Investors gambling on divorce battles

01/17/2012

A recent newspaper article has highlighted a growing trend in the divorce arena.

The Sunday Times in the UK outlined how investors are increasingly putting money up to fund legal cases in return for a cut of the divorce payout. Key players driving the trend forward include hedge fund managers, venture capitalists and other lenders. Wealthy individuals are usually targeted.

According to the Sunday Times report, one company has provided divorce loans to up to 100 individuals at a rate of around 20 per cent. The paper says that growing economic uncertainty and banks’ unwillingness to lend is fueling the industry for up-front divorce finance.

Some people are using the money to enter into legal battles to gain money they believe they should rightly win in a divorce settlement. In some cases, partners are looking to prove that well-off spouses are trying to conceal wealth in order to keep divorce settlement costs down.

One UK business development manager for a barristers' chambers is quoted as commenting on the trend, "Rather than backing stocks and shares, hedge funds are backing litigation, because the returns are good for successful cases. They wouldn't be doing it unless they thought they could make money out of it."