Longford Capital Raises $682 Million for New Investment Fund
Longford Capital Management, LP, a leader in commercial litigation finance, announced the final closing of its most recent fund (including a parallel fund, “Fund III”), at $682 million. Longford’s assets under management now exceed $1.2 billion, placing it among the largest private equity firms focused on investments in legal assets. Fund III is the third private investment fund Longford has closed since the firm began operating in 2013.
Fund III includes repeat investors from Funds I and II, as well as many new investors, attracting capital from state and municipal pension funds, university endowments, foundations, single and multi-family offices, and high-net-worth individuals. Fund III will invest in the outcomes of commercial disputes, antitrust and trade regulation claims, and intellectual property claims that Longford believes to be highly meritorious and have a strong likelihood of success. Fund III has already committed nearly $270 million to new investments.
“Litigation funding continues to gain acceptance among law firms, their clients, and investors alike,” said Timothy S. Farrell, co-founder and managing director of Longford Capital. “We have seen significant growth in interest in litigation finance from leading institutional investors and high-net-worth individuals eager to put their money to work in an uncorrelated asset class.
“The significant capital we have raised gives us the latitude to be flexible and to innovate,” he added. “Groundbreaking agreements with top law firms – like our arrangement with Willkie Farr & Gallagher – are hallmarks of our innovative approach and how we seek to generate returns for our investors. We are grateful for our investors and our law firm and corporate partners.”
Since 2017, Longford has doubled the size of its underwriting team to manage the growing demand for its capital and added several talented business executives to scale its business.
“We’ve assembled an exceptional team of former first-chair litigators from leading law firms and experienced executives from great companies, and our team is the wellspring of our success,” said Farrell. “Private practice litigators and corporate general counsel bring their matters to Longford because our team has walked in their shoes, and each member dedicates his and her thoughtful, diligent and individual attention throughout the lifespan of a matter. This will remain a key element of our culture as we continue to scale our business.”
About Longford Capital
Longford Capital is a private investment company that provides capital to leading law firms, public and private companies, research universities, government agencies, and other entities involved in large-scale, commercial legal disputes. Longford was one of the first litigation funds in the United States and is among the world’s largest litigation finance companies with more than $1.2 billion in assets under management. Typically, Longford funds attorneys’ fees and other costs necessary to pursue meritorious legal claims in return for a share of a favorable settlement or award. The firm manages a diversified portfolio and considers investments in subject matter areas where it has developed considerable expertise, including business-to-business contract claims, antitrust and trade regulation claims, intellectual property claims (including patent, trademark, copyright, and trade secret), fiduciary duty claims, fraud claims, claims in bankruptcy and liquidation, domestic and international arbitrations, claim monetization, insurance matters, and a variety of others.
These types of situations (shown above to the right of the arrow) resemble business negotiations moreso than binary litigation, and can be modeled to resolve in a more predictable fashion. By the nature of a credit-oriented investment strategy, an IP-focused Private Credit fund targets the latter opportunity set, whereas the litigation finance market has shown a willingness to fund what we characterize as the riskier, more binary type enforcement situations. Accordingly, while litigation is not necessarily an outcome that results from such an investment, a manager that invests in the sector does need to expect, plan and prepare for litigation as a potential outcome, or at the very least as a means to an end. The idea, as with most litigation, is that ‘saner heads will prevail’ and that a commercially reasonable settlement will be achieved by both parties prior to embarking on expensive litigation. Of course, this means that the onus is on the investor to understand the merits of the case and the plaintiff’s strategic position, potential defenses, procedural activities that could frustrate or delay litigation, and the costs associated therewith. The complexities associated with understanding the value of intellectual property assets, and the complexity of the litigation process, make the sector a highly specialized area for investors who are often best served by investing with or alongside specialist managers. 
Slingshot Insights Secular shifts in the economy should be forcing investors to think about value in different ways. It’s indisputable that intellectual property is clearly the basis for technology company valuations, and therefore value must be attributable to IP when considering financing alternatives. While understanding the value inherent in intellectual property can be difficult, fund managers with specific expertise exist to allow investors to allocate capital in an appropriate risk adjusted manner. The fact that the insurance industry is now providing insurance products geared toward intellectual property is a testament to how far the industry has come and how significant the opportunity is, and perhaps much less risky than one would think, if approached prudently. I believe the IP Credit asset class has a bright future, as existing players have had great success producing consistent returns in a sector that one might otherwise believe to be volatile. As always, I welcome your comments and counter-points to those raised in this article. 
Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry. Slingshot Capital inc. is involved in the origination and design of unique opportunities in legal finance markets, globally, investing with and alongside institutional investors. 
Soryn IP Capital Management LLC (“Soryn”) is an investment management firm focused on providing flexible financing solutions to companies, law firms and universities that own and manage valuable intellectual property (“IP”) assets. Soryn’s approach employs strategies, including private credit, legal finance, and specialty IP finance, which enable it to invest across a diversity of unique IP-centric opportunities via investments structured as debt, equity, derivatives, and other financial contracts. The Soryn team is comprised of seasoned IP and investment professionals, allowing the firm to directly source opportunities less travelled by traditional alternative asset managers.
Reflecting their specialization, however, these funds’ management possess an interdisciplinary expertise in IP, and are concentrated on opportunities where the underlying asset value supporting the investment is intellectual property. Given the flexibility within these strategies, and the skillset of those managing the capital, this new genre of IP-focused investor will likely be an important source of strategic capital available in IP-intensive sectors. IP VALUE PROPOSITION According to recent reports, intangible assets represent ~90% of the S&P 500 market value compared to ~30% in 1985. Other studies estimate that intellectual property — a subset of the intangible asset class — represents more than a third of the market value of US publicly traded companies. 
Intellectual property refers to creations of the mind, such as inventions, literary/artistic works, designs and symbols/names/images used in commerce. The primary forms of intellectual property are:
IP VALUE CREATION IP gains sufficient value to form the foundation for a financial transaction, when third party commercial actors have either begun to use the IP or desire to use it in the future. When this situation occurs, IP rights can create value in several ways, including:
Although IP offers a unique and significant source of value, many owners and managers of IP experience difficulty when attempting to leverage their IP to achieve an appropriate risk-adjusted cost of capital due to the lack of IP expertise, and/or transactional flexibility among the investing community. As such, the new genre of IP Private Credit funds may prove to be an important source of strategic capital available in IP-intensive sectors. IP CREDIT IP Credit generally involve highly structured, privately negotiated financial contracts of varying types. Counterparties are often companies possessing valuable IP portfolios, which are underserved by the capital markets. The strategy seeks to provide these IP owners with differentiated financing solutions through flexible and creative structures that offer attractive risk-adjusted returns. Just as private debt funds take different shapes and sizes, so too does an IP Credit fund. Portfolio composition, while manager or mandate-specific, focuses on financing opportunities across the capital structure wherein IP forms a material component of a transaction’s value proposition. Where the underlying IP, and/or associated rights or income streams can be assigned predictable licensing, monetization, and/or sale value, various transactions can be structured to leverage or maximize the value of the associated IP. Investment Types Investment types in the Private Credit strategy include senior loans, loans secured by IP, loans secured by legal judgments, loans secured by insurance policies, convertible debt instruments, highly structured preferred equity, common equity, and warrants. The types of credit products involved in an IP Credit strategy are generally not limited. Deal Structuring The duration of Private Credit investments is generally one to five years, and expected returns on these investments will vary based on the existence of negotiated downside protections. The underlying investments in an IP-focused Private Credit Strategy can feature a plurality of terms and structures designed to solve for an appropriate risk-adjusted cost of capital, including:
