In the vast ocean of investment opportunities, traditional assets like stocks and bonds have long been the go-to choices for many investors. However, the investment landscape is evolving, and alternative investments are gaining traction.

One company that stands out in this realm is Legalist, co-founded by the young and dynamic Eva Shang as featured in a recent interview with GoBankingRates.  The young co-founder and CEO of Legalist, a hedge fund that uncovers technology-driven alternative investments that grew her fund from an initial $10 million to nearly $1 billion.

Inspiring Backstory in a Male-Dominated Industry:  Eva Shang (with no formal investment training) and fellow Harvard University dropout Christian Haigh launched Legalist with a splash in 2016 when she was 20, then struggled for years to attract backers.

“I don’t blame them,” Ms. Shang said about the investors who swiped left on Legalist. “If I were an allocator, there would be no reason to take a 20-year-old dropout with a computer seriously.”

Initially, Eva and her co-founder Christian aimed to profit from court cases using proprietary technology. However, they soon realized the potential of alternative investments and pivoted their business model.

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Shang believed that alternative assets offer a unique advantage as they are not directly tied to the broader economy.  While these assets offer promising returns, accessing them can be challenging for individual investors.

The fundamentals of what our company does is [that] we look in government databases, and we crawl through millions and millions of government records to look for alternative investment opportunities in a few different areas that we cover that are disproportionately likely to be successful or to need financing.

Pioneering a New Investment Frontier

Legalist, under the leadership of Eva Shang, has carved a niche for itself in the world of alternative investments.

• Eva Shang and her team at Legalist believe in the power of diversification. By focusing on alternative investments, they aim to provide their clients with unique opportunities that are not correlated with the broader market. This strategy can offer stability during economic downturns and potentially higher returns during boom periods.
• Shang views these alternative assets as complements to traditional investments.
• They offer a hedge against market volatility, ensuring that portfolios are not solely dependent on the performance of stocks and bonds.

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While many hedge funds diversify their portfolios with a mix of traditional assets, Legalist has taken a contrarian approach, focusing on three primary areas: litigation finance, bankruptcy, and government contracts.

1. Litigation Finance - Betting on Justice

• Litigation finance, also known as legal financing or third-party litigation funding, involves investing in lawsuits. Legalist identifies cases with a high likelihood of success and invests in them. If the case wins, the company earns a return on its investment.
• Successful cases can offer substantial returns, often higher than traditional investments.
• The outcome of a lawsuit is based on its merits and legal arguments, not based on stock market performance or economic conditions.

2. Bankruptcy Investments - Finding Value in Distress

• When companies face financial turmoil and enter bankruptcy, their assets, including equipment, land, and other properties, need to be sold. Legalist invests in facilitating this sales process. Once the assets are sold, Legalist earns a return, often with a healthy margin.
• The investment is backed by tangible assets, providing a safety net.
• While bankruptcy spells trouble for the company involved, it can be a lucrative investment opportunity for those who know how to navigate it.

3. Government Contracts - Capitalizing on Pending Payments

• Legalist also ventures into financing government contracts. If a company has secured a government contract but hasn't been paid yet, Legalist lends money against that contract. Once the government fulfills the contract's payment terms, Legalist receives its investment back along with a profit margin.
• Governments are generally reliable payers, ensuring a steady return on investment.
• The risk of default is minimal, especially when dealing with stable governments.

Conclusion

Eva Shang's journey from a Harvard dropout to the helm of a successful hedge fund is nothing short of inspiring. Her ability to blend technology with human judgment sets Legalist apart in the competitive world of litigation finance.

See: The Shift to Alternative Assets: Overcoming Barriers and Exploring Opportunities

With trailblazers like Eva at the forefront, the future of hedge funds and alternative investments looks promising.