Private markets have expanded far beyond traditional private equity, private credit, and infrastructure investing. Among the more specialized corners of the alternatives universe sits litigation finance, an asset class where investors provide capital to fund legal disputes in exchange for a share of potential settlements or damages. Seeking to capitalize on this niche segment, French independent asset management firm IVO Capital Partners has established since 2014 a dedicated litigation finance strategy focused on providing third-party funding across legal disputes. While still relatively unknown among many institutional investors, litigation finance offers exposure to a distinct return stream driven by legal outcomes rather than traditional market forces.
Understanding Litigation Finance
The principle behind litigation finance is relatively straightforward: investors finance the costs associated with pursuing a claim, while returns depend on the successful outcome of the litigation. “As a fund, we take charge of all the costs of litigation: lawyers, experts, and everything related to the dispute,” explains Alexandre Lercher, Litigation Finance Fund Manager at IVO Capital Partners. “If the claim succeeds, then we receive a part of the damages recovered by the claimant. But if the dispute is lost, then we lose our investment.” Because litigation finance investments are generally structured on a non-recourse basis, downside is limited to invested capital, while successful cases can generate significant upside.
“As a fund, we take charge of all the costs of litigation: lawyers, experts, and everything related to the dispute. If the claim succeeds, then we receive a part of the damages recovered by the claimant. But if the dispute is lost, then we lose our investment.”
Alexandre Lercher, Litigation Finance Fund Manager at IVO Capital Partners.
Although legal expenses can generally be estimated with reasonable confidence, returns are ultimately determined by the success and scale of legal claims. “Our economic return is driven by an option embedded in the funding agreement,” explains Lercher. “The economics are agreed from day one. Our return is typically defined as either a multiple of the capital invested or a share of the proceeds recovered, with the funding agreement specifying how the final amount is calculated following a successful outcome.” IVO Capital targets gross returns of roughly three to four times invested capital on successful cases.
“The economics are agreed from day one. Our return is typically defined as either a multiple of the capital invested or a share of the proceeds recovered, with the funding agreement specifying how the final amount is calculated following a successful outcome.”
Alexandre Lercher, Litigation Finance Fund Manager at IVO Capital Partners.
This creates a risk-return profile that, in some respects, resembles venture capital or private equity, where a limited number of large winners compensate for unsuccessful investments. “You can have unicorn outcomes,” argues Lercher. “A case costing €2 million could generate €20 million, €30 million, or potentially much more because the amount invested does not directly determine the size of the damages.”
For institutional investors, the appeal extends beyond return potential. Litigation finance offers exposure to risk factors largely disconnected from traditional financial markets, with outcomes primarily driven by legal processes rather than economic growth, interest rates, or market sentiment. “This is probably one of the least correlated asset classes available today,” says Lercher. “The value driver is the amount of damages claimed in the dispute and that amount is not directly influenced by markets or spreads.”
Building a Pan-European Litigation Platform
IVO Capital Partners launched its fourth litigation finance vintage during 2025 and predominantly focuses on continental Europe, covering nearly ten jurisdictions across countries including Sweden, Portugal, Switzerland, Belgium, France, and Germany. “We are the only truly pan-European litigation funder with meaningful exposure across multiple jurisdictions,” says Lercher.
“We are the only truly pan-European litigation funder with meaningful exposure across multiple jurisdictions.”
Alexandre Lercher, Litigation Finance Fund Manager at IVO Capital Partners.
The team applies a highly selective approach to geographic exposure, avoiding jurisdictions where litigation timelines become excessively long or institutional frameworks create additional uncertainty. “Italy is a jurisdiction where we tend to be more cautious because litigation durations may be long,” explains Lercher. “And there are some jurisdictions in Eastern Europe where corruption concerns may become relevant.” Building a diversified portfolio across jurisdictions is therefore seen as an important part of risk management.
Given that litigation finance vehicles are typically structured as closed-ended funds with seven-year lifespans, managing duration risk becomes an important consideration. To mitigate both duration risk and potential capital losses, IVO Capital utilizes insurance solutions designed to protect investors if cases extend materially beyond expectations. “We use insurance to balance the two main risks: duration and loss of capital,” says Lercher. “Invested capital is covered through insurance if cases extend beyond the expected lifetime of the fund.” While legal outcomes remain uncertain, these structures are designed to reduce some of the risks associated with long and unpredictable litigation timelines.
Sourcing, Diversification, and Scaling the Strategy
With four litigation finance vehicles already launched and 12 years of experience in the asset class, sourcing new opportunities has gradually become easier. “The first step was simply becoming known among law firms,” explains Lercher. “Initially, a lot of the work involved raising awareness among lawyers about litigation funding is and how it could be used in practice.” Today, the situation has changed considerably, with the firm increasingly receiving inbound opportunities. Since the beginning of this year alone, the team has reviewed more than 80 funding opportunities while selecting only around ten percent. “We are highly selective on the cases we fund, a discipline made possible by the strong volume of opportunities in the market,” says Lercher.
“What is interesting is that each case is independent from another. There is diversification not only versus financial markets but also between industries and cases themselves.”
Alexandre Lercher, Litigation Finance Fund Manager at IVO Capital Partners.
The current litigation finance fund consists of approximately 50 separate cases, providing diversification across industries, geographies, and legal processes. “What is interesting is that each case is independent from another,” notes Lercher. “There is diversification not only versus financial markets but also between industries and cases themselves.” The team targets a success rate of approximately 60 percent while seeking returns of three to four times invested capital on successful cases. Combined, this translates into an expected internal rate of return of roughly 14 percent.
An Asset Class Still in Its Early Days
Despite increasing adoption, litigation finance remains relatively underdeveloped in Europe, which Lercher believes creates opportunities both for funders and investors. “We are seeing more and more demand from law firms,” he concludes. A major reason for this growth remains education, as many legal professionals and institutional investors are still unfamiliar with the financing model. “At the moment, litigation funding is still new in Europe,” says Lercher. “Most people simply don’t know about it. Once lawyers and general counsels discover that this tool exists, they often want to use it.” For institutional investors, understanding litigation finance increasingly means understanding not only its unique risk-return profile, but also how an uncorrelated asset class such as litigation finance can fit within broader portfolio construction.
