Can litigation financing really achieve a 30% return rate?

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1. Introduction

Interest rates on deposits are falling again, stock market valuations appear increasingly high, and real estate has long been considered overpriced.

So what remains for the non-institutional investor — the ordinary private individual with capital available?

The answer depends first on how long one intends to invest, how much risk one is willing to assume, and whether additional objectives are being pursued — for example, supporting certain social or environmental values. It also depends on whether one wishes to actively engage with the project in which the capital is invested, or whether one prefers to rely solely on the statements contained in a prospectus. In practice, private investors rarely make decisions based solely on return expectations. Across numerous evaluated cases, the decisive factors tend to be transparency, enforceability of claims, and the structural relationship between capital at risk and potential outcome.

2. Why is litigation financing accessible to everyone?

Commercial litigation funding has existed in Germany for more than 25 years. Over this period, the industry has developed from a niche legal financing tool into a recognized component of professional risk management for complex claims. Companies with expertise and significant capital invest in the enforcement of legal claims — professionals, often referred to in the industry as ‘ProFis.’ The original idea was to enable anyone with a strong and enforceable claim to obtain justice. Over the years, however, this founding idea has shifted.

Where the minimum claim threshold once stood at €100,000, today most professional litigation funders will not engage unless the claim amounts to at least €1 million — preferably several multiples of €10 million.

The AEQUIFIN platform has taken a different approach.

It enables claimants with smaller claims to obtain third-party funding for the enforcement of their rights. Naturally, certain economic conditions must be met for litigation funding to make sense for all parties involved. The claim amount must justify the effort, and Germany’s degressive court cost system makes higher claims proportionally more attractive to pursue.

For example, the litigation cost risk for a €100,000 claim in the first instance is approximately €2,738.79 (ratio 1 : 0.027), while for a €1 million claim it is approximately €8,535.39 (ratio 1 : 0.0085). This proportional advantage makes larger claims particularly attractive from an investor’s perspective — provided the chances of success are predominantly favorable.

3. Entering a Case Investment

From an investment perspective, the quality of case selection is the single most important risk factor. The majority of potential losses in litigation funding originate not from court decisions alone, but from weak initial screening or unrealistic claim assumptions.

Naturally, investors do not like to hear the word ‘loss,’ and this concern also applies to litigation funding.

Avoiding procedural losses begins with careful case selection. The AEQUIFIN team conducts an initial screening, ensuring that clearly unviable or legally weak claims are not admitted to the platform. Experience shows that only one to two out of ten submitted cases pass this first filter.

A second and essential review is conducted by the claimant’s attorney, who must conclude that the case has predominantly favorable prospects of success in court. The legal reasoning and supporting documentation are made available on the platform.

At this stage, the investor forms an independent opinion. The investor reviews the information, evaluates plausibility and legal arguments, and decides individually on the investment amount and desired success participation. With the AEQUIFIN quota balancing mechanism, final participation rates are determined transparently among all investors.

During this decision phase, the investor retains full control and participates economically in the outcome of a legally structured enforcement process.

4. A Question of Return

While return expectations are often the starting point for investors, experienced participants focus primarily on risk structure, duration, and enforceability rather than headline yield figures. For most investors, the decisive factor is the potential return.

Savings and fixed-term deposits in spring 2026 offer between 1.5% and 3.0%, often requiring switching after promotional periods to maintain competitive rates. Broad equity funds and ETFs achieved approximately 8% to 15% in the strong market year of 2025, while real estate funds delivered between 2% and 4%.

Cases offered on the AEQUIFIN platform typically provide success participation of 30% to 40% of the recovered amount, before deduction of unreimbursed legal costs and platform fees.

This results in the following example calculation: Of the €800,000, the sponsors receive 30%, i.e. €240,000. From this amount, 10% (€24,000) is deducted as platform fees.

The investor receives one fifth of the remaining share (€10,000 investment out of €50,000 total sponsoring), i.e. €43,200.
Assuming an average duration of two years for a regional court proceeding based on the remaining share, this results in a fourfold return on the invested sponsoring (4.3x multiple).

Any cost reimbursements are not taken into account in this example.

5. High Return Equals High Risk?

An old saying states: ‘In court and at sea, you are in God’s hands.’ Litigation inevitably involves uncertainty, as the final decision lies with a judge and procedural developments cannot be fully predicted.

Nevertheless, risks can be managed through careful preparation by experienced counsel and ongoing monitoring by the platform. In practice, the primary drivers of risk are procedural duration, enforceability against the debtor, and deviations between expected and realized settlement values. Also, historical observations suggest that outcomes vary significantly across case types, and total losses remain possible in individual proceedings. Some cases conclude through settlement.

Investors should nonetheless be aware that proceedings may last longer than expected and settlement outcomes may differ from initial projections.

6. Which Cases Are Suitable for Private Investment?

Professional investors typically evaluate cases not only on legal merit, but also on economic enforceability, duration risk, and the asymmetry between potential gain and capital exposure. Whether a claim enforcement proves successful and profitable depends on several factors:

– Is the debtor solvent and capable of paying?
– Is the claim plausible and well-documented?
– Can the claimant substantiate the claim with evidence?
– Has the attorney prepared and explained the matter clearly?
– Do I personally believe the claimant is right and deserves enforcement?

These criteria provide useful guidance when evaluating a case.

7. Conclusion

Investing in the enforcement of third-party legal claims is not mainstream. The correct selection of cases — initially conducted by the AEQUIFIN platform — is essential. Equally important is forming one’s own independent opinion.

The risk of total loss exists in every individual case and should be managed through diversification, disciplined allocation, and realistic time expectations.

Those who are prepared to contribute to the enforcement of legitimate rights, who enjoy entrepreneurial engagement, and who are willing to invest where few others do, may find litigation funding with success-based participation a compelling alternative investment.

A prudent approach is to diversify across two or three cases. This reduces risk without materially diminishing return potential and allows the investor to participate in multiple enforcement processes as part of the litigation funding team.

Important notice: Litigation funding is an event-driven investment and involves risk, including the possible loss of the invested capital. Past outcomes are not indicative of future results. This text is provided for informational purposes only and does not constitute investment or legal advice.