🔑 Views from the ground: Litigation funding outlook for 2026

As the litigation finance market moves into 2026, professionals across the industry describe a shift toward tighter capital discipline, sharper focus on duration risk, and greater emphasis on realised performance over headline returns. We spoke to senior funders, advisers, and market participants about how performance metrics, capital structures, and deployment strategies are evolving as the market enters the new year.

As Duration Risk Rises, Litigation Finance Metrics Evolve

The litigation finance market is entering the year ahead in a more disciplined, institutionally shaped phase, as funders, advisers, and capital providers respond to longer case durations, higher costs of capital, and uneven regulatory signals across jurisdictions. While demand for funding remains resilient, market participants consistently describe an environment that is less tolerant of inefficiency, more focused on realised outcomes, and increasingly influenced by private credit techniques and portfolio-style deployment.

A defining theme across strategies is duration risk. Gabriel Olearnik, head of legal at Apex Litigation Finance in London, said timing has become the dominant driver of volatility across portfolios. “The most critical metric right now is duration risk, meaning time to cash and time to realisation,” he said, noting that it underlies IRR and MOIC and explains much of the dispersion in returns seen over the past year. While win rates still matter, Olearnik emphasised that they “measure outcome rather than timing,” making them an incomplete indicator in a market where enforcement delays can materially erode returns.

That focus on time-adjusted performance is echoed across jurisdictions. Juliana Giorgi, general counsel for Latin America at Loopa Finance, described Net IRR as the most relevant benchmark for both managers and investors, precisely because it captures the cost of capital tied up in long-running proceedings. “Proceedings are increasingly back-loaded, with longer timelines and enforcement delays,” she said. “Net IRR best reflects the true economic performance once fees, losses, and timing effects are taken into account.” Giorgi added that limited partners are no longer satisfied with headline metrics and are increasingly scrutinizing fee drag, loss concentration, and capital recycling assumptions.

Elena Rey, a partner in litigation funding and special situations at Brown Rudnick in London, said investor focus on liquidity has intensified. “Net, realised cash performance has been one of the important metrics in the past year as investors are focused on how fast the cash will come back,” she said. Rey noted that this shift is also driving more explicit benchmarking against private credit and structured credit strategies, particularly as funders expand portfolio finance, monetisations, and law-firm funding.

Brian Roth, CEO and CIO of Washington-based Rocade Capital, framed the issue as one of balance rather than substitution. While his firm continues to focus on gross IRR as a measure of yield, Roth said investors increasingly demand a fuller picture. “A portfolio that delivers a strong multiple but takes too long isn’t attractive, and a portfolio that shows a strong IRR early on but doesn’t ultimately return meaningful capital isn’t attractive either,” he said. Roth added that institutional investors now routinely request line-item performance data and conduct their own independent modeling, reflecting a more sophisticated underwriting of the asset class itself.

Tets Ishikawa, CEO at LionFish Capital in London, makes a similar point, noting that the “right” metric often misses the point as portfolio performance is typically assessed through a combination of MOIC and IRR depending on how the underlying capital is structured. He does not distinguish sharply between gross and net figures, observing that definitions vary across managers, and said the relevance of MOIC versus IRR ultimately depends on the terms on which the capital supporting a portfolio is measured, rather than one metric being inherently superior to the other. Ishikawa also added that this debate exists in part because there is no sharing of anonymised performance data across the industry. Taking it further, Ishikawa also cautioned against overreliance on win rates, which he described as potentially misleading in isolation as these should be weighted in accordance with their investment size.

Technology as Infrastructure, Not Autopilot

On technology, funders described broad adoption of data analytics, but with clear limits. David Perla, vice chair of Burford Capital in New York, said quantitative modeling plays a central role in evaluating legal risk and constructing portfolios at scale. “They inform decisions but don’t make them,” Perla said. “Litigation outcomes still turn on legal strategy, the quality of counsel, and the credibility of facts, which are fundamentally human judgments.”

Roth echoed the operational importance of technology in high-volume strategies, noting that Rocade spent years developing bespoke systems to evaluate mass tort inventories and manage dynamic portfolios. “Technology is essential for us because we see high volumes of the same types of claims,” he said, adding that stronger analytics directly improve decision-making.

Others remain more cautious. Ayse Yazir, managing director at Bench Walk Advisors in London, said her firm does not use AI or automated tools for case selection or valuation, citing confidentiality and the bespoke nature of disputes. “Our investment decisions are based on rigorous legal, factual, and commercial due diligence carried out by experienced professionals,” she said, while acknowledging growing market interest in AI-assisted workflows.

Peter Petyt, CEO of 4 Rivers in Los Angeles, said the use of AI in due diligence and monitoring is increasing and expects that trend to accelerate, particularly as advisory firms and external counsel integrate technology into early-stage case assessment.

Structured Capital and the Search for Liquidity

Hybrid and structured funding arrangements continue to expand, though unevenly across jurisdictions. Evan Meyerson of Burford said there is “clear appetite for more creative funding structures,” including arrangements that allow defense-focused firms to pursue plaintiff-side matters by de-risking economics without altering core business models.

Rey said hybrid capital increasingly manifests through portfolio funding, layered capital structures, and claim monetisations, rather than traditional single-case funding. She also observed a marked increase in secondary activity, including sell-downs of later-stage positions to shorten duration and manage concentration risk.

Yazir similarly described secondaries as a practical tool in a higher cost-of-capital environment. “Seasoned positions have become a way to generate earlier liquidity, manage duration and recycle capital without waiting for final resolution,” she said.

Others remain skeptical. Ishikawa said LionFish does not participate in secondaries, noting that opportunities often come from distressed sellers seeking unrealistic pricing. Roth added that Rocade continues to see greater value in primary deployment, particularly given reduced competition in mass torts.

Nick Rowles-Davies, CEO of Lexolent in Dubai, pointed to private credit as a structural force reshaping the market, with debt facilities and syndication increasingly used to enhance liquidity and reduce downside exposure. He said traditional LP-GP fund structures are becoming less attractive to some investors, even as they remain favorable for managers.

Regulation, Geography, and the Year Ahead

Regulatory clarity remains a decisive variable, particularly in the UK. Several funders pointed to the UK government’s stated intention to reverse the effects of PACCAR as a potential catalyst for renewed deployment. Olearnik said the announcement has already eased uncertainty, while Rey and Yazir said meaningful clarity could restore confidence in collective actions and structured solutions.

In the US, Roth said regulatory noise in 2025 disrupted fundraising and diligence, but expects less volatility ahead following the failure of proposed federal legislation.

On growth areas, insolvency and restructuring-related disputes featured prominently. Giorgi described distressed environments as generating high-value, enforceable claims where estates often lack liquidity. Yazir and Rowles-Davies similarly highlighted insolvency, fraud, and enforcement as areas of sustained demand.

Geographically, experts identified selective growth rather than broad expansion. The US and UK remain core markets, with Continental Europe, Latin America, and Singapore offering targeted opportunities. Petyt highlighted Latin America as a key growth region, while others pointed to Europe’s evolving collective redress regimes.

A Slower, More Selective Market Takes Shape

As the market moves into 2026, litigation finance is less defined by raw appetite for risk and more by execution, structure, and discipline. Professionals across the market describe an asset class that is increasingly institutional in character, where time to cash, capital efficiency, and transparency now sit alongside legal merit in underwriting decisions. Regulatory clarity in key jurisdictions may unlock renewed deployment, but the direction of travel is clear regardless: returns will be judged on realised performance, not projections, and funders that align strategy, capital structure, and duration management are best positioned to compete in a slower, more demanding market.