Litigation funding has grown into a USD 18.2 billion global market that smart investors can’t overlook. Traditional investment options might be familiar to you, but this alternative asset class brings something truly different—returns of 10% to 12% that don’t move with market swings.
This investment strategy has evolved from a specialised legal financing tool to one that is mainstream. The market will likely hit USD 37.5 billion by 2028, with a strong growth rate of 13.2% each year. Companies like Woodville litigation funding have shown how supporting the right legal cases creates big returns and helps people access justice.
The year 2025 has the potential to significantly transform this investment approach. Market trends reveal that investors, following significant victories such as the £58 million Post Office scandal settlement, are seeking alternatives to traditional investment options. The positive news is that litigation funding is now available to everyday investors, not just big institutions and hedge funds.
What is litigation funding and why it matters in 2025
Third-party litigation funding lets plaintiffs pursue legal claims without paying upfront costs. A third party covers the legal expenses and gets a share of the settlement or judgement in return. If the case is unsuccessful, the plaintiff typically owes nothing—this no-risk feature makes these arrangements very appealing to claimants.
How litigation funding works
Litigation funding serves as a way to share risk. Funders look at a legal claim’s merit and decide whether to cover the costs. They receive either a percentage of the recovery (usually 10-35% based on claim size) or multiply their investment (2-4 times typically).
The funding process starts with careful review, where funders look at:
- Legal merit and winning chances (they usually want at least 60% probability)
- Possible damages and recovery amount
- How long it might take and what it costs
- Whether the defendant can pay a judgment
The claimant keeps control of case decisions even though funders provide money. Funders stay passive and just provide financing.
The transformation from legal cost to investment chance
Litigation funding has seen remarkable progress. What started as help for cash-strapped claimants has grown into an investment asset class that draws major institutional money.
This change really took off over the last several years. Law firms with litigation funding deals jumped from 7% to over 35% between 2013 and 2017. The industry now manages EUR 14.50 billion in U.S. assets alone.
Investors love litigation funding because it doesn’t follow traditional market patterns. Case outcomes depend on legal and economic facts, not broader market conditions. Smart investors use this type of financing to diversify their portfolios, especially when markets get shaky.
Why 2025 is a turning point
The year 2025 stands out as crucial for litigation funding. The market should hit USD 18.9 billion this year, growing 11.1% yearly from now. These numbers show how mainstream litigation funding has become as both a financing tool and an investment option.
2025 brings regulatory clarity too. The PACCAR Supreme Court decision in 2023 created uncertainty about funding agreement enforcement. Now the Civil Justice Council will release its final report on litigation funding by summer 2025. This report should create a balanced regulatory framework that protects consumers while helping the market grow.
The CJC will likely suggest statutory regulation through Lord Chancellor Regulations, treating commercial and consumer funding differently. This clarity helps the market move past recent regulatory confusion.
The industry keeps growing into new areas by 2025, especially ESG-related disputes and creative deals mixing funding with insurance. This growth shows how sophisticated the industry has become and its closer ties to mainstream finance.
Legal professionals and investors need to understand litigation financing, as it will revolutionise the legal world by 2025.
The business model behind litigation funding
The basic business structure of litigation funding is different from traditional legal financing. Traditional loans work differently from litigation funding, which invests in specific legal outcomes where returns depend on case success. This approach has revolutionised the financing of complex litigation in the legal industry.
Contingency vs. hourly billing
Legal services typically follow two payment models: hourly billing or contingency fees. Hourly billing means clients pay attorneys based on time spent, whatever the outcome—defendants and corporations with enough capital usually prefer this model. On the flip side, contingency arrangements let clients avoid upfront payments, and attorneys receive a percentage (usually 25-40%) of any recovery.
Litigation funding builds on the contingency model. Law firms often provide full-contingency billing to clients while funders make periodic payments to cover firm costs. The resulting arrangement creates a three-way relationship that spreads risk differently than traditional models.
Law firms might not want to take on all the financial risk of contingency work, and some clients can’t afford hourly fees. That’s where third-party funding comes in as a middle ground. Some firms use hybrid approaches—they charge lower hourly rates plus smaller contingency percentages—to balance cash flow with future returns.
Role of third-party funders
Third-party funders play a unique role in the litigation ecosystem. These groups—from specialised litigation financing firms to hedge funds, sovereign wealth funds, and public companies—provide money without being directly involved in disputes.
