I’ve long been a fan of all things alternative and in particular, I’ve had a soft spot for any investment that gives the investor what’s called an uncorrelated return i.e the fund or shares might move in an entirely different way than the main market. Litigation funding has emerged as an alternative asset class in the last decade and UK listed Burford has very much been the most vocal champion. I’ve consistently recommended buying Burford in my FT column over the last decade and in more recent times I’ve also been a fan of their slew of retail bonds. In sum, I like the business. But with Burford’s share price increased a whopping 175% in the last year, I have to say I;m growing a little cautious.

My core concern has never been with the business, which seems well run and aggressive in its growth ambitions. My worry is what I call the Binary event. Many alternative investments seem a good idea until something very binary, almost tectonic shifts. Something structural happens that changes the underlying rationale for investing. It could be an unstoppable tide of new output. Or a regulatory change. Or acquiring new, powerful, enemies determined to trash the opportunity.

Which is where a PR note from a rival firm to Burford comes in. It’s from an outfit called Bentham. I’ve put the long Pr note in below, but basically, it focuses on the fact that big US business wants to shut down litigation funders. this isn’t an entirely new observation. The US Chambers of Commerce has tried to take down taut lawyers and class actions before, and they’ve long criticised the funders. But now they seem to be stepping on the gas. With a President who is likely to listen to them.

In a sense, their criticism seems valid. Why on earth should we allow these external parties fund plaintiff’s actions? It just encourages litigation. But the likes of Bentham and Burford rightly say that litigation funding is simply levelling the playing field. Why should litigation just be the preserve of rich corporations? That’s a very fair point except of course the real truth is that many litigation actions involving the funders actually involve corporations and well to do businesses who don’t need a Robin Hood. The key policy issue for me is whether the rise of litigation funding outfits results in an intolerable pressure on the legal system — if it doesn’t leave it alone. It’s a free market!

But this all misses the point. If the US CoC is really going to take on the litigation funders — and strong arm their friends in the Republican Party — the the likes of Burford and Bentham have a problem. It’s not an insurmountable problem but it might take the shine off the share price a bit.

In sum are we close to Peak Litigation funding? Maybe.

Anyway more from Bentham….

U.S. Chamber of Commerce Undermines Business Interests in Push for Mandatory Disclosure of Litigation Funders

LOS ANGELES (June 5, 2017) — On June 1, 2017, The U.S. Chamber of Commerce submitted a letter to the Committee on Rules of Practice and Procedure to force mandatory disclosure of litigation finance. In submitting the letter, which renews the 2014 petition to the Committee on the same subject, the Chamber proves once again that its true motives run counter to many of the lofty pro-business, pro-innovation goals that it touts. Three full years after filing the original petition, the Chamber is unable to assert any new reasons for reconsideration of its request, save for the growth of the litigation finance industry. “It is ironic that the industry growth which the Chamber identifies as justification for the renewed petition seeking mandatory disclosure of litigation finance actually proves how funding is serving a need: namely, facilitating access to an expensive legal system that otherwise only the most well-moneyed players are able to afford,” said Allison Chock, Bentham IMF’s Chief Investment Officer.

The contradictions in the Chamber’s positions on litigation finance compared with its stated objectives to promote “fair, efficient and innovative capital markets,” and to fight “for the kind of financial rulemaking that protects consumers and investors, encourages reasonable risk taking, {and} doesn’t constrain innovation and growth,” (see https://www.uschamber.com/financial-regulation) belie its true motives. “It seems the only interests the Chamber is really trying to protect are those belonging to its big business members, who are eager to retain an advantage they typically enjoy in high-stakes commercial disputes: superior financial resources to litigate,” said Ms. Chock. “Providing a level of financial parity for the parties enables disputes to be decided on their true legal merits,” she continued.

Although the Chamber cites the increase in the use of litigation finance by law firms as a cause for alarm, the reality is that those law firms are, in most cases, using such financing to serve precisely those same underserved and underfunded clients — small-to-mid-size businesses and individuals — who cannot otherwise afford to pay a top-tier law firm on an hourly-fee basis to litigate their claims. “The fact of the matter is, the larger the potential damages and more complicated the case, the harder it is to win. Commercial litigation finance allows all plaintiffs with strong, meritorious claims access to the tools necessary to hold wrongdoers accountable for their actions in court,” Ms. Chock added. “What we’re seeing in the Chamber’s latest petition is prioritization of big-business interests and an attempt to protect the Chamber’s largest and most profitable members from legal accountability under the guise of protecting the public from ‘third parties interested solely in profit.’”

The Chamber’s proposed rule is also unfairly one-sided. If a plaintiff must disclose the terms, amount, and source of its financial backing for its lawsuit, a truly balanced approach would require defendants to make similar disclosures, including how much they can or intend to spend on the case, their own legal departments’ annual internal and external counsel budgets, their law firms’ projected budgets for the case, hourly billing rates, and the like. “Upon looking more closely at the Chamber’s petition, it becomes clear that a proposed rule change requiring mandatory disclosure of litigation finance should, once again, be rejected by the Committee,” said Ms. Chock.


Bentham IMF is the U.S. arm of publicly listed IMF Bentham Limited (ASX: IMF), one of the most successful litigation funding companies in the world, with a portfolio that has a total claim size value of $3.3 billion AUD. Together, our companies have 11 offices throughout the U.S., Australia, Canada and Asia and provide funding to clients in jurisdictions including the U.S., Australia, Canada, New Zealand, Hong Kong and Singapore. We have reviewed thousands of commercial cases in the past 16 years, funding to completion more than 157 cases and generating over $2 billion AUD in recoveries. We have achieved a 90% success rate, with clients utilizing our funding retaining an average of 63% of all case proceeds.