Rocade Closes $470 Million Fund to Back Mass Torts Law Firms

As the litigation funders begin to pivot to the increasingly profitable mass tort sector, industry stalwart Rocade Capital announced it has closed on its fourth and largest fund for $470 million.

The fund said it received $220 million from investors and $250 million from global investment manager Barings LLC in a joint venture. Rocade provides loans to law firms, typically in the mass tort sector, with loans ranging from $10 million to more than $100 million. Rocade CEO Brian Roth says this fund will likely finance 20 to 25 US firms

“There has been capital flowing into the space a little bit more recently,” said Roth. “There’s a tremendous amount of complexity to both how the firms operate and how the litigations operate and we have built, over the last decade, the ability to really understand the market.”

Litigation finance, the growing asset class in which investment firms pour money into lawsuits in exchange for a portion of the award, also encompasses the law firm loan sector. Unlike investments in individual suits that only have payoffs if there’s an award, law firm loans go toward the firm itself and are required to be paid back with interest. The litigation finance industry topped $13 billion in assets under management last year.

Rocade, which started in 2014 and is part of asset management firm EJF Capital, says it has funded over $1 billion in loans. These types of loans can go toward any aspect of a firm’s operations. Rocade tends to focus on late-stage litigation so there’s a shorter duration for a return.

“We’re allowing law firms to operate on a contingency basis to really fight for people that have been injured,” said Roth.

Roth says that they have seen more institutional investors than in prior funds, including a European pension investor and a large pension fund adviser. Investors also are comprised of family offices that have invested with them for a long time and and some high-net-worth individuals. He declined to identify any investors by name.

Roth joined EJF in 2009 as senior managing director. He led Armadillo Financial Partners, EJF’s specialty finance platform for law firm lending, which eventually became Rocade.