SYDNEY, 16 March 2020: Omni Bridgeway Limited, (formerly known as IMF Bentham ASX:IMF), has welcomed talented new colleagues to the team as the company continues its international expansion. The appointments include global leadership positions following the merger of IMF and Omni Bridgeway in November 2019 and important roles in Australia in response to increased appetite for dispute finance solutions. Omni Bridgeway can also announce it is expanding its footprint into New Zealand, where the firm is already active in several actions. OMNI BRIDGEWAY WELCOMES: Leanne Meyer | Investment Manager, Sydney Leanne is a former in-house counsel and joins the Australian Investment Management team to identify and assess investment opportunities and manage funded claims with a focus on finance solutions for corporates. [Read more.] Heather Collins | Investment Manager, Sydney Heather augments the Australian Investment Management team to identify and assess investment opportunities with a particular specialisation in financing in the insolvency sector. [Read more.] Niall Watson-Dunne | Associate Investment Manager, Sydney Niall joins the Australian Investment Management team to manage due diligence and assist with the management of funded claims. [Read more.] Gracey Campbell | Associate Investment Manager, Melbourne Gracey will undertake due diligence and assistance with managing funded claims for the Australian Investment Management team. [Read more.] Siobhan Hannon | Global Head of Compliance and Risk Sydney-based Siobhan is a seasoned compliance and risk specialist who will lead the design and management of the Group’s global compliance framework, encompassing risk management reporting, policies and procedures. [Read more.] Elizabeth Beacham | Global General Manager People & Culture Elizabeth is based in Sydney and will lead the company’s global People & Culture strategy and initiatives. [Read more.] Alistair Morgan | General Counsel – Australia and Asia Perth-based Alistair will advise the company on transactional and regulatory matters across the Asia Pacific region. [Read more.] NEW ZEALAND EXPANSION: In addition to the above new appointments, Omni Bridgeway’s geographic footprint is expanding to New Zealand where the company is already funding proposed combustible cladding class actions. Sydney-based Investment Manager and Head of New Zealand, Gavin Beardsell, is leading the company’s expansion into New Zealand in response to increasing financing inquiries from that market. In New Zealand, Gavin already manages the company’s investments in one of the CBL Corporation shareholder class actions and the proposed combustible cladding class actions involving product liability claims against certain manufacturers of Alucobond and Vitrabond PE core cladding products. [Read more here and here.] Omni Bridgeway is a global leader in dispute resolution finance, with expertise in civil and common law legal and recovery systems, and operations spanning Asia, Australia, Canada, Europe, the Middle East, the UK and the US. Omni Bridgeway offers dispute finance from case inception through to post-judgment enforcement and recovery. It has a proud 34-year record of funding disputes and enforcement proceedings around the world. Omni Bridgeway is listed on the Australian Securities Exchange (ASX:IMF) and includes the leading dispute funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz. It also includes a joint venture with IFC (part of the World Bank Group). Visit imf.com.au or omnibridgeway.com to learn more.

The following article is part of an ongoing column titled ‘Investor Insights.’  Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance.  In part one of this two part series, which can be found here, I explored a variety of portfolio theories and applied them to the litigation finance asset class. This second article continues the application to commercial litigation finance and discusses implications for portfolio construction. Executive Summary

• Modern Portfolio Theory (MPT) - a mathematical framework based on the “mean-variance” analysis - argues that it's possible to construct an "efficient frontier" of optimal portfolios offering the maximum possible expected return for a given level of risk
• MPT states that assets (such as stocks) face both “systematic risks” - market risks such as interest rates - as well as “unsystematic risks” - mostly uncorrelated exposures that are characteristic to each asset, including management changes or poor sales resulting from unforeseen events
• Post-modern Portfolio Theory (PMPT) adds a layer of refinement to the definition of risk
• Diversification of a portfolio can mitigate the impact of unsystematic risks on portfolio performance - although, it depends on its composition of assets
• Behavioural Finance (BF) introduces a suggestion that psychological influences and biases affect the financial behaviors of investors and financial practitioners, also applicable to litigation finance

Slingshot Insights:

• Portfolio theory is important to the commercial litigation finance asset class due to its inherently high level of unsystematic risks
• Slingshot’s Rule of Thumb: a portfolio should contain no less than 20 investments in order to provide the benefits associated with portfolio theory
• Diversification is critical for every fund manager
• Specialty fund managers may play a positive role in a comprehensive litigation finance investing strategy by assisting with meeting a particular performance objective when defined in the context of acceptable “mean-variance” targets
• Diversification provides optionality for an under-performing manager to ‘live to fight another day’ if their first fund achieved sub-par performance
• Portfolio theory is applicable to consumer litigation finance

