The dropout who started a hedge fund at 20

Eva Shang dropped out of Harvard at the age of 20 to start Legalist, a hedge fund that uses algorithms to invest in lawsuits and distressed assets. In less than a decade, she scaled the firm to nearly $1 billion in assets under management.

This week, we look at how Eva Shang launched Legalist from a dorm room project and how she built credibility in one of the most competitive industries in finance:

• ☕ Dropping out of Harvard to build Legalist

• 🔢 Turning data into a billion dollar fund

• 📊 Facing doubt and proving investors wrong

— Investor Briefcase Team

Eva Shang came to Harvard planning to become a civil rights lawyer. But in her second year, she began working on a project that scraped court records to track lawsuits, mainly out of curiosity. She and fellow student Christian Haigh used public court data to map how civil cases moved through the legal system.

The tool attracted interest, and in 2016 they were accepted into Y Combinator. During the program, they shifted from selling analytics to funding lawsuits directly. This model, known as litigation finance, meant backing plaintiffs in exchange for a share of the settlement.

At age 20, Shang dropped out of Harvard to launch Legalist with Haigh. She was responsible for pitching investors, raising capital, and building out the firm’s operations. From the start, Legalist focused on small businesses involved in lawsuits they could not afford to fight alone.

The decision to leave college wasn’t easy. But Shang believed the opportunity was bigger than any degree. Legalist launched its first fund the following year in 2017.

Legalist built its edge on data. Instead of hiring teams of lawyers to review cases, the firm used software to scan tens of thousands of court records. Their algorithms looked for patterns in filing histories, case durations, and judge behavior to identify legal claims with a high chance of success.

This automation let them process far more cases than traditional litigation finance firms. And it caught the attention of investors. Legalist closed its first fund at $10 million. Two years later, they raised $100 million. Today, the firm manages close to $1 billion across multiple funds, including litigation finance, bankruptcy claims, and government receivables.

Investors were drawn to Legalist’s combination of technology and access to alternative assets. Shang, meanwhile, handled the fundraising, pitching to skeptical allocators who had rarely seen someone in their 20s in charge of a hedge fund.

Legalist’s model gave it access to an overlooked market. Small lawsuits, defaulted receivables, and bankruptcy claims typically fall below the radar of large funds. But for Shang and her team, these inefficiencies were an opportunity.

Despite Legalist’s early momentum, Shang still had to overcome doubts from investors who were wary of her age and limited experience. At just 20, she didn’t look like a typical hedge fund manager. 

In early meetings, potential backers regularly questioned whether the team had the maturity to handle institutional funds. One investor famously asked, “Where did you find the tweens?” Others were blunt about wanting someone older in the room.

Despite the skepticism, Shang and Haigh maintained their focus on performance and execution. Legalist’s first fund returned 1.7x net of fees, a result that exceeded expectations and helped validate their model. This enabled them to raise $100 million for their second fund, a major step in winning broader investor confidence.

Shang and Haigh went on to raise three more funds after the second, and now manage nearly $1 billion in assets. They still run a lean operation with a software-first approach, but now they do so with the backing of some of the world’s top allocators. The early doubts haven’t disappeared, but the results have shown they were worth betting on.

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Other Dropouts Who Became Hedge Fund Managers

> Michael Burry: Left a medical residency to pursue investing full-time. He founded Scion Capital and gained fame for predicting and profiting from the 2008 subprime mortgage crisis, as depicted in The Big Short.

> Bill Ackman: Dropped out of Harvard’s MBA program for a year before returning to finish. Ackman later founded Pershing Square Capital Management, known for activist investing and bold bets on companies like Herbalife and Chipotle.

> Joe Edelman: Left the University of California, San Diego before graduating. He went on to found Perceptive Advisors, a biotech-focused hedge fund that has delivered strong returns by investing in emerging healthcare companies.

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