Former Fortress Partner to Launch New Litigation Finance Company Amid Industry Boom
- October 8, 2020
Category: Patent Market, Patent Watch, TPLFTag: TPLF
The litigation finance industry has seen explosive growth since the onset of the coronavirus pandemic, with wealthy investors—including hedge funds and private equity firms—reportedly flooding the so-called “recession-proof asset class” with capital. Several established litigation funders have disclosed record fundraising this year, with some also touting enormous returns. Meanwhile, new entrants continue to arrive on the scene, including some with hundreds of millions of dollars ready to deploy. This week, the launch of a yet another litigation funder was announced, this one headed by a former partner at Fortress Investment Group LLC and with backing from Tetragon Financial Group as well as Fortress.
Founded by Brandon Baer, Contingency Capital is expected to formally launch on November 1. Baer is a former partner and managing director of Fortress’s Credit Funds business; he also cofounded the Legal Assets group at Fortress, where his work focused on, among other things, litigation finance.
According to an October 6 press release, Tetragon, a closed-ended investment company, has agreed to provide Baer’s new company with “working capital and a $50M commitment to Contingency Capital’s first commingled investment fund”. Under the agreement, TFG Asset Management (Tetragon’s diversified asset management business) will also provide Contingency Capital with “operating infrastructure—encompassing critical business management functions such as risk management, investor relations, financial control, technology and compliance/legal matters” and will receive a minority interest in the new venture.
The same press release confirms that Contingency Capital is launching with the support of Fortress, with which it has reportedly entered into coinvestment arrangements “pursuant to which Fortress may invest up to $500 million in Contingency Capital’s opportunities”. The statement further reports Contingency Capital having entered into “arrangements with a large fixed income asset manager relating to up to $900M of additional co-investment opportunities”.
“The Contingency Capital business seeks to provide access to high-quality litigation finance assets in an increasingly expanding market”, stated Baer, adding that the company’s focus “will be on investments whose primary outcomes are driven by legal, tax or regulatory processes and are intended to be generally uncorrelated to the markets”.
Simply put, the performance of an uncorrelated asset class is largely untethered to the stock and fixed income markets, making it an attractive option for investors in an economic downturn. With interest rates exceedingly low and the markets volatile, wealthy investors are increasingly looking to uncorrelated asset classes, including litigation finance, as a source of stable, or even high, returns.
RPX has reported extensively over the years on private equity’s growing interest in patent litigation—a trend that may in fact accelerate in the wake of COVID-19 and the resulting recession. RPX members interested in taking a closer look at this trend, the litigation finance industry, and the potential impact of third-party litigation funding on the patent space, can learn more via a webinar available on RPX Insight here.