Leading listed Australian litigation funder Bentham IMF is finally to enter the UK after sealing a joint venture with US hedge funds.
The joint venture will be based in London with the aim of funding cases throughout Europe but primarily in the UK and the Netherlands. A similar arrangement will co-fund cases in Asia-Pacific.
IMF has agreed co-funding arrangements and joint venture arrangements with subsidiary entities of funds managed by Elliott Management Corporation.
IMF said these funds have billions of US dollars under management globally.
The pair are splitting equally the funding costs and operational expenses of Bentham Ventures BV, and in return will share in the profits and losses on an equal basis. They will jointly guarantee the business’s funding obligations to litigants, including adverse cost exposure.
London-based Bentham Europe Ltd, a wholly owned subsidiary of Bentham Ventures, will identify, evaluate and recommend funding opportunities to the joint venture. IMF will provide “certain consultancy services” for a fee.
IMF said its current expectation is for the joint venture to continue for an initial term of five years and thereafter until such time as determined by the joint venture shareholders.
In Asia-Pacific, IMF has agreed to offer Elliott the opportunity to jointly fund cases, with an initial budget of more than A$8.5 million (£4.7m).
IMF has funded in the UK before – it lost £3.3m in the high-profile failed InnovatorOne professional negligence action in 2012 – but has hesitated over establishing a presence for many years.
IMF chairman Rob Ferguson said the arrangements are a key milestone in IMF’s evolution as a large-scale global litigation funder.
“IMF has a very strong record of success funding claims in Australia, and we have made no secret of our desire to replicate this success internationally after commencing business in the USA over two years ago. Elliott brings to the table not only considerable funding resources but also experience in the field of complex international litigation.
“The arrangements significantly bolster IMF’s footprint and funding capability in Asia and Europe and, alongside our existing US subsidiary completes our global reach.”
IMF executive director John Walker, who will be heading up IMF’s involvement in the joint venture, added: “Based on the claims that have already been brought to our attention, many related to investments made during the financial crash, we see potential to build a high-quality litigation funding business in Europe.”
Last December, IMF announced it was backing a claim filed in The Netherlands against Royal Bank of Scotland N.V. and ratings agency Standard & Poor’s (S&P) on behalf of a group of 16 European institutional investors.
The claim is for up to $250m in damages from losses allegedly suffered on investments in complex financial derivatives called constant proportion debt obligations that were rated AAA by S&P in the lead up to the financial crisis of 2007.
It is the first group action of its kind to be launched in Europe against an investment bank and ratings agency for conduct prior to the crisis.
Last year, IMF (Australia) Ltd changed its name to Bentham IMF Limited both to reflects the company’s growing international presence and to recognises the memory of Jeremy Bentham, the 19th century jurist and social reformer who was among the first to support the utility of litigation funding.
As at 31 December 2013, IMF’s case portfolio stood at 29 cases with an estimated claim value of about $2 billion. Since it listed on the Australian Stock Exchange in 2001, IMF has commenced and completed 149 cases, of which 109 were won or settled, 35 withdrawn and only five lost at judgment.
Total revenue generated has been in excess of A$1.28bn, with A$849M returned to claimants and Bentham IMF receiving net revenue of A$281m.