Rigorous Due Diligence: Building Investor Confidence in Litigation Finance

Important Notice: This article is for information purposes only and does not constitute investment advice or a recommendation to invest. It is intended for readers who understand the risks of investing in non-mainstream investment products. This content may constitute a financial promotion and is therefore directed only at persons qualifying under the Financial Promotion Order 2005.

Introducing Litigation Funding?

Litigation funding – also known as third-party funding or litigation finance – is an alternative asset class that gives investors access to uncorrelated returns through the funding of legal claims. As volatility continues to impact traditional financial markets, interest in litigation-backed investment strategies is growing, and fast.

However, the nature of litigation makes robust due diligence essential. Evaluating the legal merits, strategic viability, jurisdictional considerations and enforceability of claims – as well as the financial standing of defendants – is critical to identifying opportunities with strong prospects for success. Additionally, well-structured capital protection and security frameworks play a vital role when it comes to safeguarding investor capital.

At Securatan, our approach to litigation finance is grounded in experience and a rigorous, multi-layered due diligence process. In this article, we outline why due diligence is fundamental to litigation investment success, and how our approach helps to protect investor capital while unlocking access to this compelling asset class.

What Does Due Diligence Mean in Litigation Finance?

Due diligence in litigation finance goes beyond traditional financial analysis. Instead of market trends or historical returns, the focus is on assessing the legal, strategic and enforcement aspects of a claim to determine its strength and potential for success.

Key considerations include:

  • Legal merits – Funders evaluate legal precedent, evidentiary support and overall case strategy
  • Economics – Realistic projections of damages and legal costs are essential to justify investment and deliver attractive risk-adjusted returns
  • Defendant solvency and judgment enforceability – Even with a strong case, recovery depends on jurisdiction and the defendant’s ability to satisfy a judgment

Bear in mind that due diligence also encompasses the structure of the investment product itself. Litigation finance vehicles – particularly asset-backed securities – can be complex and opaque. It’s crucial to assess capital protection measures and ensure alignment with your risk profile. For high-net-worth and sophisticated investors seeking uncorrelated returns, this level of scrutiny is key to managing risk and preserving capital.

The Litigation Funding Approval Process

Litigation finance requires a rigorous, multi-stage approval process – one that assesses the legal, financial and enforcement viability of each claim. For high-net-worth and sophisticated investors, this structured approach is key to managing risk and ensuring capital is deployed into opportunities with the highest potential for success.

The typical process includes:

  • Initial screening – A preliminary review to determine whether the claim meets baseline criteria, including legal merit, jurisdiction and potential damages
  • Legal due diligence – The case is analysed in depth, examining legal arguments, precedents, procedural risks and overall likelihood of success
  • Enforceability assessment – Defendant solvency, asset location and potential enforcement obstacles are evaluated
  • Financial structuring – Terms are tailored to align with investor objectives, from investment amount to return expectations and attitude to risk
  • Final approval and funding agreement – Once the case passes all thresholds, a formal agreement is executed, detailing terms, protections, and recovery structures

This process is supported by a network of expert partners – from leading law firms and litigation strategists to insurers. For example, we work closely with top-tier experts to optimise claim strength and with Lloyd’s of London syndicate to secure case-level protection, further enhancing capital security. In addition, all cases are approved by the Securatan investment committee.

Risk Mitigation in Litigation Finance

Comprehensive risk management is fundamental to litigation finance – and it begins with rigorous due diligence. By carefully evaluating legal merits, procedural risks and enforceability, only high-quality cases with the potential for robust returns proceed to funding. Plus, with a meticulous screening process, funders significantly reduce the risk of adverse outcomes.

Another crucial element of due diligence is financial structuring. Further protecting investor capital, it ensures that terms align with return expectations and individual risk profiles.

Portfolio diversification is also critical. By investing across a range of cases – encompassing a variety of jurisdictions, sectors and claim types – investors mitigate risk and boost overall returns.

Equally important is the experience provided by the litigation funder. Partnering with a specialist like Securatan Group enhances every stage of the investment process. From case selection to legal strategy, experienced funders bring deep expertise, dedicated networks and a disciplined approach to structuring – providing peace of mind, confidence and risk mitigation for investors.

The Securatan Approach to Due Diligence

Litigation finance is inherently complex – but our model makes it accessible and investor-friendly. We offer clearly structured investment products – fixed-income bonds as well as equity funds – designed to provide transparency, control and confidence at every stage.

Each case is sourced by experts, undergoes comprehensive due diligence, is insured by Lloyd’s of London syndicate, and passes a rigorous review by our investment committee. Disciplined yet streamlined, this approach ensures that complexity is managed behind the scenes – so high-net-worth and sophisticated investors engage with clear opportunities aligned with their objectives.

What’s more, our multi-sector case selection strategy strengthens the investment framework. By funding claims across a broad variety of sectors and legal domains, we enhance portfolio diversification and reduce exposure to individual sectors or outcomes. This approach builds resilience and contributes to stable, risk-adjusted returns.

By eliminating unnecessary structural layers and maintaining full transparency, we offer sophisticated investors and eligible counterparties a simplified path into litigation finance.

To explore how litigation funding could complement your investment strategy, get in touch.

Disclaimer: This content may constitute a financial promotion for the purposes of section 21 of the Financial Services and Markets Act 2000. It is issued exclusively to, and directed exclusively at, certified high-net-worth individuals or self-certified sophisticated investors, as defined under Articles 48 and 50A of the Financial Promotion Order 2005.

This article has not been approved by a person authorised by the Financial Conduct Authority. Capital is at risk. Past performance is not a reliable indicator of future results. This product is not covered by the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS). Readers should seek independent financial advice before acting on any information contained herein.

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Let’s Chat About How
We Simplify Litigation Finance
While Safeguarding Your Returns

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Important: Investments with Securatan are available only to professional investors and eligible counterparties. This does not constitute an offer to retail investors.

Important Notice: Securatan Group Limited does not offer products to retail clients. All investment opportunities are limited to certified high-net-worth individuals or self-certified sophisticated investors under Articles 48 and 50A of the Financial Promotion Order 2005, and to professional clients under MiFID II. Capital is at risk. Past performance is not a reliable indicator of future results. These investments are not covered by the Financial Services Compensation Scheme (FSCS) or the Financial Ombudsman Service (FOS). No financial promotions on this website have been approved by an FCA-authorised person.

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