The litigation funding market is entering a pivotal new phase. Although once a relatively niche area of finance, it has grown into an established asset class with accelerating capital inflows and heightened scrutiny¹. Industry observers noted at the start of the year that the sector is “starting 2025 on a strong note, driven by growing investor interest, regulatory changes and advancements in technology”². A maturing regulatory climate, coupled with more sophisticated investors and larger pools of capital, is reshaping how litigation funding operates. In this forward-looking perspective, we argue that the convergence of institutional capital and tech-driven efficiency will define the next chapter for litigation finance – rewarding those fund managers who embrace transparency, operational excellence, and innovation.

A Maturing Market with Growing Inflows

Over the past decade, litigation funding in the UK alone has expanded dramatically. Assets under management by funders jumped from £198 million in 2011 to around £2.2 billion in 2022, a tenfold increase. The UK now hosts one of the largest litigation funding markets globally¹. What was once viewed as a speculative or boutique investment has evolved into a mainstream strategy for diversification and stable returns². Globally, the market’s size underscores this growth – valued at $17.5 billion in 2025 and projected to reach roughly $67.2 billion by 2037³. Investors are drawn by litigation finance’s non-correlation to public markets and its attractive yield profile (often low double-digit annual returns or better). This surge of capital – including significant cross-border inflows from the US, Europe, and beyond – reflects a growing recognition of the asset class’s potential. Major institutional players like pension funds and university endowments now “put more capital into litigation finance” as part of their portfolios, seeking both portfolio optimisation and downside protection in uncertain economic times⁴.

Crucially, as the investor base expands, investor sophistication is rising. Many early entrants were high-net-worth individuals or specialist funds comfortable with the quirks of funding legal claims. Now, institutional investors are entering the fray, and they bring a higher bar for transparency and governance. These investors – accustomed to rigorous due diligence and oversight in other alternative assets – expect litigation fund managers to operate with institutional-grade practices. In short, institutional capital is raising the standards for everyone. Fund managers find themselves answering deeper questions about how cases are selected, how risks are managed, and how returns are reported. This is all taking place in a climate where regulators and industry bodies are themselves pushing for clearer standards.

Regulatory Climate: Toward Transparency and Accountability

The regulatory backdrop in the UK is gradually evolving to keep pace with the industry’s growth. Historically, British litigation funding has been lightly regulated under a self-regulatory code administered by the Association of Litigation Funders. However, recent developments signal that a more structured oversight framework is on the horizon. A 2023 UK Supreme Court decision (PACCAR), which threatened to invalidate many funding agreements, prompted swift calls for reform¹. In response, the Civil Justice Council (CJC) conducted a major review and in mid-2025 recommended “light-touch regulation” for the sector⁵. Key proposals include requiring funders to maintain adequate capital reserves and introducing universal standards for transparency and sustainability of funds. In practice, this means funders may soon face mandatory disclosure of funding arrangements, minimum capital adequacy rules, and oversight to prevent conflicts of interest or undue influence on litigation. The direction is clear – the UK aims to “establish transparency and frameworks for [third-party funding] participation… ensuring a balance between the interests of investors, claimants, and justice”⁶.

For fund managers, this maturing regulatory climate is a double-edged sword: it brings higher compliance burdens, but also greater legitimacy and investor confidence. Even voices critical of the industry acknowledge that “proper oversight is essential to protect consumers, ensure transparency, and restore public confidence” in litigation funding⁵. In essence, regulation is cementing what sophisticated investors have been seeking all along – transparency, accountability, and governance. Fund managers who pre-empt these changes by bolstering their operational maturity will not only stay ahead of compliance requirements but also appeal to the institutional capital increasingly flowing into the space.

Institutional Investors Demand Operational Excellence

With pension funds, asset managers, and other institutional investors allocating to litigation finance, fund managers are under pressure to meet institutional standards. Transparency, robust governance, and risk management are no longer optional; they are prerequisites to attract big-ticket commitments. Institutional Limited Partners (LPs) perform intense due diligence on fund operations. They expect detailed reporting, audited financials, and clear policies on how cases are underwritten and monitored. A recent industry outlook noted that funders in 2025 will need to provide “greater transparency and detailed reporting… ensuring accountability at every stage of the funding lifecycle.”² This includes frequent updates on case progress and portfolio performance, not just high-level annual summaries. Furthermore, risk oversight is coming under the microscope. Investors want to know that fund managers are assessing the financial health of law firm partners, diversifying case exposures, and monitoring for early warning signs of trouble. In fact, financial oversight is becoming more rigorous, with advanced tools being used to track case milestones and flag risks early.

