# Litigation Funding Portfolio An 8-case litigation-finance fund model over a 6-year horizon: commercial-litigation, IP, antitrust, mass-tort, arbitration, securities, trade-secret, and lien claims, with per-case expected value (wins and partial loss recoveries), portfolio cashflows, European-style 2-and-20 fee structure, gross and net IRR / MOIC, and a 5x5 sensitivity grid on win rate by MOIC bands. - Canonical: https://finamodel.com/templates/litigation-funding - Excel download: https://finamodel.com/templates/litigation-funding.xlsx - Category: Private Equity - Model type: Fund returns - Difficulty: Intermediate - Audiences: Investors & analysts, Bankers & advisors, Litigation-finance LPs, Alternative-asset allocators, Fund GPs, Family offices - Tags: litigation finance, alternatives, fund returns, irr, waterfall ## Overview A litigation-funding portfolio model captures the expected return of a closed-end fund that finances commercial-litigation, intellectual-property, antitrust, mass-tort, arbitration, and trade-secret cases in exchange for a contracted multiple of capital deployed on a win. The workbook runs across seven sheets - Cover, Assumptions, Case_Portfolio, Cashflows, Returns, Sensitivity, Checks - plus the shared Disclaimer. Every input is a named-range cell, every formula is one or two operations long, and the workbook passes static-value, self-reference, dead-assumption, and unused-named-range scans. The case panel sits on the Assumptions sheet: eight cases with capital commitment, funding year (0-2), duration in years (2-4), base win probability (35-65%), MOIC on win (2.5-6.0x), and loss recovery rate (5-20% of capital). A Scenario_Sel parameter drives a CHOOSE() over three win-rate scalars (Base 1.00x, Bull 1.20x, Bear 0.75x), capped at 100% per case on the upside. The total committed capital is 37 million USD spread across eight diversified case types and three vintages - the sector convention for a sub-$50M emerging-manager fund. The Case_Portfolio sheet computes per-case expected value: EV recovery = Capital × (Adjusted Win × MOIC + (1 − Adjusted Win) × Loss Recovery), then EV profit, EV / cost ratio, and resolution year (funding year + duration). The Cashflows sheet rolls annual portfolio cashflows - per-case capital out triggered by funding year, per-case expected recoveries triggered by resolution year, plus a 2% management fee drag every year on committed capital - into net pre-carry and cumulative pre-carry rows. Carry is computed European-style: only in the terminal year, only on profits above the hurdle × weighted-average duration, at 20% of the excess. This matches institutional fund convention for closed-end vehicles. The Returns sheet headlines gross IRR (23%), gross MOIC (2.0x), net IRR (21%), net MOIC (1.7x), TVPI, DPI, and portfolio NPV at a 12% discount rate, plus the capital-weighted win rate, weighted-average duration, total capital deployed, expected recovery, expected profit, and cumulative fees and carry paid. The Sensitivity sheet runs a 5x5 grid of net IRR across win-rate scalars (0.6x to 1.4x) and MOIC multipliers (0.8x to 1.2x) using a closed-form approximation that lands within tolerance of the headline IRR at the centre cell. The Checks sheet runs seven cross-sheet validations - capital deployed equals commitment, all adjusted win probabilities ≤ 100%, every case EV recovery non-negative, carry confined to the final period, carry respects the hurdle gate, net MOIC ≤ gross MOIC, and the sensitivity centre cell within tolerance of the headline net IRR. Target users are litigation-finance LPs (pension funds, family offices, alternative-asset allocators), fund GPs raising or reporting on a litigation-finance vehicle, and bankers underwriting LP commitments. The model is calibrated against published gross returns from Burford Capital, Omni Bridgeway, Therium, and Parabellum - typical commercial-litigation funds report 20-35% gross IRR and 15-25% net IRR on 2.5-3.5 year duration. Use the scenario selector for win-rate stress testing, edit the case panel for portfolio diversification analysis, and flex the fee-and-carry inputs to compare the LP cost of 2-and-20 against alternative structures. ## What's included - 8-case commercial-litigation panel with capital, funding year, duration, win prob, MOIC on win, loss recovery - Scenario selector (Base 1.00x, Bull 1.20x, Bear 0.75x) driving win-rate scalars across the panel via CHOOSE() - Case_Portfolio sheet with adjusted win probability, EV recovery, EV profit, EV/cost ratio, resolution year - Cashflows sheet with per-case capital out by funding year and recovery by resolution year, plus mgmt fee, carry, net pre and post - European-style waterfall: 2% mgmt fee on commitment, 20% carry on profits above 8% hurdle by weighted-avg duration - Returns sheet with Gross IRR / MOIC, Net IRR / MOIC, TVPI, DPI, NPV at 12%, and portfolio composition - 5x5 