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Cormac Leech on Litigation Funding as an Investment

July 21, 2021

Cormac Leech on Litigation Funding as an Investment

AxiaFunder is a new and innovative investment platform that focuses on litigation funding as an asset class. Founded by Cormac Leech, the UK startup caters to sophisticated investors. UK Investor Magazine explains that as an asset class, the main strength of litigation funding is its lack of correlation to the larger market. For the most part, the need for litigation is not dependent on any specific economic conditions. The following are some key takeaways from the podcast episode with Leech:   Q: Are there [investment] solutions for people who are looking into funding? CL: Absolutely, there are. Litigation funding is a relatively new asset class. As an industry it’s really only been active in the UK for around 15 years or so. It’s certainly grown strongly over the last five or ten years. Most of the providers of litigation funding are operating on a traditional model where they have a permanent pool of capital…they’re really only catering to private equity firms, which means lots of sophisticated investors cannot get access to the asset class. Q: How are cases vetted?  CL: So far, we’ve funded 12 cases based on having looked at over 300 cases. We have a very high rejection rate in terms of the number of cases we accept.  We talk through the process of how we vet cases. The first thing we look at are the legal merits of the case. The way we think about legal merits—there are two parts: we want to make sure that the claimants have the high moral ground. It has to be a case where you look at the story of the case, the claimants and the defendants, and there’s a clear indication that the defendants treated the claimants badly. You know it when you see it. The second question is to make sure the legal technical merits stack up. Other aspects include whether the defendant has money, and the ability and willingness to pay if there’s a settlement or judgement. There’s no sense winning the case if the defendant doesn’t have any money. We also look at the case economics to make sure that the value of the claim is big enough compared to what it’s going to cost to litigate. There needs to be a solution for adverse costs risk.  Q: Litigation funding is classed as an alternative asset class. One of the attractions typically is the low correlation with traditional assets such as stocks and bonds. How is that seen in the real world? CL: It’s interesting in terms of investor’s perceptions. It’s a very unusual period right now because equities have had a very strong run recently, and residential properties have had a strong run. Virtually every asset class has been increasing in value. Forward looking investors will probably realize that there’s limited upside for equities, and arguably limited upsides for property, at least on a real, inflation-adjusted basis. These asset classes have already had a tremendous run. I think smarter investors will be looking around for alternatives. It does make sense for investors to make some allocation into litigation funding—2% up to 5% of their portfolio. It is non-correlated, and the returns are very substantial.

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Private Investors Eye Profits in L.A. County Sex Abuse Settlements

An investigation reveals that private investors are positioning themselves to profit from the enormous pool of money flowing from Los Angeles County’s historic sex abuse litigation. The county has already agreed to spend nearly $5 billion this year resolving thousands of claims related to alleged sexual abuse in its juvenile detention and foster care systems, including a $4 billion settlement—the largest of its kind in U.S. history.

An article in the Los Angeles Times explains that proponents of this investor involvement argue such financing gives plaintiffs’ attorneys the capital they need to take on deep-pocketed defendants and helps victims who lack resources access justice. Records reviewed by the Times show that several law firms bringing these claims receive financial backing from private investors, often through opaque out-of-state entities and Delaware-based companies.

Backers contend the arrangement can level the legal playing field and expedite case filings and settlements. However, public officials and critics express alarm over the lack of transparency surrounding these investments and the possibility that significant portions of settlement money intended for survivors could instead flow to private financiers. Some county supervisors reported being contacted by investors asking about the potential profitability of the sex abuse suits, raising ethical concerns about treating human trauma as an “evergreen” revenue stream.

The backdrop to this investor interest is a surge in litigation following changes in California law that revived long-dormant abuse claims and spurred widespread advertising by plaintiff firms seeking new clients. Government scrutiny has heightened amid reports of questionable recruitment practices and potential fraud in some claims, and the county’s district attorney has launched an investigation into parts of the settlement process.

Commercial

JurisTrade’s Koutoulas Maps Litigation Finance to Capital Markets

By John Freund |

Litigation finance is entering a new strategic chapter as innovators seek to bridge legal funding with broader capital markets and institutional investment. At the forefront of this evolution is James Koutoulas, co-founder of JurisTrade, who draws on his unique blend of hedge fund management and securities law experience to rethink how legal claims can be structured as investable assets for large pools of capital.

An article in Lehigh Valley Business explains that JurisTrade has built the first institutional marketplace for litigation finance, where legal claims are converted into structured financial products like insured bonds, litigation index funds, and private credit vehicles—mechanisms designed to attract pension funds, hedge funds, and other institutional investors traditionally absent from the space. Koutoulas, noted for leading pro bono recovery of $6.7 billion for MF Global customers, argues that litigation finance can offer compelling risk-adjusted returns—sometimes in excess of traditional private credit yields—especially when backed by insurance or securitization features that mitigate downside risk.

The piece also highlights how managed service organizations (MSOs) could reshape law firm economics by outsourcing non-core functions—bringing a level of operational efficiency and capital-raising sophistication more typical of private equity into legal practice. Koutoulas emphasizes the impact of regulatory changes in jurisdictions like Arizona and Washington, D.C., where alternative business structures now allow non-lawyers to hold ownership stakes in law firms, further blurring lines between legal services and traditional business models. He also connects the boom in LegalTech to broader FinTech dynamics, pointing to venture capital interest and technological innovations as catalysts in transforming how legal assets are financed.

Koutoulas recognizes transparency and risk management as ongoing industry challenges, advocating for disclosure standards to protect both claimants and investors.

Commercial Regulatory Issues

France Issues Decree Regulating Third-Party Funded Collective Actions

By John Freund |

France has taken a significant step in codifying oversight of third-party financed collective actions with the issuance of Decree No. 2025-1191 on December 10, 2025.

An article in Legifrance outlines the new rules, which establish the procedure for approving entities and associations authorized to lead both domestic and cross-border collective actions—referred to in French as “actions de groupe.” The decree brings long-anticipated regulatory clarity following the April 2025 passage of the DDADUE 5 law, which modernized France’s collective redress framework in line with EU Directive 2020/1828.

The decree grants authority to the Director General of Competition, Consumer Affairs and Fraud Control (DGCCRF) to process applications for approval. Final approval is issued by ministerial order and is valid for five years, subject to renewal.

Approved organizations must meet specific governance and financial transparency criteria. A central provision of the new rules is a requirement for qualifying entities to publicly disclose any third-party funding arrangements on their websites. This includes naming the financiers and specifying the amounts received, with the goal of safeguarding the independence of collective actions and protecting the rights of represented parties.

Paul de Servigny, Head of litigation funding at French headquartered IVO Capital said: “As part of the transposition of the EU’s Representative Actions Directive, the French government announced a decree that sets out the disclosure requirements for the litigation funding industry, paving the way for greater access to justice for consumers in France by providing much welcomed clarity to litigation funders, claimants and law firms.

"This is good news for French consumers seeking justice and we look forward to working with government, the courts, claimants and their representatives and putting this decree into practice by supporting meritorious cases whilst ensuring that the interests of consumers are protected.”

By codifying these requirements, the French government aims to bolster public trust in group litigation and ensure funders do not exert improper influence on the course or outcome of legal actions.