Portfolio company Mighty Group offers a tantalizing proposition: earn 25% to 30% interest on an asset that has zero correlation with anything else in your portfolio. CEO Josh Schwadron believes in a future where financing for this sort of asset will be so easy and so ubiquitous and so inexpensive the market will not just be for plaintiffs who are desperate.
Not yet, anyway. Schwadron’s ambition is to generate enough data about the risk and returns of lending small amounts of money to plaintiffs in personal injury suits to turn litigation finance into a respectable alternative investment–one predictable and large enough to draw affluent investors who don’t chase ambulances for a living. Right now such loans are made mostly by small local outfits operating in the shadows. Schwadron’s dream isn’t so far-fetched. The potential market is sizable; in 2014 insurance companies paid out more than $140 billion for lawsuits, including $72 billion for car accidents alone, according to financial industry analyst SNL Financial, a unit of McGraw Hill Financial based in Charlottesville, Va. And there’s precedent in peer-to-peer lending sites like Lending Club and Prosper, which make small unsecured personal loans and were also once considered iffy.