In early May I read an article in Forbes Magazine about Juridica Investments investing in litigation. It was formed in December 2007 by two lawyers (surprising) and now has about $200 million under its management. It has invested in 17 cases so far and has even paid out a $5 million dividend when a case was settled earlier this year. Shares are up about 20%. I wonder if Bernie Madoff had this in his "portfolio".
Investing in litigation is a small but growing asset class. Just do a google search on "funding lawsuits" and you will see what I mean. There is even a website called lawsuitfunding.com. Even Credit Suisse has a litigation finance unit. And AIG was pondering getting into this before its collapse. Who know maybe even the federal government might be looking at it. Kidding.
Maybe I am just a bit naive, but I find the whole concept distasteful. I guess it just shows the direction this nation is going. How to make money on other people's misery.
The article does point out that in some states third party funding of lawsuits is illegal. However, many states have moved to legalize it. Regarding workers' compensation cases, California does not allow it. Some critics have asserted that such funding can distort the litigation process by encouraging frivolous lawsuits. There is also the potential to overcharge clients.
Either way, I am a critic. I think it does not pass the smell test and I find the concept of funding lawsuits about as a low as one can go. If you want to make some money now is the time to get back into the market and real estate, not litigation hedge funds.