Litigation Finance Is Growing Up, but Litigation Disbursement Funding Is Where the Smart Money Is

Litigation disbursement funding is attracting sophisticated investors and is a growing segment in litigation funding.

The Litigation Funding Sector

Litigation funding is no longer the niche asset class it once was. High-profile cases like the Post Office scandal have drawn significant media attention and increased public awareness of third-party litigation funding, bringing it onto investors' radars. As the sector matures, capital is flowing in from institutional allocators seeking strategies that combine security, predictability, and non-market-correlated yield.

While headlines tend to focus on big wins and class action windfalls, a quieter transformation is underway—one that's reshaping the risk-return profile of litigation finance.

Litigation disbursement funding, a structured credit model that finances the upfront costs of consumer legal claims, is emerging as a secure and stable allocation within diversified private debt portfolios. Fenchurch Legal is among a small number of UK funders specialising exclusively in this strategy. By swapping binary case risk for fixed-income-style returns, litigation disbursement funding offers the kind of predictability many sophisticated investors are looking for.

The Traditional Model: High Risk, High Reward

Traditional litigation funding involves financing high-value legal cases—think multimillion-pound commercial disputes or group actions. These funders typically operate on a non-recourse basis—meaning they only profit if the case is successful.

This high-stakes model has appeal—but it comes with binary outcomes, long timeframes, and considerable exposure to legal and procedural risk. It's a speculative, equity-style play on justice.

While this model has shaped public perceptions of the sector, it represents only one part of the litigation funding landscape—and there is a more scalable, lower-risk alternative in litigation disbursement funding available to investors.

What is Litigation Disbursement Funding?

Litigation disbursement funding falls under the broader umbrella of litigation finance, but it's best understood as a structured loan facility designed to finance the upfront costs of low-value legal claims at high volumes.

Instead of backing individual legal outcomes, specialist funders like Fenchurch Legal provide revolving credit facilities to law firms to cover the upfront costs of thousands of consumer litigation claims—such as court fees, expert reports, and ATE insurance premiums.

Instead of being tied to a single case outcome, these loans are repaid by the law firms regardless of individual case outcomes. This structure transforms litigation funding from speculative investing to a diversified credit exposure.

Built-in Security

Each facility is secured by multiple layers of protection:

• After the Event (ATE) insurance
• Debentures over the firm's assets
• Personal guarantees
• Assignments over case proceeds

These mechanisms mean investor capital is not reliant on a single success or a favourable verdict.

'This model doesn't rely on winning a handful of cases. It's built on diversification, structure and rigorous monitoring—making it particularly attractive to investors seeking steady returns, reduced volatility, and low correlation with traditional markets,' says LouisaKlouda, CEO of Fenchurch Legal.

Why Litigation Disbursement Funding Is Where the Smart Money Is

Investing in litigation disbursement funding offers something traditional litigation bets rarely do: predictable, fixed-income style returns combined with robust downside protection. Here's what the smart money likes about the strategy:

• Predictable Returns – Funders charge up-front fees at origination, ensuring a portion of returns is secured upfront. Investors typically can see returns of between 11–14 per cent p.a. Returns aren't contingent on a courtroom win; they're baked into the loan structure from day one.
• Multi-layer security – Every facility is protected by several layers of security. All must fail before investor capital is at serious risk—creating a robust credit profile.
• Diversification at Scale – Capital is deployed across thousands of low-value consumer claims, multiple law firms and several case types. A single loss does not materially impact the overall portfolio. That built-in spread is the kind of risk control institutions want.
• Low market correlation – Litigation outcomes are not affected by interest rates, equity volatility, or macroeconomic shocks. This makes disbursement funding an attractive hedge against systemic market risk.
• Real-Time Monitoring – Specialist funders like Fenchurch Legal use advanced software to monitor every drawdown and repayment in real time, keeping default rates low and transparency high.

What's Driving Growth?

Litigation disbursement funding is poised to keep growing, and three macro trends are accelerating investor interest in this segment:

1. Surge in Consumer Litigation – The end of the PPI era hasn't cooled consumer redress. A new wave of claims—particularly mis-sold motor finance (PCP) is generating a multibillion-pound pipeline of protocol-driven claims. These claims are ideal for high-volume, credit-line funding models.
2. Growing Focus on ESG-Linked Strategies – Litigation disbursement funding sits squarely within the "S" in ESG. Funding access to justice for underserved consumers aligns with broader social impact objectives, and some specialist managers are already marketing these strategies as ESG-aligned private credit.
3. Demand for Speciality Credit – With yields tightening in traditional fixed income, investors are expanding into low‑correlation credit strategies such as trade receivables, asset‑backed lending, and now litigation disbursement funding.

Final Thoughts

While it hasn't replaced big-ticket litigation funding, litigation disbursement funding is gaining traction as a complementary, lower-risk strategy within private credit. It offers predictable yields, robust security, and broad diversification—qualities that explain why the smartest money in private credit is moving to this once-overlooked corner of the market.

And with specialist players like Fenchurch Legal leading the way, the future of litigation funding disbursements looks less like a gamble and more like a well-structured opportunity for stable, long-term growth.

Disclaimer: This article is an editorial piece and does not constitute financial or investment advice. Past performance is not indicative of future results. Litigation funding involves risks, and potential investors should carefully consider the associated risks and suitability before making any investment decisions. Always conduct your own research or consult with a professional advisor before making investment decisions.

About Fenchurch Legal

Fenchurch Legal is a UK-based specialist litigation financier, providing disbursement funding to small and mid-sized law firms pursuing consumer claims where outcomes are well-established and repeatable, including housing disrepair, financial mis-selling, and undisclosed commission cases. Founded in early 2020, Fenchurch Legal was established in response to growing demand for litigation funding in the smaller consumer claims segment—an underserved area of the UK litigation finance market. In parallel, Fenchurch Legal structures litigation finance investment products designed for investors, providing exposure to a non-correlated, secured investment class.

Contact:

Fenchurch Legal

Laura Rinaldi

Head of Marketing

laura@fenchurch-legal.co.uk

Linen Hall, 162-168 Regent St,
London, W1B 5TB