A study claims that C-suite figures at companies around the world are increasingly aware of, and interested in, legal finance. Investing in legal cases and law firms has become an interesting niche area in recent years.

UK-listed Burford Capital a law finance business, has published a survey which claims that its sector will grow rapidly because corporate chiefs increasingly understand how the financial side of legal action can affect their business.

The 2019 Managing Legal Risk Report: A Survey of CFOs and Finance Professionals, surveyed 502 chief financial officers and other senior professionals in the US, the UK and Canada.

The report comes at a time, Burford said, when companies lose millions of dollars (or equivalent) to abandoned claims and unpursued recoveries. Most finance professionals (63 per cent) said their companies have abandoned meritorious claims because they worry that this will hit company accounts. Some 77.6 per cent said their companies have unenforced judgments and uncollected awards valued at $10 million or more.

Making money from financing lawsuits and related legal activity is growing and is arguably that rarity - a truly uncorrelated asset class. Demand for lawsuit finance may even rise when economies slow down or tip into recession as bankruptcies and other problems arise. As a result, proponents say it is a good portfolio diversifier.

A recession will cause legal budgets to shrink and legal finance to grow, Burford said. Most chief financial officers and other colleagues (66.9 per cent) report that in the event of an economic downturn they would advocate reducing legal budgets; still more (67.3 per cent) say that a recession would make them more likely to advocate using legal finance.

“CFOs intuitively grasp that legal finance is simply corporate finance for law, no different from the financing they use to pay for other corporate costs, and a far better alternative than paying out-of-pocket or abandoning valuable legal assets," Christopher Bogart, Burford’s CEO, said.