Another aspect institutions focus on is governance. As one trend analysis highlighted, reputable funders maintain a passive role in the litigation (leaving control with the claimants and lawyers), and uphold ethical practices and disclosures to avoid conflicts⁷. Institutional LPs will look for fund managers that have formalised governance frameworks – for example, investment committees for case selection, independent board members or advisors, and clear conflict-of-interest policies. The bottom line is that institutional capital comes with institutional expectations. Fund managers must demonstrate not only that their strategy can deliver returns, but that their organisation has the infrastructure and culture to meet fiduciary standards. This is where modern technology can play a transformative role.

Technology as a Catalyst for Scale and Trust

Litigation financiers have historically managed deals with basic tools – think Excel spreadsheets, PDF contracts, and email chains – an approach that becomes error-prone and cumbersome as a fund grows. Today, however, forward-looking funders are adopting purpose-built software to streamline every aspect of the funding process. Key tech innovations include:

• Litigation Financing Administration Platforms: End-to-end systems that replace spreadsheets by tracking deals, loan commitments, drawdowns and returns in one secure interface, often in real time. This allows fund managers to calculate metrics like NAV or IRR on the fly and handle complex multi-entity fund structures with ease. By centralising data, these platforms improve accuracy and auditability of financial records.

  
  

• Borrower (Law Firm) Portals: Dedicated portals where law firms or claimants (the “borrowers” of litigation capital) can apply for funding, upload case documents, and report progress as well as keep on top of burn-down of billable hours against funding. These portals enforce standardised data collection and keep all stakeholders aligned. They can also speed up deal flow by automating application intake and due diligence using smart questionnaires and even ML analysis and support for assessing key case indicators (e.g. recoverability or quantum).

  
  

• Case Tracking and Analytics Tools: Software that monitors each funded case through its lifecycle – from filing to resolution. Legal milestones, court deadlines, budgeting and spend, and case outcomes are tracked centrally, giving funders a live bird’s-eye view of portfolio exposure. Data rich platforms can incorporate analytics to identify patterns across cases and flag potential issues (like delays or cost overruns). This data-driven approach to underwriting and monitoring enhances risk management by reducing reliance on gut feeling and catching problems early.

  
  

• Automated Capital Flow Reconciliation: As litigation funds scale, managing the flow of capital becomes complex – with multiple drawdowns to finance cases, contingency-based returns, and waterfall distribution of proceeds. New fund operations software can automate capital calls and distributions, tying them to case milestones or settlement events. Every pound or dollar moving in or out is logged and reconciled without manual spreadsheets. This not only reduces administrative workload but also ensures that LPs have a transparent, up-to-date view of how their capital is deployed and returned.
  
  

These technologies are an essential building block in the process of driving efficiency and instilling the confidence expected by institutional investors. The immediate benefits are tangible: lower administrative costs, faster deal turnaround, and the ability to manage larger portfolios without a commensurate rise in headcount. For instance, deploying an integrated platform in place of spreadsheets can “reduce admin burden” for general partners, limited partners, and even borrowers themselves. But beyond efficiency, tech adoption addresses the very concerns that institutional investors raise. Risk oversight is improved because fund managers can monitor their portfolio in real time and respond to issues proactively. Processes become repeatable and standardised across the portfolio, meaning each case is evaluated with consistent rigour and documented thoroughly – exactly what an investor (or regulator) wants to see. In fact, the use of sophisticated lawtech in funding is cited as a reason legal finance is becoming “an even more attractive option for investors”, by enabling data-driven insights and faster case assessments⁷. When a funder can demonstrate that they have a tech-enabled handle on their business – from case intake to cashflow management – the asset class becomes far more investable to cautious institutional money.

Emerging Secondary Market: Liquidity Requires Data and Trust

While technology is transforming how litigation funds operate, an important next frontier is developing a secondary market for legal finance claims. The idea is to enable funders and investors to trade stakes in ongoing cases or portfolios, bringing much-needed liquidity to what has traditionally been a hold-to-maturity asset class. Interest in this evolution is growing – for instance, a secondary market for quality legal claims has already begun to take shape, with new entrants buying into existing funded cases to make these investments more liquid. In theory, a robust secondary marketplace could allow funders to rebalance portfolios or exit early and let new investors in, much as happens in mature private equity or debt markets.

