Litigation funders struggled to raise new funds in 2023 due to broader financial market trends
A new US-based litigation finance firm, Arcadia Finance, has launched with over US$ 100 million in capital to fund lawsuits.
Led by former Validity Finance professionals David Kerstein, Ronit Cohen, and Joshua Libling, Arcadia Finance will focus on US-based commercial and patent litigation and US and international arbitration.
Reuters reported that Arcadia Finance, headquartered in New York, enters the market at a challenging time for US commercial litigation funders. According to a report from Westfleet Advisors, litigation funders faced difficulties raising new funds in 2023, driven by broader financial market trends that prompted institutional investors to allocate capital elsewhere. The report highlighted a 14 percent decline in capital committed to new deals by commercial litigation funders in 2023, marking a shift after years of growth. The industry's size remained relatively stable, with funders managing a combined US$ 15.2 billion in assets. However, the number of active US players in the industry decreased from 44 in 2022 to 39 in 2023.
Despite these challenges, Kerstein expressed confidence in Arcadia's potential. "We are glad to buck the trend as others exit the industry," he said, acknowledging the difficult capital-raising environment. Arcadia Finance anticipates most of its funding deals to range between US$ 2 million and US$ 25 million.
Kerstein, who co-founded Validity Finance and previously worked at Omni Bridgeway, declined to disclose the identities of Arcadia's investors. However, he revealed that the firm is backed by multiple US-based financial institutions, including at least one with billions of dollars under management.
The co-founders departed Validity Finance in August 2023 after the firm reduced its focus on new commercial investments. This strategic shift followed TowerBrook Capital's decision to cut future investments in Validity, leading to staff reductions and a narrowed focus on patent cases, which was reported by Bloomberg Law in June last year.
