Over the past few years, I have noticed a distinct change in the appetite of litigation funders when it comes to getting involved in patent litigations. It used to be the case that patent litigation was viewed negatively by the litigation funding community…

In part one of this two part series, which can be found here, I explored a variety of portfolio theories and applied them to the litigation finance asset class. This second article continues the application to commercial litigation finance and discusses implications for portfolio construction.

Portfolio risk is generally influenced by three main factors: volatility of results, correlation (of outcomes within a given portfolio) and the size of the portfolio.  For the purposes of this article, I have assumed that correlation within a portfolio is non-existent, as each case stands on its own and is not influenced by others in the portfolio.