Portfolio Funding

Portfolio funding is becoming an increasingly common form of asset financing for both corporates and law firms and usually takes one of two forms:

  1. a funding agreement is made directly with large corporations and financial institutions with a large book of litigation that is absorbing cash flow. The corporation/institution thereby moves the costs for pursuing good claims to the funder. When a claim is successful, the funder will be paid an agreed success fee from the settlement amount.  Cash flow is released for other operational purposes.
  2. a funding agreement is made with a law firm that is able to refer a number of similar claims which it considers suitable for funding or which meet pre-agreed criteria.

In both instances, Harbour will assess the overall risk and establish a level of return that can be obtained from successful case conclusions as they occur. Importantly, the level of risk typically decreases as the portfolio broadens (in number of claims, projected costs, merits of each claim etc.) enabling a reduction in the rate of return required by the funder when compared to individual case funding.

Stop Press

Are the legislative changes on third party funding in Asia (r)evolutionary? Harbour View Q4 2016 offers a comparison of the developments in Singapore and Hong Kong, as well as the wider region, and a first-hand insight into what lawyers, institutions and corporates really think.