Gerchen Capital Closes $600 Million Fund in Shifting Strategy

Litigation funder Gerchen Capital Partners closed on a new fund in April, solidifying the financier’s move away from the secondaries market toward a broader investment strategy.

The $600 million fund, GCP’s sixth, will target large corporations that want to monetize their litigation and continue to fund late-stage and post-settlement cases with a credit-like strategy. Gerchen Capital made a name for itself focusing exclusively on secondary transactions, in which investments are bought and sold, in the litigation funding space.

“There was this unmet market need that we had sort of lived and breathed,” said Adam Gerchen, the company’s CEO.

Corporate monetization, in which companies receive money based on the value of legal claims and get immediate cash flow without putting debt on their books, is a key part of the funder’s new strategy. It’s a departure from traditional litigation finance, in which the majority of investments are used to cover legal fees for ongoing cases.

GCP last year hired Kelly Daley, a seven-year veteran of Burford Capital who specializes in corporate monetization transactions.

“If you as a company decide that you need $10 million of liquidity, you can’t go to a bank and say, ‘Hey, I have this litigation and the litigation might pay off in the next six months and they pay off the defendants in the next three years, but I would like you to loan me money against that litigation,’” Daley said. “You could do that with a building, you can do it with a property, you can do it even with accounting receivables, but you can’t do it with litigation receivables.”

Adam Gerchen

Gerchen Capital Partners

The funder sees corporate monetization as a potential growth area during a turbulent market: “We’re pitching certainty, so the more uncertainty there is in the market, the more appealing certainty is,” Daley said.

Secondaries were the funder’s bread and butter when it launched in 2021. The deals allow capital providers to monetize well-performing portfolios by selling assets. Gerchen Capital recently secured $370 million worth of insurance protection for its first secondary portfolio. CEO Gerchen says it was the most mature part of their assets, had the best mix of exposures and was a way to protect against the sometimes protracted timelines for litigation payouts.

New Hires

Gerchen has been involved in the litigation finance industry for over a decade. He launched his first company, Gerchen Keller Capital, in 2013 and sold it to Burford three years later for $175 million. He continues to work as a senior partner at Keller Postman, the mass tort law firm he co-founded in 2018.

GCP has raised $1.9 billion in assets in the three years since it was launched. Its up to 20 employees, including a handful that came over from Burford Capital. Many of the employees worked with Gerchen when his first company was purchased by the massive funder.

“Burford is one of the largest players in the market and so people who work there have built up their own background and expertise,” he said. “Obviously a great place to recruit from.”

Daley says her move was about working somewhere that had a big toolbox of solutions for companies instead of trying to cram it into a mold that hits shareholder expectations.

“A lot of it was a culture decision,” she said. “The ability to be in a more nimble entrepreneurial environment was appealing to me.”