Secondary Sale of Litigation Claim Interests

The transfer of an existing investor's or fund's economic interest in a funded litigation claim or portfolio to a new buyer prior to the underlying case's resolution, allowing the original investor to achieve liquidity without waiting for the litigation to conclude. Secondary transactions in this asset class remain less common and less standardized than in more established alternative asset classes such as private equity, both because case-level valuation is inherently uncertain and because many funding agreements include consent or notification requirements governing any transfer of the funder's interest, reflecting the underlying claimant's and counsel's interest in knowing who ultimately holds an economic stake in their matter. Pricing in a secondary sale is typically negotiated at a discount to the seller's own internal mark, reflecting both the buyer's independent diligence costs and the inherent illiquidity premium attached to an asset with no established trading market.

The absence of a liquid secondary market is one of the defining features distinguishing litigation-asset investing from most other alternative asset classes, and investors size their initial commitments and duration expectations accordingly, since an early exit is neither assured nor efficiently priced if genuinely needed before a case resolves. Funders that do execute secondary sales — often to manage concentration risk or to generate interim liquidity for their own investors — treat the transaction pricing itself as a valuable independent data point on how a sophisticated third party actually values the remaining case risk, distinct from the seller's own internal marks.