Today, however, such a secondary market remains nascent and constrained. The chief obstacles are a lack of trust between would-be trading partners and a lack of standardisation in how deals are reported, valued, and benchmarked. Each litigation finance deal is bespoke, and information about a case’s progress and prospects tends to live in siloed spreadsheets or internal reports. A potential buyer of a case interest faces steep information asymmetry – they must rely on the selling funder’s own representations of case status, risk, and value, with no universal benchmark to validate those figures. There is no widely accepted standard for how to value an in-progress claim or report case performance, meaning valuation remains “perhaps more art than science” and demands highly specialised expertise⁸. In practice, this uncertainty forces secondary investors to be extremely cautious. Deals (when they occur at all) often trade at significant discounts to the seller’s stated fair value, as buyers price in the volatility and unknowns inherent in unresolved cases⁸. These dynamics underscore a fundamental trust gap: without consistent metrics or third-party validation, investors are understandably wary about taking over another funder’s positions.

Unlocking a true secondary market will require the industry to coalesce around systematised data and valuation standards. If every funded case were tracked with transparent, consistent metrics – from legal milestones and budget updates to unbiased valuations – secondary buyers could more confidently assess what they are purchasing. Common reporting frameworks would allow an apples-to-apples comparison of cases and portfolios, rather than each funder using its own playbook. Crucially, auditability must be built in. Buyers need to know that the data underpinning a case’s valuation is reliable and can be independently verified. At present, even fundamental figures (like aggregate returns across the market) are hard to come by, as experts have noted persistent gaps in available market data for litigation finance⁹. This highlights the need for better information infrastructure across the sector. By embracing standardised data collection and reporting, funders can begin to close those gaps – and signal to outside investors that an offered claim or portfolio interest stands on solid, well-documented ground.

Technology and purpose-built infrastructure will be critical to this effort. Modern litigation funding platforms (for example, purpose-built software like Fenaro) can enforce uniform data schemas and reporting workflows across all cases in a portfolio. By capturing case information in a structured, centralised way, such systems ensure that all parties are effectively speaking the same data language when evaluating a claim’s performance. This kind of infrastructure brings much-needed transparency and rigour at the case level – every update is logged, every valuation uses consistent methodology, and every outcome is recorded and auditable. In fact, the industry itself has been “clamouring for years” for standardisation and transparency as a means to eliminate uncertainty and attract liquidity into litigation finance⁸. A dedicated platform that provides real-time, transparent case data can act as the bridge between primary funders and secondary investors, reducing the trust deficit by making the state of a claim far more visible and consistent. In short, robust digital infrastructure lays the groundwork by turning opaque case updates into shareable, credible data – a prerequisite for any efficient secondary trading ecosystem.

In the long run, a mature secondary market may also benefit from independent benchmarks or even third-party ratings to bolster confidence. Just as credit rating agencies and standardised indices help investors trust complex debt instruments, the litigation finance space might eventually see the rise of impartial evaluators or industry benchmarks that rate the risk or quality of legal claims. Such external validation, alongside better internal data, would further reassure participants that an offered litigation asset has been vetted according to common standards. Over time, these developments – systematised data, consistent valuation metrics, auditability, and perhaps third-party ratings – can reinforce one another. Together, they form the bedrock of trust on which a secondary market can flourish. With these pieces in place, litigation funding could evolve from a purely buy-and-hold proposition into a more fluid marketplace, unlocking liquidity for funders and investors alike while maintaining the transparency and accountability that institutional participants demand.

Meeting Institutional LP Expectations: Data, Auditability and Compliance

As litigation finance matures, auditability and transparency are not just buzzwords but requirements for winning over institutional LPs. Fund managers need to be prepared to open the hood on their operations. This means having in place comprehensive reporting and data rooms that can satisfy the due diligence of a pension fund or insurance company considering an allocation. Modern fund platforms are rising to the challenge: many now offer customisable LP dashboards with instant access to reports, so that investors can log in and see updated metrics on their commitments, returns, and even case progress. Such on-demand reporting goes a long way to reassure institutions that their capital is being managed transparently. Moreover, audit trails are increasingly a standard feature of fund tech – every action (from underwriting decisions to disbursements) can be timestamped and recorded. This level of auditability is invaluable not only for internal governance but also if a regulator or external auditor comes knocking. Indeed, the CJC’s proposed guidelines underscore the need for record-keeping and disclosure, effectively nudging the industry to be ready for audits at any time⁶.

