Burford Capital has raised nearly $300m (£230m) for a new fund aimed solely at post-settlement matters.
The funding will be put to “monetising a claimant’s settlement and other associated legal receivables”, the AIM-listed company said in a stock market announcement.
The Burford Alternative Income Fund (BAIF) is backed by institutional investors, who are making $297m available.
It is Burford’s second post-settlement fund. The first was founded in 2014, and Burford’s recently published 2018 annual report said the company had $225m invested in post-settlement work.
The BAIF is open until 4 September 2021. It will pay management fees of 1.5% of invested capital, and profits will be distributed first to the investors to give them a preferred return of 5%; thereafter all the profits will go to Burford until it has received its performance fee of 10%.
Burford’s total assets under management are now $2.7bn.
Burford chief executive Christopher Bogart said: “BAIF’s investment strategy helps clients manage the frequent and significant delays that occur between the point at which parties agree a settlement and the finalisation of and payment under the settlement.
“Furthermore, the solution supports our aim of fulfilling client needs across the lifespan of a litigation matter’s duration, from inception through to conclusion.”
The annual report said that often post-settlement delays were due to “the operation of the judicial process, which may require notice periods and fairness hearings before approval of settlements”.
It continued: “In the interim period, both law firms awaiting payment of their fees and clients eager for cash to flow may well find it attractive to secure funding against those expected receipts, and our post-settlement fund provides such monetisation, at return levels considerably lower than traditional litigation finance.”
In other funding news, a UAE-based funder has predicted that litigation funding market is set to double in size in the next five years as it becomes a mainstream asset class.
Dilip N Massand works with Legal Ventures, a UAE-based fund from Phoenix Advisors that specialises in emerging markets, which is in turn backed by UAE Dalma Capital, a leading alternative investment manager.
Mr Massand said litigation finance was “now undeniably emerging as a mainstream asset in its own right on a global level”.
He explained: “In Australia, for example, the market is already heavily developed, but even the Australian market is expected to grow, owing to rising litigation demand for class actions.
“The US, which currently accounts for around 40% of all litigation funding, also remains a significant growth market primarily due to it being the largest litigation market.
“At 5%, the UK is a considerably smaller but a highly attractive region for litigation funders being home to over 200 law firms and four of the top 10 global law firms.
“Elsewhere, litigation funding for arbitration cases has been recently authorised in Singapore and Hong Kong.”
He added that the market would “continue to extend itself into new jurisdictions in the emerging markets surrounding us in the UAE”, including India.
Zachary Cefaratti, CEO of Dalma Capital, added: “As we enter the late stages of economic and credit cycles globally, sophisticated investors are increasingly seeking uncorrelated asset classes that can perform well in a market downturn.
“Litigation funding is a unique asset class in this regard; demand for litigation funding increases during downturns in the markets – a time when litigation spikes.”
“As was the case in 2008, we expect the performance and opportunities for litigation funds to increase in the event of downturns and increasing market volatility.”