Litigation Finance Hits a Wall After Bets on Huge Gains Falter

Core Insights - The litigation finance industry, valued at $20 billion, is experiencing significant challenges, including reduced capital availability and regulatory changes, leading to a contraction in the market [2][3][8] Industry Challenges - Hedge funds and other capital sources are pulling back, causing some litigation finance firms to suspend fundraising and seek alternative cash generation methods [1][2] - Regulatory changes in the UK and US are imposing stricter controls on litigation funders, including requirements for transparency and limitations on profit structures [8] Market Adjustments - Firms like Therium Capital Management are adapting by outsourcing responsibilities to manage costs and maximize investor returns [5] - Litigation Capital Management paused active marketing for a fund due to uncertainties around potential tax changes in the US [6] Performance and Outcomes - Burford Capital Ltd. has seen its shares decline over 25% this year despite a potential $16 billion settlement in a significant case, highlighting the financial pressures within the industry [7] - A notable case against Mastercard illustrates the industry's difficulties, with a claim initially valued at £14 billion settling for only £200 million, raising concerns about funding viability [9][10]