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The Evolving Landscape of Commercial Litigation Finance in the U.S.

2024 has marked a transformative year for the U.S. commercial litigation finance industry, as revealed in Westfleet Advisors' latest report. The study highlights a 16% decline in new capital commitments, a continuation of a concerning trend first noted in 2023. This trend might raise eyebrows, but strong demand persists as key industry players strive to maintain their portfolios amidst a tightening financial landscape.

Key Findings from the Report

According to the Westfleet Insider 2024 Litigation Finance Market Report, 42 active capital providers currently manage an impressive $16.1 billion in assets. However, new capital commitments have plummeted to nearly 30% below 2022 levels. The downturn primarily stems from challenges funders face in securing new capital, which reflects broader financial market conditions. Charles Agee, Founder and CEO of Westfleet Advisors, stated, "This is the first time we've observed consecutive declines in new capital commitments. The contraction is supply-driven rather than demand-related, indicating a shift in the market dynamics."

Trends Shaping the Industry

The report outlines several significant trends contributing to this shift in the commercial litigation finance sector:

• - Larger Transactions: The average transaction size has increased to $8 million, with single-case deals rising to $6.6 million, while portfolio deals have surged to $16.5 million. This reflects a preference for more substantial investments.
• - Growth in Monetization Deals: Notably, claim monetization deals have accounted for 26% of new commitments, a rise from 21% in 2023, indicating a trend toward creative financing solutions.
• - Patent Litigation Investments: With patent-related cases now comprising 32% of total capital commitments, there is a clear preference for portfolio financing over single-case deals.
• - Big Law's Share in the Market: Although commitments from major law firms, collectively termed “Big Law,” fell to $850 million, they still constitute 37% of total capital commitments, showing the continued influence of established players in the market.
• - Insurance-Backed Deals: Furthermore, 19% of commitments included contingent risk insurance, showcasing a proactive approach to risk management in these financially uncertain times.

The Road Ahead

As the U.S. commercial litigation finance market navigates these challenging conditions, stakeholders are urged to adapt to the evolving landscape. Remaining selective in capital allocation seems to be a prudent strategy among funders as they continue to support litigation outcomes reliant on financing. Westfleet Advisors remains committed to providing clarity and guidance in this space, striving for transparency and efficiency in an industry that is crucial for many litigators and their clients.

Since its inception in 2013, Westfleet has emerged as a prominent advisory firm that focuses on litigation finance, helping clients secure advantageous terms in competitive fundraising processes. With a multidisciplinary team of experienced professionals, the firm plays a pivotal role in shaping how litigation finance operates in the contemporary market.

For those looking to delve deeper into the intricacies of the commercial litigation finance landscape, Westfleet's comprehensive report serves as an indispensable resource. For further insights, visit westfleetadvisors.com.