act but recessed without ever voting on the measure and did not reconvene to advance it. The bill, introduced by Representative Darrell Issa of California, has now effectively been pulled from further consideration at this stage.

An article in IPWatchdog states that the Protecting Third Party Litigation Funding From Abuse Act was debated alongside other measures during a lengthy markup that focused primarily on immigration enforcement issues. The measure closely tracked a previous effort, the Litigation Transparency Act of 2025, also spearheaded by Issa, which sought to require parties in civil actions to disclose third party funding sources and related agreements. Like its predecessor, the current bill faced procedural challenges and competing priorities in committee, and did not reach the floor for a vote before lawmakers recessed.

Issa and his co-sponsors have framed the effort as necessary to illuminate so-called abuses in the U.S. litigation system by requiring the identity of third party funders to be disclosed to courts and opposing parties. But the repeated failure of similar bills to gain traction reflects deep partisan and practical concerns. Opponents argue that broad disclosure mandates could chill legitimate funding arrangements and impede access to justice, while supporters insist that transparency is essential to protect defendants and the legal system from hidden financial interests.

The stall of this latest proposal comes amid other congressional efforts on litigation finance, including separate proposals to address foreign funding in U.S. courts, but underscores the political and policy challenges in regulating private capital in civil litigation. With the bill pulled, stakeholders will watch for whether future iterations emerge in committee or form the basis of negotiations in upcoming sessions.

Commercial Regulatory Issues

Malaysian Bar Backs Arbitration Funding Reform

By John Freund |

The Malaysian Bar has publicly endorsed Malaysia’s newly implemented legislative framework governing third party funding in arbitration, while cautioning that all stakeholders must remain vigilant as the regime is put into practice. The comments come as Malaysia formally joins a growing group of jurisdictions that have moved to regulate litigation and arbitration funding rather than prohibit it outright.

An article in Business Today Malaysia reports that the Malaysian Bar welcomed the coming into force of the Arbitration Amendment Act 2024 on 1 January 2026, which abolishes the long standing common law doctrines of maintenance and champerty in the context of arbitration. The new law expressly permits third party funding for arbitral proceedings and introduces a regulatory structure aimed at balancing access to justice with procedural fairness and independence. According to the Bar, the reforms are a positive and necessary step to ensure Malaysia remains competitive as an international arbitration seat.

The legislation includes requirements for funded parties to disclose the existence and identity of any third party funder, addressing concerns around conflicts of interest and transparency. It also introduces a code of practice for funders, designed to ensure that funding arrangements do not undermine counsel independence, tribunal authority, or the integrity of the arbitral process. The Malaysian Bar emphasised that funders should not exert control over strategic decisions, evidence, or settlement, and that tribunals retain discretion to manage funding related issues, including costs and security for costs applications.

While acknowledging ongoing concerns that third party funding could encourage speculative or unmeritorious claims, the Bar took the position that ethical and well regulated funding should not be viewed as a threat to arbitration. Instead, it framed funding as a legitimate tool that can enhance access to justice for parties who might otherwise be unable to pursue valid claims due to cost constraints. The Bar called on lawyers, arbitrators, institutions, and funders to uphold both the letter and the spirit of the new law as it is implemented.

Commercial People Moves

Omni Bridgeway Appoints Nathan Krapivensky as Investment Advisor

By John Freund |

Global litigation funder Omni Bridgewayhas announced the appointment of Nathan Krapivensky as an Investment Advisor, reinforcing the firm’s ongoing focus on deepening its investment expertise and strengthening origination capabilities across complex disputes.

Omni Bridgeway states that Krapivensky joins the business with extensive experience spanning litigation finance, complex commercial disputes, and investment analysis. In his new role, he will advise on the assessment and structuring of potential investments, working closely with Omni Bridgeway’s global investment teams to evaluate risk, quantum, and strategic considerations across funded matters. The appointment reflects the firm’s continued emphasis on disciplined underwriting and the development of sophisticated funding solutions for corporate clients, law firms, and claimants.

According to the announcement, Krapivensky brings a background that combines legal insight with commercial and financial acumen, positioning him to contribute meaningfully to Omni Bridgeway’s case selection and portfolio construction processes. His experience in analysing disputes at various stages of the litigation lifecycle is expected to support the firm’s efforts to deploy capital efficiently while maintaining rigorous investment standards. Omni Bridgeway highlighted that the role is advisory in nature, underscoring the importance of independent, high-quality judgment in evaluating opportunities across jurisdictions and asset classes.

The hire also aligns with Omni Bridgeway’s broader strategy of investing in talent as competition within the litigation funding market intensifies. As funders increasingly differentiate themselves through expertise rather than capital alone, senior advisory appointments have become a key lever for firms seeking to enhance credibility with sophisticated counterparties. By adding an experienced investment advisor, Omni Bridgeway signals its intention to remain at the forefront of the market for complex, high-value disputes.