Parabellum Capital Raising Second Litigation Finance Fund

Litigation finance firm Parabellum Capital is raising its second fund after going on a hiring tear over the summer.  

According to Parabellum’s third quarter investor letter, which was obtained by Institutional Investor, the firm is working to raise $350 million for a fund it expects to close around March 31, 2019.  

The new fundraising effort comes after Parabellum “substantially expanded” its sourcing team, according to the letter. The firm had previously announced three hires including directors for commercial litigation strategies, intellectual property strategies, and underwriting.  More recently, the firm added Charles Booth, a professor at the Richardson School of Law, as a senior advisor focused on commercial, bankruptcy, and special situations strategies.

[II Deep Dive: Is Litigation Finance Hot? Hiring Points to Yes.]

Litigation finance is an investment niche which allows investors to provide funding for a lawsuit in exchange for a cut of any financial reward. Lawyers surveyed by Parabellum competitor Burford Capital have suggested that the industry is poised for growth, with 77 percent of the survey’s 495 respondents agreeing that it was a “growing and increasingly important area,” according to Burford.

In the letter, Parabellum claimed that its strategy delivers “attractive returns, uncorrelated to markets, through investments in commercial disputes.” The firm added that it plans to build a “diversified investment portfolio of both single cases and portfolios of cases that have the potential to generate equity-like returns.”

A person familiar with Parabellum said the firm has seen strong demand from institutional investors, including endowments, foundations, and pension funds. Although the minimum target for the new fund is $350 million, the firm is planning to raise as much as $500 million, the source said.

In addition to traditional limited partner investments, the source said that Parabellum is developing a principal-protected share class, which would ensure that 100 percent of invested capital would be protected from downside risks. 

Assets under management for the firm’s first fund, which is still being deployed, were $166 million as of September 30, the letter said.