Litigation Finance Returns: Understanding MOIC, IRR, and Duration Sensitivity

How returns are measured, why duration matters so much, and how the asset class compares to alternatives.

Litigation finance returns are measured primarily through two metrics that institutional investors will recognize from private markets: multiple on invested capital and internal rate of return. MOIC expresses how many times the invested capital is returned, a case that returns three dollars for every dollar invested has a 3.0x MOIC. IRR expresses the annualized rate of return, accounting for the time over which the capital was deployed. The two metrics together describe both the magnitude and the velocity of returns.

The relationship between MOIC and IRR reveals why duration is so consequential. A 2.0x MOIC achieved in two years represents a far higher IRR than the same 2.0x achieved in five years, because the capital was at work for less time. This is why funders price duration so carefully: a longer expected timeline requires a higher MOIC to deliver the same IRR. Two cases with identical expected recovery can warrant very different pricing purely because of their expected duration.

Returns vary widely by case type and stage at investment. Individual matters have historically produced gross MOICs ranging from modest multiples to several times invested capital, with corresponding IRRs that depend heavily on resolution timing. At the fund level, returns net of fees, expenses, and losses on adverse cases settle into ranges that institutions evaluate against private credit and private equity. The dispersion of individual outcomes makes portfolio diversification essential to delivering consistent fund-level returns.

The defining attribute for portfolio construction is low correlation. Because litigation outcomes depend on legal merits and judicial decisions rather than on markets or the economic cycle, litigation finance returns are largely uncorrelated with equities and credit. This makes the asset class valuable as a diversifier within an institutional portfolio, providing a return stream that does not move with the rest of the book. Past performance, of course, does not guarantee future results.

Criterica Capital improves return predictability by grounding case selection and duration estimates in outcome models trained on 106M+ court records, sharpening the timing assumptions that drive IRR. Institutional investors evaluating the return profile of litigation finance can contact our team to discuss how data-driven underwriting affects portfolio outcomes.

Discuss your matter with our institutional team.