Investing in litigation, like investing in hedge funds, can generate returns that are not correlated with the returns on other assets. In an environment in which previously disparate assets are moving in unison – in large measure, being dragged down all at once by Europe
– uncorrelated returns are coveted and hard to come by. Litigation funding therefore offers an attractive opportunity for hedge fund managers as well as hedge fund investors. However, litigation funding involves a litany of unique risks. To help hedge fund managers, hedge fund investors and others unravel some of these risks and see more directly to the potential merits of the strategy, the Hedge Fund Law Report recently interviewed Kenneth A. Linzer, Esq., founder of law firm Hobart Linzer LLP. We posed questions to Linzer on the following topics: the definition of litigation funding; types of investment managers and specific names active in the space from a sourcing and management perspective; the types of entities and specific names that invest in litigation or litigation funding vehicles; typical structures whereby investors in litigation make such investments; how to “value” litigation for purposes of equity-like investments; the “market” for key terms of debt-like investments in litigation; how to surmount the time issue; sourcing; due diligence; substantive legal areas that lend themselves to litigation funding; whether litigation funding has a role on the defense side; champerty; policy; and performance of the strategy. The full text of our interview with Linzer is included in this issue of the Hedge Fund Law Report.