Litigation Finance Fund Structures: Closed-End, Managed Accounts, and SMAs

How litigation finance vehicles are structured, and how deployment and distribution waterfalls work.

Litigation finance funds are organized in several structures, each suited to a different investor base and strategy. The closed-end limited partnership is the most common: investors commit capital that the general partner draws down over a deployment period and returns as cases resolve, over a fund life that typically spans five to seven years with extension options. This structure mirrors private equity and private credit, with which institutional investors are familiar.

Separately managed accounts and funds-of-one serve larger allocators who want a customized mandate rather than a commingled pool. In an SMA, the investor's capital is managed under terms specific to its objectives, with parameters for practice area, geography, case stage, and concentration. This gives the investor greater control and transparency, and it avoids the blind-pool risk of committing to a fund whose investments are not yet identified. The trade-off is that SMAs generally require larger commitments to be economical.

Deployment in litigation finance differs from other private strategies because case opportunities arrive irregularly and each requires careful underwriting. A fund cannot deploy capital on a fixed schedule; it must wait for qualifying matters and resist the pressure to fund weaker cases simply to put capital to work. Disciplined funds accept a measured deployment pace, which lengthens the deployment period but protects portfolio quality. Investors should expect capital to be drawn gradually as the manager finds matters that clear underwriting.

Distribution waterfalls govern how proceeds are shared. A typical structure returns committed capital to investors first, then provides a preferred return, after which the manager participates in profits through carried interest above a hurdle. The specifics, the preferred rate, the hurdle, the carry percentage, and any catch-up, are negotiated and set out in the fund documents. Because case resolutions are lumpy and unpredictable, distributions arrive irregularly rather than on a smooth schedule.

Criterica Capital structures vehicles across the closed-end, managed account, and SMA spectrum, with every investment underwritten using outcome models trained on 106M+ court records. This gives investors a consistent, data-grounded basis for evaluating the portfolio regardless of structure. Institutions evaluating litigation finance vehicles can contact our team to discuss structure, terms, and deployment strategy.

Discuss your matter with our institutional team.