A Quantitative Approach to Litigation

Finance
Ben Swanson

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Agenda

 What is Litigation Finance?

 Who are the key players?

 Opportunity for Data Driven Investment.

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A Quantitative Approach to Litigation
Finance
What is Litigation Finance?

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 Victims require funding to bring claims against large
corporations.
Plainti Law Financ
ff Firm er
Cas Case
e Equity
Net Fundin
Proceeds g

Damag Laws
Legal Funding Diagram

es uit

Cour
t

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 Litigation Funding has proven to be an attractive method of
investment.
The IRR from the three
segments is regularly higher
than the equity IRR. The rate
of recovery from a case loss is
higher than the recovery from
a default on a bond.
Return and Risk Statistics

Investing in cases has

asymmetry similar to options.
You either lose most the
premium paid, or you receive
a large sum at maturity.

Data sourced from Morning Investments.

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A Quantitative Approach to Litigation
Finance
Key Players

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 There are many established participants in Litigation
Finance.
Firm Collage

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 The major players all rely on a traditional approach.
Investment
1 Process
Initial Screening

Burford gathers general case statistics from the plaintiff

or law firm representing the plaintiff.

2 Merit Analysis

Researches the counterparty and jurisdiction to determin

Burford Capital Overview

$7 Billion AUM Established 2009What are the chances of winning and what will be the damages
Can the counterparty pay the damages assigned by the court
3 Economic Analysis

The firm wants to know:

45 in House
160 employees Whether there are better uses of capital?
Lawyers
How this case fits with Burford’s current portfolio?

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A Quantitative Approach to Litigation
Finance
Opportunity for Data Driven Investment

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 Point72 can improve the efficiency of the entire funding
process
1 Initial Screening

1. Create a system for plaintiffs to enter key case informat

deemed important from historical data.
2. Pull from macro teams to evaluate regulatory fact

2 Merit Analysis

1. Already has credit ratings for other public firms, and ca

use its proprietary software to rate private firms.
2. Excellent at evaluating success and loss at defaul
Point72 Market Entry

3 Economic Analysis
1. Has some of the best loan underwriters in the business.
2. Boasts $36 Billion AUM, dwarfing competitors.
3. Great at evaluating diversification benefits and
limiting exposure to prevent large losses.

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A Quantitative Approach to Litigation
Finance
Questions

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