The European Parliament has created specific rules for these funders:
- Authorization systems must ensure proper qualification
- Funders must act in claimants’ best interests without controlling proceedings
- Funders need sufficient capital to meet obligations
- Funders cannot abandon claimants mid-litigation
Funders take 30–90 days to review case merits, legal landscapes, and counsel quality before investing money. This full picture helps manage risks and maintain quality.
Many large law firms, including those in the Am Law 100, now use litigation funding for complex, high-stakes cases. Patent litigation takes up 19% of new capital commitments, along with antitrust cases and international arbitration.
How funders make money
Successful case outcomes drive financial returns for litigation funders. Most funders get 20-40% of the recovery or 3–4 times their invested capital. Portfolio investments usually aim for about a 20% internal rate of return.
Litigation funding works as a non-recourse financing solution. If a case fails, funders do not receive any returns and lose their investment. This “no cure, no pay” system connects funder interests to case outcomes and moves risk away from clients and law firms.
Funders look at several things when planning returns:
- Case complexity and predicted timeline
- Legal merits strength (usually needing at least 60% chance of success)
- Whether defendants can pay judgments
- Litigation costs, including legal fees, expert witnesses, and court expenses
Smaller cases usually involve claims worth £3-5 million, while complex cross-border disputes range from £30-50 million. Some specialised claims, like IP and patents, can go over £100 million.
Investors like this model because returns don’t follow traditional markets. Case merits determine litigation outcomes rather than broader economic conditions, which makes it a great way to diversify portfolios for sophisticated investors.
Why smart investors are turning to litigation funding
Smart investors worldwide are adding litigation funding to their portfolios faster as this emerging asset class proves its worth. The global market for litigation funding reached USD 18.2 billion in 2023. This significant increase indicates that the market is expected to reach USD 37.5 billion by 2028. These numbers show why savvy investors can’t ignore this opportunity.
High return potential
The numbers paint a clear picture—litigation funding delivers impressive returns that beat many traditional investments. Successful cases typically give funders 3-4 times their invested capital or at least a 20% internal rate of return (IRR) plus legal costs. Non-recourse investments yield returns between 20% and 30%. Small-ticket litigation funding provides steady returns from 11% to 15%.
These returns significantly exceed those of conventional investment vehicles. Juridica, a major industry player, showed a lifetime gross internal rate of return of about 85% from resolved investments. These numbers catch any investment manager’s attention.
Non-correlation with traditional markets
Litigation funding stands out because it doesn’t follow market swings. Case outcomes depend on their specific merits, unlike stocks and bonds that move with economic cycles. This advantage makes litigation funding perfect for hedging against market volatility.
The market runs on an intriguing twist—litigation funding performs better during economic downturns. More insolvencies during recessions create more litigation, which can lead to better returns for investors. This contrary-to-market behaviour protects portfolios when traditional markets struggle.
Portfolio diversification benefits
Strategic diversification in litigation funding adds another safety layer. Investors can alleviate risk by building portfolios across:
- Multiple case types and legal jurisdictions
- Various litigation stages and timelines
- Different sectors and damage amounts
Some litigation funders mix high-value landmark cases with high-volume small claims to create balanced risk profiles.
Research shows impressive math behind this strategy. Spreading funds across just 10 cases, each with a 70% success probability, could deliver annual returns above 40%. Investors have a 99% chance of positive returns. Cases don’t relate to each other—a rare feature in investment markets.
Examples of investor profiles
The investor landscape has grown over the last several years. What started with hedge funds chasing high returns now attracts many sophisticated investors. Today’s participants include:
Institutional investors such as pension funds and university endowments put money into litigation funding to get risk-adjusted returns. Private equity firms use litigation funding to boost deal flow and pursue legal claims that match their investment goals. Family offices and high-net-worth individuals see litigation funding as an available alternative investment.
Traditional investment managers now see litigation funding as more than a niche market—it has become a legitimate way to diversify portfolios.
How funders choose the right cases
Successful litigation funding depends on picking the right cases. The numbers tell an interesting story—only about 5% of cases reviewed ended up receiving financing. The result shows how carefully funders screen cases before they invest their capital.
Due diligence and legal merit
Funders need six to eight weeks to get a full picture of case strength. They examine case presentations, documentary evidence, and the expertise of counsel. Most funders stay away from “he said/she said” disputes or cases based on verbal contracts because witness performance can be unpredictable. They prefer cases backed by solid documents and clear legal merit. The experienced counsellor’s favourable assessment usually indicates a 65% chance of success. Interestingly, when someone asserts a 100% success rate, it triggers suspicion.
