Hedge Funds Becoming Big Players In Litigation Industry

Hedge funds looking for investments that are disconnected from the economic cycle are jumping into litigation finance. The $6 billion hedge fund EJF Capital is raising money for an investment vehicle that will lend money to lawyers bringing mass-tort cases. EJF was a pioneer in litigation finance, making loans at rates up to eighteen percent to personal injury law firms. Other investors, including Wall Street firms, are financing class actions against drug and medical device companies. They are piggybacking on the increased scrutiny lawmakers and attorneys general are bringing to bear on big pharma and the medical industry. Analysts estimate that litigation finance is at least a $10 billion industry, and growing. It has already spawned niches that are coming under legal scrutiny. Federal prosecutors in Brooklyn have opened an investigation into a network of finance firms and attorneys that allegedly lured women into getting unnecessary surgery that improved their chances of winning a large settlement from a medical device manufacturer.