Sensitivity grid: win-rate scalar (0.6x-1.4x) by MOIC multiplier (0.8x-1.2x) producing closed-form Net IRR - Seven validation checks: deployed equals commitment, win prob bounded, EV non-negative, carry mechanics, sensitivity centre matches headline - 8-case commercial-litigation panel (capital, funding year, duration, win prob, MOIC on win, loss recovery) - Scenario selector (Base 1.00x, Bull 1.20x, Bear 0.75x) driving win-rate scalars across the panel - Case_Portfolio sheet with adjusted win probability, EV recovery, EV profit, EV/cost ratio, resolution year per case - Cashflows sheet: per-case capital out (by funding year) and expected recovery (by resolution year), plus mgmt fee, net pre-carry, carry, net post-carry, cumulative - European-style waterfall: 2% mgmt fee on committed capital, 20% carry on profits above 8% hurdle × weighted-avg duration, terminal-year only - Returns sheet: Gross IRR / MOIC, Net IRR / MOIC, TVPI, DPI, Portfolio NPV at 12%, plus capital-weighted win rate, duration, and composition lines - Seven validation checks tying capital, win-prob bounds, EV sign, carry mechanics, and sensitivity centre to the headline IRR ## Litigation Funding Portfolio: How the Fund Model Works This litigation funding template shows how an eight-case commercial litigation finance portfolio is evaluated from the investor side over a six-year horizon. It combines per-case expected value with portfolio cashflows, an illustrative 2-and-20 fee structure, gross and net return metrics, and a sensitivity grid on win rates and contracted multiples. ### How the Case Portfolio Is Built The portfolio contains eight commercial litigation cases representing breach of contract, intellectual property, antitrust, mass tort, international arbitration, securities, trade secret, and construction lien matters. Total committed capital is spread across funding years zero to two, with individual case durations of two to four years, so capital deploys gradually and resolutions cluster in later years. - Each case carries a capital commitment, a base win probability, a contracted multiple on a win, and a loss recovery assumption. Loss recovery is an input for partial settlement proceeds on unsuccessful cases. - This construction diversifies the fund across case type and timeline rather than concentrating exposure in one dispute. ### Per-Case Expected Value Logic Expected value is calculated case by case before any portfolio aggregation. A scenario selector applies a win-rate scalar to every case's base win probability, capped at one hundred percent on the upside. - Adjusted probability then blends the contracted multiple on a win with the loss recovery on a loss, weighted by those probabilities. Subtracting capital gives expected profit, and dividing expected recovery by capital gives the expected recovery-to-capital ratio. - Each case's resolution year is its funding year plus duration. Because the same scalar moves every case, the scenario layer shifts portfolio-level outcomes without changing the underlying case assumptions. ### Portfolio Cashflows and Fee Waterfall Year-by-year cashflows combine capital outflows, expected recoveries, management fees, and carried interest. Management fees are charged on committed rather than deployed capital at a constant annual rate. - Carry is calculated only in the terminal year on profits above the input preferred return scaled by weighted-average duration, following a European-style, portfolio-level waterfall. Each year's net cashflow feeds a cumulative pre-carry balance used to test the hurdle. - Fees and carry are deducted from gross cash flows to calculate LP net cash flows. The model includes a check comparing gross and net return multiples. ### Returns, Sensitivity, and Practical Use Outputs include gross and net IRR, MOIC, TVPI, DPI, portfolio NPV at the input discount rate, and weighted-average duration and win rate. - A five-by-five sensitivity grid varies the win-rate scalar and contracted multiples, approximating net IRR across win-rate and MOIC bands. - The grid is a closed-form simplification that does not reproduce full deployment timing and can be compared with the headline result at the centre cell. - Practically, the model lets an evaluator see how case mix, win-rate assumptions, and multiple haircuts interact with the fee structure, and understand which drivers matter most for LP outcomes. ## Built for litigation-finance LP diligence When the question is "does the case panel and the 2-and-20 fee structure clear the LP net-IRR hurdle?", a clean EV recovery panel plus a European-waterfall cashflow is the only honest answer. This template hands an LP a one-page bridge from gross case economics to net investor IRR. ## Designed for one-edit responsiveness Every input - case capital, win prob, MOIC, loss recovery, fee, carry, hurdle, scenario - is a named-range cell. Edit one and the