Litigation finance firm Gerchen Keller Capital LLC said today it raised $475 million for its latest private fund, hiking its assets to more than $800 million and making the nearly 2-year-old investment firm the world’s largest focused on legal and regulatory risk.
And as big as it is, GKC is also nimble.
In a sign of the growth and evolution of litigation finance, which has typically been described as providing non-recourse loans in exchange for a share in litigation awards, GKC’s latest and largest investment fund will offer a different, less-risky type of product.
Rather than investing in lawsuits at early stages, the money will be used to purchase the rights to collect legal fees, judgments and settlements that have largely been resolved. The financing allows companies and law firms to immediately collect awards that, for example, may be waiting on court approval.
The firm has already invested more than $100 million in post-judgment or post-settlement cases where the “legal risk” has largely been eliminated.
“This really grew out of the market demand from our clients, companies and law firms,” said CEO Adam R. Gerchen.
“These opportunities were already coming to us without us necessarily looking for it. It was a product that the market told us was in heavy demand that wasn’t necessarily out there for law firms and companies.”
The new investment fund is just one sign of the growth at GKC.
Led by Gerchen, a former hedge fund employee, and Ashley C. Keller and Travis D. Lenkner, both former clerks to U.S. Supreme Court Justice Anthony M. Kennedy, GKC launched in spring 2013 with a $100 million fund. It reached $300 million in assets by January last year.
At that time, GKC had three partners — Gerchen, Keller and Lenkner — and two full-time employees. By March, Lenkner said, the firm plans to employ 15 people full time, most of whom will be lawyers.
In the past year, it has hired attorneys from Kirkland & Ellis LLP; Katten, Muchin, Rosenman LLP; Sidley, Austin LLP; and the White House.
“Growth is the name of the game, just given the opportunities we’re seeing,” Gerchen said.
Lenkner said the firm works with law firms of nearly all sizes — ranging from the AmLaw 25 to boutiques — and also companies from the Fortune 100 down to closely held businesses.
The firm’s investors include family offices, financial institutions, public pensions, endowments and foundations. The $475 million raised makes it by far its most in-demand fund.
“There certainly is significant appetite in the investor community. But there is also significant demand from companies and law firms,” Lenkner said.
“To put it simply, we would not be able to raise these sorts of funds from the investor community if we were not able to demonstrate that there is demand to put the money to work.”
And increasingly, there are more ways to put that money to work as the firm continues to diversify its financial offerings.
In addition to monetizing post-judgment awards, Lenkner said the firm can help “de-risk” verdicts or judgments facing an appeal. For instance, if a $30 million verdict is being appealed, GKC offers a financial product that allows a company (or law firm on a contingency fee) to cash in a portion of that award regardless of the appeal’s outcome.
For law firms looking to accelerate their hourly billing collections, GKC has purchased the rights to outstanding receivables — providing a lump-sum payment to a law firm while collecting the bill from that firm’s client.
GKC also helps in mediations or settlement negotiations. If a plaintiff requires a one-time payment but a defendant can only provide a series of installments, Lenkner said the firm will act as a financial intermediary that allows a settlement to happen right away.
It is a far cry from a definition of litigation finance confined to an early-stage trade of a cut of litigation awards for cash.
“Litigation finance as it is traditionally understood is only a small part of the sorts of investments that we make. We deploy capital to companies and law firms at all stages of the litigation process,” Lenkner said.
“The short summary is there’s a lot going on. And we’re extremely excited about it.”