A UK litigation funder is seeking fresh capital less than six months after it liquidated a key fund, the latest twist for a firm that’s navigated a bumpy year.
Katch Investment Group is raising new money for its open-ended Katch Legal Lending Fund, targeting a 20% annual return, according to a pitch deck seen by Bloomberg News. The fund’s proceeds will be used to finance litigation including a £250 million ($341 million) lawsuit against Uber Technologies Inc. on behalf of thousands of London’s black-cab drivers.
In the growing market of litigation funding, investors pay the legal costs of a lawsuit in exchange for a portion of any settlement, essentially betting on the outcome of cases.
The push for new money comes as Katch winds down KLIF, a separate £422 million fund that financed claims by UK consumers in a long-running car finance misselling case. Katch wrote down the value of the fund when it became clear that payouts were going to be much smaller than expected, before halting redemptions in September, letters to investors show.
Overall, lenders last year were told by the UK’s Financial Conduct Authority to pay £8.2 billion in compensation — far short of the £30 billion initially expected.
The KLIF fund has had no new investors for almost a year and is going through a voluntary self-liquidation process, a spokesperson for Katch said, adding that this doesn’t mean its underlying investments are being liquidated and the firm intends to meet any outstanding obligations.
Those choosing to invest separately in the Katch Legal Lending Fund are investing in an entirely different vehicle, the spokesperson said.
Binary Outcomes
Litigation finance firms say the industry helps individuals bring lawsuits against large corporations, while investors can be attracted by the prospect of a big payout and the fact that returns aren’t correlated to other assets. But bets are risky, with the entire investment often hinging on a binary outcome and cases sometimes dragging on for years.
For Katch, the fund liquidation is the latest among several recent challenges. The firm was one of the funders behind Sheffield-based SSB Law and Liverpool-based McDermott Smith Law, both of which collapsed into administration in 2024.
And the motor-finance saga is still playing out. The FCA is investigating the Katch-backed claims management firm The Claims Protection Agency Limited for its advertising and sales tactics. The FCA has not reached any conclusions.
The TCPA did not respond to a request for comment.
“The litigation finance industry has always been about managing complex risks and experienced investors understand this,” said Nick Rowles-Davies, chief executive officer of legal finance platform Lexolent. “Those backing a new Katch fund would likely have conviction based on due diligence, not naivety.”
Katch’s new fundraising partly reflects the tension between risks and opportunities in the industry after a difficult year for many firms, amid delayed payouts in some big cases and an unpredictable regulatory backdrop.
Unlike mainstream funders that back big-ticket commercial disputes, Katch built a large part of its business lending to UK law firms processing large volumes of consumer claims. It shifted that strategy in the wake of the motor finance ruling, telling investors in a letter that it is now focusing on financing portfolios of commercial claims.
Commercial Claims
Still, even commercial claims come with high risk.
Funder Burford Capital Ltd. prevailed in the courts in 2023 in a case relating to the nationalization of Argentine oil company YPF SA, putting it on track for a $16 billion settlement. But payment has since been held up in US courts, and the company’s shares fell 36% in London trading last year.
And perhaps the most well-known example of distress in the industry is Pogust Goodhead, the London-based firm backed by Gramercy Funds Management that funded claims against BHP Group Ltd. over a 2015 Brazilian dam disaster. While a judge decided against BHP last year, a ruling on compensation is still pending. In the meantime, Pogust Goodhead lost almost £400 million in two years.
Read more: BHP Refused Permission to Appeal UK Judgment Over 2015 Brazil Dam Collapse
Despite these challenges, the industry seems to be growing, with the current $17.5 billion global market opportunity projected to exceed $67 billion by 2037, according to an estimate from legal research company Chambers and Partners cited in Katch’s pitch deck.
And some see the possible payoff as worth the risk.
Entrepreneur Invest, a French asset manager that’s also pitching investors with Katch’s new fund, sees an attractive opportunity in legal funding, especially in the UK. Katch was identified as one of the leading and most established performers in the sector, a spokesperson for EI said.
Photograph: The skyline of the City of London. Photo credit: Jose Sarmento Matos/Bloomberg
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