Litigation finance

Paying a claimant's legal costs in return for a share of any award or settlement. Returns depend on how cases end, so they have little to do with markets but are all-or-nothing and slow.

Where you will meet it

Litigation finance appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Explain the features of special situations investing and the risks it brings
  CFA Level III · Private Markets Pathway

  “Special situations are event-driven, opportunistic investments that arise from corporate or market events: distressed debt and restructurings, rescue or bridge financing, spin-offs, forced asset sales, litigation finance and changes in regulation.”

• Contrast the risk-return profiles of different special situations strategies, and of special situations versus other private debt, in a strategic allocation
  CFA Level III · Private Markets Pathway

  “Control distressed positions and litigation finance behave more like equity, with higher targets and wider dispersion.”

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with L · Glossary