Case_Portfolio, Cashflows, Returns, Sensitivity, and Checks sheets all recompute. No formula rewrites needed to test a different fund structure. ## Honest about losing cases EV recovery handles partial settlements on losing cases via a per-case Loss Recovery rate (typical 5-20% of capital). Most litigation-finance models treat losses as zero; this one is realistic about defendants settling to avoid retrial risk and legal-cost reimbursement claims. ## Built for litigation-finance LP diligence When the question is "does the case panel and the 2-and-20 fee structure clear the LP net-IRR hurdle?", a clean EV recovery panel plus a European-waterfall cashflow is the only honest answer. This template hands an LP a one-page bridge from gross case economics to net investor IRR. ## Designed for one-edit responsiveness Every input - case capital, win prob, MOIC, loss recovery, fee, carry, hurdle, scenario - is a named-range cell. Edit one and the Case_Portfolio, Cashflows, Returns, Sensitivity, and Checks sheets all recompute. No formula rewrites needed to test a different fund structure. ## Honest about losing cases EV recovery handles partial settlements on losing cases via a per-case Loss Recovery rate (typical 5-20% of capital). Most litigation-finance models treat losses as zero; this one is realistic about defendants settling to avoid retrial risk and legal-cost reimbursement claims. ## Workbook structure ### Cover Workbook overview, sheet legend, and tab-colour key for navigation. - Title and scope framing - Sheet-by-sheet purpose summary - Tab-colour legend ### Assumptions Every driver in one sheet: scenario selector, portfolio economics, 8-case panel, scenario scalars, sensitivity bands, check tolerance. - Scenario_Sel (1=Base, 2=Bull, 3=Bear) - Mgmt fee, carry, hurdle, discount rate, vintage year - 8 cases with capital, funding year, duration, win prob, MOIC on win, loss recovery - Scenario scalars (1.00x, 1.20x, 0.75x) and active scalar derived via CHOOSE - Sensitivity grid bands and check tolerance ### Case_Portfolio Per-case derived metrics with totals and weighted averages. - Adjusted win prob = MIN(1, base win prob times active scalar) - EV recovery = capital times (adj win times MOIC plus (1 minus adj win) times loss recovery) - EV profit and EV/cost ratio per case - Resolution year = funding year plus duration - Capital-weighted average win, duration, and MOIC ### Cashflows Year 0-5 portfolio cashflows with per-case detail. - Per-case capital out triggered in funding year - Per-case expected recovery triggered in resolution year - Mgmt fee drag every year on committed capital - Net pre-carry and cumulative pre-carry - European-style carry only in terminal year above hurdle gate - Net cashflow to LP and cumulative LP cash ### Returns Gross and net IRR, MOIC, TVPI, DPI, NPV, and portfolio composition. - Gross IRR pre-fee and pre-carry; Net IRR to LP - Gross MOIC and Net MOIC - TVPI and DPI off LP distributions - Portfolio NPV at the discount rate - Capital-weighted win rate, loss rate, and duration - Capital deployed, expected recovery, expected profit, fees, carry ### Sensitivity 5x5 grid of Net IRR across win-rate scalar and MOIC multiplier. - Win-rate scalar rows (0.6x to 1.4x) - MOIC multiplier columns (0.8x to 1.2x) - Closed-form Net IRR approximation per grid cell - Grid bands sourced from Assumptions named ranges ### Checks Seven cross-sheet validation checks. - Capital deployed equals portfolio commitment - Adjusted win prob bounded at 100% - EV recovery non-negative for every case - Carry confined to final period - Carry respects hurdle gate - Net MOIC bounded by gross MOIC - Sensitivity centre cell within tolerance of headline net IRR ### Cover Workbook overview, sheet legend, and tab-colour key for navigation. - Title and scope framing - Sheet-by-sheet purpose summary - Tab-colour legend ### Assumptions Every driver in one sheet: scenario selector, portfolio economics, 8-case panel, scenario scalars, sensitivity bands, check tolerance. - Scenario_Sel (1=Base, 2=Bull, 3=Bear) - Mgmt fee, carry, hurdle, discount rate, vintage year - 8 cases with capital, funding year, duration, win prob, MOIC on win, loss recovery - Scenario scalars (1.00x, 1.20x, 0.75x) and active scalar derived via CHOOSE - Sensitivity grid bands and check tolerance ### Case_Portfolio Per-case derived metrics with totals and weighted averages. - Adjusted win prob = MIN(1, base win prob times active scalar) - EV recovery = capital times (adj win times MOIC plus (1 minus adj win) times loss recovery) - EV profit and EV/cost ratio per case - Resolution year = funding year plus duration - Capital-weighted average win, duration, and MOIC ### Cashflows Year 0-5 portfolio cashflows with per-case detail. - Per-case capital out triggered in funding year - Per-case expected recovery triggered in resolution year - Mgmt fee drag every year on committed capital - Net pre-carry and