Litigation Finance Specialist Pravati Launches Third Fund

Oct 27 2017 | 9:13pm ET

Litigation finance specialist Pravati Capital has launched its third fund vehicle to capitalize on opportunities in the burgeoning litigation finance sector. 

The new fund, named Pravati Credit Fund III, will invest in mature stage, high-probability, high-value cases or case portfolios where there is established liability and precedent for settlement, according to a statement. Like its predecessors, Fund III aims to build an all-weather fund of differentiated return streams uncorrelated to traditional equities and fixed income based on conservative underwriting mandates for investors.

The new fund is structured with an expected duration of 36-48 months, commensurate with the life of the loans typically held in the fund. Preferred income would be distributed quarterly with principal and additional interest earned to be returned at termination of the fund, the company said.

A highly specialized area of alternative investing, litigation finance involves funding participants involved in some sort of legal action that either require or desire a bridge until settlement proceeds are released. 

Pravati has historically only accepted 1 out of every 30 potential investments, the statement added, and has historically funded wrongful termination, intellectual property violations, breach of contract, serious injury, commercial litigation, and mass tort cases. 

Allocations are typically split between law firm portfolios and single event plaintiff cases, with loan rates ranging between high teens to mid-30’s depending on risk.

Fund III has reportedly surpassed its original fundraising goals with private participation vehicles reaching capacity but remains open for investments in a commingled fund. Amounts of the fundraising were not disclosed, although Pravati’s website notes a $50 million target for the new fund. 

Pravati said in the statement that it plans to deploy in excess of $100 million in litigation funding over the next 12-18 months.

Founded in 2013 and headquartered in Scottsdale, Arizona, Pravati Capital’s second litigation finance fund has returned 18.39% so far this year, according to information provided to FINalternatives

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