
Litigation Finance Specialization: Focus on Public Sector Entities
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
INVESTOR INSIGHTS
Investor Insights The PSE sector is a vast segment of every country’s economy and litigation funders should be aware that significant opportunities may exist in the public sector given the sheer size of these organizations and the claims they may attract. While PSE motivations may be different than commercial entities, PSEs should understand that commerce lies at the core of litigation finance and that investors need returns commensurate with the risk they assume to ensure the long-term viability of the asset class. Disclosure and RFP processes may be problematic in the context of litigation finance given the nature of the financing, and so this issue needs to be dealt with early on in the process. PSEs should think about litigation funders not just as sources of capital, but trusted advisors that can add value above and beyond the capital they may provide. For litigation funders, PSE claims would likely qualify as ESG investing activities, given the social benefits that are derived from these activities.
Edward Truant is the founder of Slingshot Capital Inc., and an investor in the litigation finance industry (consumer and commercial). Ed is currently designing a new fund focused on institutional investors who are seeking to make allocations to the commercial litigation finance asset class.
Grant Farrar is the founder and managing director of Arran Capital Incorporated, which is currently raising capital to create the first fund specifically dedicated to investing in the PSE sector.
- Specialization has occurred and will continue to occur in the legal finance market.
- Public Sector Entities represent a unique plaintiff type which merits specialization
- Damages can be significant for PSE claims, which has implications on rewards and case duration
- Litigation finance for PSE plaintiffs is timely due to budget constraints exacerbated by the economic effects of the coronavirus.

- PSE claims are unique enough that specialization makes sense;
- Specialization by plaintiff type is unique and mitigates systematic risk attributable to specialization related to specific case types
- Investors need to be aware of duration risk associated with PSE claims due to claim size
- Investors need to ensure there is good alignment of interests and contractual arrangements between the PSE and their economic goals
- 35,000 cities, towns, villages, townships;
- 3,000 counties;
- over 52,000 special districts (such as airport, harbor, water and/or sanitary districts); and
- the remainder are school districts and other miscellaneous units.


