LexShares Opens New $100M Litigation Fund to Investors
The litigation backer, which launched six years ago as a platform for individual investors to pick and choose between cases, also released new data on its investments so far.
June 10, 2020 at 12:29 PM
3 minute read
Litigation funder LexShares announced a new $100 million fund Wednesday, two years after closing its first fund allowing investments in a portfolio of lawsuits at $25 million.
The move marks a continued turn towards a model resembling other funders of commercial litigation for a company that, when it launched in 2014, focused on smaller, a la carte investments. While institutional investors and accredited individuals can still use the LexShares platform to identify and select individual cases to invest in, investors in the new fund will see returns based on the performance of all cases on the platform.
The launch of "LexShares Marketplace Fund II" follows the outfit's 100th investment in a legal claim in its six years of operation.
LexShares co-founder and CEO Jay Greenberg trumpets the fact that his business releases more details on the nature of its investments than other privately held rivals. The two largest players in the industry, Burford Capital and IMF Bentham, do make numbers available on the performance of their portfolios, but are obligated to do so as publicly traded businesses.
"I would love to see more transparency in our industry, because I think transparency leads to credibility, and I think that leads to a larger and more efficient market," Greenberg said.
According to LexShares, out of 103 total claims the firm has invested in as of Wednesday, 43 have resolved, resulting in a 52% median internal rate of return, after fees and expenses are factored in. Additionally, the firm's average investment per case is rising, with a figure of $1.46 million over the last year, compared to $845,000 the previous year. In another example of the firm's growth, investments since the start of 2019 represent 48% of all capital deployed since its 2014 founding.
The funder relies on its proprietary Diamond Mine software to identify potential claims. The program scrapes all federal courts and most state courts, leading to over 1 million potential investments identified since the launch of the software in 2016. Nearly half of actual investments have been in state court, with a slight majority in federal court.
In addition to bringing in investments via the two funds, LexShares allows institutional and accredited investors to fund individual claims directly, via its online marketplace, where typical investments range from $500,000 to $2 million. When the company launched in 2014, leaders said that accredited investors would be able to contribute as little as $2,500 to individual cases.
—Additional reporting by Ben Hancock
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