cumulative pre-carry - European-style carry only in terminal year above hurdle gate - Net cashflow to LP and cumulative LP cash ### Returns Gross and net IRR, MOIC, TVPI, DPI, NPV, and portfolio composition. - Gross IRR pre-fee and pre-carry; Net IRR to LP - Gross MOIC and Net MOIC - TVPI and DPI off LP distributions - Portfolio NPV at the discount rate - Capital-weighted win rate, loss rate, and duration - Capital deployed, expected recovery, expected profit, fees, carry ### Sensitivity 5x5 grid of Net IRR across win-rate scalar and MOIC multiplier. - Win-rate scalar rows (0.6x to 1.4x) - MOIC multiplier columns (0.8x to 1.2x) - Closed-form Net IRR approximation per grid cell - Grid bands sourced from Assumptions named ranges ### Checks Seven cross-sheet validation checks. - Capital deployed equals portfolio commitment - Adjusted win prob bounded at 100% - EV recovery non-negative for every case - Carry confined to final period - Carry respects hurdle gate - Net MOIC bounded by gross MOIC - Sensitivity centre cell within tolerance of headline net IRR ## Features - **Per-case expected value with loss recovery:** EV recovery handles both wins and partial settlement recoveries on losses (typical 5-20% of capital) so the portfolio number is honest about the downside cases that settle for legal-cost reimbursement instead of trial. - **Scenario-driven win rate with cap:** Scenario_Sel runs Base / Bull / Bear win-rate scalars through a CHOOSE() against every case's base win probability, capped at 100% on the Bull side so the math stays sane at high uplifts. - **European-style waterfall:** Carry is computed portfolio-level after all capital is returned plus the preferred return - the institutional-LP convention. Carry only fires in the terminal year, only on profits above hurdle × weighted-avg duration. ## Use cases - **Fund-formation LP diligence:** Walks an institutional LP through the gross-to-net bridge, the IRR sensitivity to win-rate assumptions, and the carry mechanics. Flip Scenario_Sel between Base, Bull, and Bear to see how a 20% relative shift in win rates moves the LP's net IRR. - **Portfolio diversification stress test:** Edit case capital, duration, or MOIC on the Assumptions panel and the Returns and Sensitivity grid recompute. Drops a heavy weight on one case to see how concentration affects the weighted-average duration and the closed-form IRR. - **Fee-and-carry calibration:** Flex mgmt fee, carry %, and hurdle on Assumptions to compare 2-and-20 against a no-carry / lower-fee alternative or a deal-by-deal carry pattern. The gross-to-net gap on the Returns sheet quantifies the LP cost of each structure. ## Frequently asked questions ### What is a litigation-funding model? A litigation-funding model captures the expected return of a closed-end fund that finances commercial-litigation, IP, antitrust, mass-tort, and arbitration cases in exchange for a contracted multiple of capital on a win. It is how institutional LPs underwrite whether a diversified case panel and the 2-and-20 fee structure clears the required net IRR hurdle. ### How does the expected-value formula handle losing cases? Each case has a Win Prob and a Loss Recovery rate. EV recovery = Capital times (Adjusted Win times MOIC plus (1 minus Adjusted Win) times Loss Recovery). Loss recovery captures partial settlements on losing cases - typical 5 to 20% of capital - because defendants often settle to avoid retrial risk and legal-cost reimbursement claims. ### What does the scenario selector do? Scenario_Sel (1=Base, 2=Bull, 3=Bear) runs a CHOOSE() over three win-rate scalars (1.00x, 1.20x, 0.75x). The selected scalar multiplies every case base win probability, capped at 100%. Flipping the cell on Assumptions recomputes the entire portfolio in one keystroke - Case_Portfolio, Cashflows, Returns, Sensitivity, and Checks all follow. ### Why is carry only paid in the terminal year? The model uses a European-style waterfall - carry is calculated portfolio-level after all capital is returned plus the preferred return (8% times weighted-avg duration). This is the institutional LP convention for closed-end fund vehicles. Deal-by-deal carry would fire on each case settlement, which favours the GP at the LP expense. ### Can I model insurance-wrapped litigation finance? Not directly. This template models a fully-funded fund with no ATE (After-The-Event) insurance or capital-protected note structure. To layer insurance, add a premium row (cost) and a recovery floor (proceeds) per case on Assumptions, then adjust the loss-recovery formula to take MAX(LossRec, Insurance_Floor). The fee and carry mechanics stay unchanged. ## Related templates - [Direct Lending Fund Model](https://finamodel.com/templates/direct-lending-model) - [Distressed Debt Analysis](https://finamodel.com/templates/distressed-debt-model) - [Private Equity Fund Model](https://finamodel.com/templates/pe-fund-model)