Parabellum Capital, which spun off from Credit Suisse 12 years ago, has successfully closed a $754 million fund, making it one of the largest private pools raised for litigation finance.
Parabellum has allocated two-thirds of the fund to 50 investments in which the firm seeks a return by covering the cost of commercial lawsuits. The investors and the specific lawsuits the pool of money is backing have not been disclosed by Parabellum.
This new fund, the third and biggest for Parabellum, reflects the increasing popularity of litigation finance as an option for returns uncorrelated to equity markets. In 2022, forty-four funders managed $13.5 billion in US commercial litigation investments, representing a 9% increase from the previous year, according to Westfleet Advisors.
“The asset class is moving out of infancy and moving into a state of maturity,” said Howard Shams, CEO and co-founder of Parabellum, in an interview. “Serious people can recognize this as a way to make money over and over again with excellent results—private equity-like results.”
Rebecca Berrebi, a litigation finance broker and consultant, stated that large players like Parabellum are increasingly dominating the litigation finance space, indicating the level of success achieved by the company in fundraising large amounts.
Parabellum’s journey began in 2006 when Howard Shams and Aaron Katz, Parabellum’s chief investment officer, started the legal risk strategies and finance business at Credit Suisse. Since then, Parabellum has grown to $1.45 billion in assets under management and 18 employees.
Parabellum’s first two funds raised a total of $631 million and financed numerous investments, and the previous fund of $465 million is now in harvest mode, while the first fund of $166 million has completed its life cycle.
The First Fund
Parabellum’s first fund closed for $166 million and financed 55 investments, which has now been fully realized. The litigation finance secondary market has seen significant growth in recent years.
Parabellum’s $754 million fund included insurance protection for around 20% of the investors, amounting to $158 million, which can be used for leverage.
Despite competition from insurance markets, which have begun to invade the litigation finance space, Parabellum’s structure has found ways to work in tandem with the insurance industry.
“The insurance attracts the leverage,” Shams said. “Most leverage providers, they’re not litigation financiers, they’re coming in and they’re saying, ‘I’d love to lend, but I don’t know how to evaluate this stuff.’ But once an insurer’s able to come in and say, `We’ll guarantee that you won’t lose money,’ at that point, it’s off to the races.”