HedgeCo.Net — Hedge funds are increasing their purchases of legal claims tied to the 2025 Los Angeles wildfires after a political effort to restrict the trades lost momentum, Bloomberg reported. Prices range from as little as 3 cents on the dollar for some claims to around 60 cents for the most expensive, according to transaction details shared with Bloomberg.
The trades involve subrogation rights, which let an insurer pursue a third party such as a utility for losses it has paid out. Rather than wait years for litigation, insurers can sell those rights to investors at a discount for immediate cash. Eaton fire claims are being acquired for 55 to 60 cents on the dollar, while Palisades claims, seen as riskier because liability is harder to establish, are trading at 3 to 5 cents, according to broker Cherokee Acquisition.
Cherokee director Bradley Max said there is “plenty of appetite for buyers and sellers” and that most hedge funds in the market are targeting returns in the low-to-mid teens. He said Cherokee recently acquired roughly $100 million of Palisades-related claims for less than 10 cents on the dollar, and that such transactions are typically funded within a couple of weeks.
California adopted a law in 2025 requiring insurers to give utilities a right of first refusal before selling claims to investors, but it stopped short of banning hedge fund purchases. Max said the rule has had little effect on demand. The fires caused an estimated $40 billion of insured losses, and a bellwether jury trial in the Eaton fire litigation is scheduled for January 2027.
The market is a clear example of how hedge funds are sourcing returns from legal and insurance outcomes rather than market direction. The spread between Eaton and Palisades pricing shows how sharply investors are discounting liability risk, and the legislative impasse has removed, for now, the threat that the opportunity would be closed off entirely.