Data-driven underwriting is another pillar of operational maturity. Institutional investors, who often have committees and risk officers, feel more at ease when funders use objective criteria and analytics to select cases. Employing tools with ML-augmented case evaluation or statistical risk models signals that a funder is taking a disciplined, repeatable approach to deploying capital². It also helps in portfolio construction – ensuring diversity of cases by sector, legal forum, or claim size, to spread risk. LPs will ask fund managers to articulate their underwriting model and track record, and those who leverage data can provide richer answers backed by evidence.

Finally, automated compliance processes are increasingly important. With larger capital pools come stricter compliance obligations – KYC (Know Your Customer) checks on claimants or law firm partners, AML (Anti-Money Laundering) regulations for international funds flows, and data protection (GDPR in Europe) when handling sensitive case files. Here, too, technology offers solutions: leading fund management systems have KYC/AML workflows built-in and ready for regulatory review. By automating identity verification and flagging politically exposed persons or sanctioned entities, funders can avoid compliance pitfalls that would give institutional LPs pause. In essence, operational excellence in litigation funding now spans from initial due diligence on cases all the way to back-end compliance checks – and each piece is crucial when marketing to institutional investors. Those fund managers who can demonstrate strong control of data, rigorous reporting, and airtight compliance will find themselves well-positioned in this new phase.

Purpose-Built Solutions: Positioning for the Next Phase

The convergence of institutional capital and tech efficiency in UK litigation finance creates a clear mandate: embrace modern infrastructure or risk being left behind. Fortunately, the industry is witnessing the emergence of purpose-built platforms to help funders meet these heightened demands. Fenaro, for example, has positioned itself as a fund operating system tailored to operationally complex litigation funding assets. By offering an integrated platform that ditches spreadsheets in favour of secure, scalable software, Fenaro enables fund managers to “scale fast, while remaining secure and compliant.” All the elements discussed – analytics-driven case triage to automated capital management – are part of such solutions. Adopting a platform like this can equip a litigation fund with institutional-grade infrastructure overnight: case intelligence engines to evaluate deals, capital deployment controls for structured drawdowns, real-time performance reporting for LPs, and built-in compliance modules ensuring audit readiness. The result is that even smaller or newer fund managers can instil the confidence in investors that typically only well-established financial institutions enjoy.

In the coming years, as UK litigation funding enters its next phase, we expect to see a bifurcation in the market. On one side will be funders who proactively upgrade their operations – embracing transparency, robust governance, and technology-driven efficiency. On the other side will be those who cling to ad-hoc processes and opaque practices. The former group is far more likely to attract the swelling ranks of institutional capital eager to enter this asset class. They will be the ones who not only comply with emerging regulations, but actually help shape best practices that define the industry’s future. In an environment where a sophisticated pension fund can choose from multiple fund managers, the differentiator will be trust and operational excellence. As a purpose-built solution, Fenaro’s fund operating system exemplifies the kind of innovation that can bridge the gap, enabling litigation funders to meet institutional expectations without sacrificing agility.

Conclusion

The next phase of litigation funding in the UK will be characterised by greater amounts of institutional capital converging with tech-enabled fund management. This marriage of capital and technology stands to benefit all stakeholders: claimants gain access to justice through well-capitalised funders, investors gain confidence through transparency and predictability, and fund managers themselves can scale responsibly and efficiently. The message to UK legal finance professionals is clear – to thrive in this new era, embrace the tools and practices that elevate litigation finance to an institutional-grade asset class. Those who do will help solidify the UK’s role as a global leader in litigation funding, where capital meets tech efficiency to deliver both justice and returns.

About Fenaro

Fenaro is the platform for managing operationally complex assets - built from the ground-up to meet the complex needs of litigation funders. Find out more at Fenaro.com.

Fenaro is onboarding now, book a demo today and see how we can help your fund make the most of litigation funding’s capital markets moment, powered by data and technology.

Sources

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8.  ‘Secondary’ Investing in Litigation Finance: Why, why now, and how to approach investing in Lit Fin Secondaries | Slingshot Capital
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