Playbook #119: Legal Financing

🖼️ The Big Picture

Legal finance might be the most exciting “boring alternative investment" you’ve never heard of. 

Basically, it’s a pooled business loan to a law firm to pay their expenses while they litigate in major lawsuits (that sometimes take years to settle). 

Once a settlement is made, or a judgment is awarded, the loan is paid off — and sometimes with bonus interest if the settlement is large. 

The loans are diversified so they don’t depend on any one case winning or losing. In general, about 20-25% of the cases don’t pay out. But the 75-80% that do can provide some outsized returns — and investors love that returns aren’t correlated with the market.

The downside is that payouts are event-based (a lot like real estate apartment complex deals that depend on a refinance or sale after a few years to pull cash out and pay back lenders and investors). 

Our Chief Reasearch Officer who leads the research team here at Wealth Factory (whose name is Tom but who's known internally as “The Professor”), has been doing this for years, and had a short quote to share about his experience so far:

“I have been involved in 9 different legal finance loans over the last 10 years, and all of them have returned 100% principle and an average of 18%+ interest. When I first heard about it, it almost sounded too good to be true. And it was a tough first step because the first one I started with required $100k minimum investment. But after seeing the results, and then finding Yieldstreet (which has offerings with $20k-$40k minimums) it really made sense, and it’s done very well. Not being correlated to the market is a huge plus, especially in iffy markets like we're in right now.”

As you can probably imagine, loans made to law firms for this purpose can be relatively complex and are often quite large, so a good starting point is checking out one of the crowdfunded (pooled) opportunities listed in the Key Players section.

🔢 By The Numbers

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