Assessing defendant solvency
A case’s legal merits mean nothing if defendants can’t pay judgements. One litigation expert puts it well: “A judgement in your client’s favour is simply an unbanked check.” Funders examine the defendant’s finances, assets, and payment history. Some use complex solvency tests like the “balance sheet,” “unreasonably small capital,” and “knowing how to pay debts” methods. The right identification of defendants from the start ensures you can enforce judgements.
Expected duration and cost
Risk grows with time in litigation funding. Funders carefully compare proposed legal budgets with potential recoveries. They usually look for budget-to-claim ratios around 1:10. Smaller cases take less time than bigger ones, which affects investment math. Funders need to evaluate the real cost estimates against the duration of their financial commitment. These costs include legal fees, expert witnesses, and court expenses.
Use of data and AI in case selection
AI now shapes how funders pick cases. Smart algorithms exploit giant datasets of case law, statutes, and past outcomes to spot patterns. This live analysis helps predict likely outcomes based on courts, judges’ behaviours, precedents, and case details. It can even show which arguments work best in specific courts. This informed approach works with traditional legal analysis to make investment decisions more reliable.
Success stories that changed the game
Landmark cases illustrate the transformative impact of litigation funding on access to justice. Success stories show how funding arrangements strengthen plaintiffs who couldn’t afford to challenge resourceful opponents.
The Post Office scandal
The Post Office scandal significantly changed the landscape of litigation funding in the UK. Sir Alan Bates and 554 sub-postmasters got crucial financial support to pursue their claims against the Post Office. The case exposed the Horizon IT scandal. The English legal system’s high costs would have stopped these victims from seeking justice without litigation funding.
The case settled for £57.75 million, but sub-postmasters received only £11 million after legal costs. The case, shown in “Mr Bates vs the Post Office,” brought massive public attention to both the injustice and litigation funding’s vital role in challenging powerful institutions.
PPI claims and consumer justice
Payment Protection Insurance (PPI) mis-selling grew into the UK’s biggest financial services scandal. Litigation funding made group compensation possible for many consumers. The groundbreaking Plevin case in 2014 expanded compensation eligibility beyond original mis-selling claims. Cases with hidden commissions up to 78% became eligible.
Legal experts Harcus Parker started a Group Litigation Order that could realise £18 billion in PPI commission claims. Banks had previously blocked these claims. PPI shows how litigation funding makes “case management of claims that share a common basis in law” possible.
Woodville Litigation Funding’s portfolio approach
Woodville Litigation Funding shows how smart portfolio diversification cuts risk while delivering strong returns. Their strategy spreads investment across 210,293 separate legal claims instead of focusing on a few big cases.
Their diverse portfolio has:
- 122,517 car finance claims (£142.9 million)
- 17,366 business energy claims (£26 million)
- 9,002 irresponsible lending claims (£6.3 million)
This strategic spread produced impressive results. The company has maintained a perfect zero percent default rate on loan capital and interest since 2019. Investors received over £109 million back. More than 4,325 private investors now get quarterly income between 10–12% yearly through Woodville’s litigation funding model.
Conclusion
Litigation funding has proven itself to be beyond just another investment trend. This asset class showed remarkable resilience and growth potential throughout 2025, with returns ranging from 20% to 30% that stayed independent of broader market shifts. Investors are continuously putting their money into this space for valid reasons as well. The projected growth to $37.5 billion by 2028 presents a real chance that smart investors should not miss.
The strength of this business model comes from its careful risk distribution. Funders take on the financial burden while plaintiffs seek justice. This arrangement fosters a mutually beneficial outcome when cases achieve success. The risk-sharing approach and strict case selection process have revolutionised litigation funding, from a niche legal tool to a mainstream investment strategy.
Success stories like the Post Office scandal and PPI claims highlight litigation funding’s dual benefits. These cases deliver justice to plaintiffs and generate substantial returns for investors. The portfolio of Woodville Litigation Funding shows how spreading investments across thousands of cases produces steady returns with minimal default risk.
Litigation funding’s value shines through its counter-cyclical nature. Legal cases tend to increase during economic downturns. This feature leads to potentially higher returns when traditional markets struggle. Adding this alternative asset to your portfolio offers both growth potential and shields against market volatility.
The Civil Justice Council’s 2025 report will bring more regulatory clarity to strengthen this investment landscape. Both individual and institutional investors should think about how litigation funding fits their current investment strategies. You are welcome to reach out if you want to discuss anything from this piece.
Litigation funding stands out in today’s investment world. It offers attractive returns, true diversification benefits, and a chance to support justice while building wealth.