How Big is Big Enough? There are many theories about how large a portfolio should be to meaningfully benefit from the application of portfolio theory, with analysts suggesting anywhere from 20 to over 100 investments (typically in relation to public equities).  While I have yet to conduct a study to determine a more finite range applicable to litigation finance, I will say that there are a few elements that are critical to consider, which are specific to litigation finance. First, litigation finance is by its very nature uncertain in terms of the amount of commitment the fund manager will ultimately deploy in relation to its financial commitment to a single case (i.e. while a manager may commit $5 million to a case, the legal team may only deploy $2MM by the time the case settles). Capital deployment (both quantum and timing) is an uncontrollable variable that makes portfolio theory difficult to apply, because portfolio theory assumes the dollars deployed in each investment are (i) known and (ii) of equal size (although weightings can be assigned).  Accordingly, in order to ensure that the portfolio is diversified on a dollars deployed basis, the portfolio needs to be sufficiently large to ensure that on a committed basis it is not skewed by a few cases which have deployed 100% or more of their initial commitment relative to those cases that have deployed less than 100%.  It is also not uncommon for managers to deploy nil or very little against their commitment as a result of an early settlement (perhaps brought on by the existence of litigation finance itself, or by virtue of the investment being in the form of adverse costs indemnity protection), which adds another element of complexity as relates to the application of portfolio theory. Second, diversification in the context of litigation finance is not only a mathematical exercise of ensuring no one case represents a disproportionate amount of the fund, it also covers the types and extent of case exposures in the portfolio.  If one is investing only in a single manager, one wouldn’t necessarily want a fund that invests solely in Intellectual Property cases, as an example, because a Systematic risk that effects that sector (for example, litigation reform such as Inter Partes Reviews in patent litigation, or an important case precedent with broad implications) will likely effect all cases in the portfolio and hence diversification will not aid at all in terms of addressing the Systematic risk. Case types, defendants, jurisdictions, judges, plaintiff counsel, defense counsel, case inter-dependencies (where the outcome of one case has a direct impact on the likely outcome of another case in the same portfolio) are all important variables that a manager should consider when creating their portfolio. Third, litigation finance portfolio financings (the concept of a funder investing in a portfolio of law firm or corporate cases) are, by their very nature, benefitting from the application of portfolio theory. Therefore, in constructing one’s portfolio, one should consider whether the committed capital is being invested in single case portfolios, cross-collateralized portfolio financings or a combination thereof, each of which having different risk-reward profiles. When we take all of the above into consideration, especially the uncertainty inherent in capital deployment, my general rule of thumb is for managers to target a minimum of 20 equally sized litigation finance case commitments within a portfolio. From there, I adjust based on a variety of factors including case types, financing sizes, jurisdictions, currencies, etc.  Other investors may have a different perspective.  Of course, the portfolio will never be comprised of 20 equally-sized cases due to deployment uncertainty, so I view this as a baseline. If the portfolio is made up of cases with a higher inherent volatility (class actions, intellectual property, international arbitration or large cases), then a larger portfolio would be more appropriate, such that the higher loss ratio in the portfolio – which is inherent in higher risk portfolios – will not disproportionately contribute to the portfolio’s overall performance. Applicability to Consumer Litigation Finance Portfolio theory suggests that diversification is exceptionally good at reducing Unsystematic risk; hence, it comes as no surprise that MPT should be more frequently applicable to the commercial litigation finance asset class given the high level of idiosyncratic case risk.  The consumer litigation finance market also exhibits similar idiosyncratic case risk, but I believe it has more Systematic risks related to defendants (usually, insurance companies with a common approach), regulation, and established case precedent where the damages are much more prescribed.  Accordingly, while portfolio theory may not be as critical in this segment of litigation finance, as an investor in the asset class I believe it remains an important value driver for the consumer litigation finance market, especially since the return profile of a single piece of consumer litigation finance is generally not as strong as those inherent in commercial litigation finance due to risk and regulatory differences. Fund Managers’ Perspective As an investor experienced with managing capital, deploying capital and portfolio construction, I offer a few observations for consideration. First, don’t fall in love with your investments (i.e. don’t get caught with personal biases working into your portfolio construction).  It is easy for a fund manager to be attracted to certain cases thinking the particular case is a ‘no brainer’ (perhaps due to personal experience and/or comfort with the merits of the case) and allocate a disproportionate amount of the portfolio to finance that case. However, in the context of an asset class with binary and idiosyncratic risk, the portfolio manager would be taking on a disproportionate amount of risk in doing so.  Once a manager has determined that the case meets their rigid underwriting criteria, her or she must change their mindset to one of portfolio allocator and take a dispassionate view of the case to ensure the portfolio is optimized.  In fact, I would suggest splitting the functional role of underwriting and portfolio construction to ensure the underwriting doesn’t influence portfolio allocation decisions! Second, do not insist on exceptions to concentration limits.  I have seen a number of fund documents where the manager has carved out exceptions to concentration limits (many of which are not appropriate for this asset class (10%, 15%, 20%) and have been derived from other PE asset classes with completely different risk profiles). By doing so, the manager is adding a lot of risk (and bias) to the portfolio that is both unnecessary and risky to the longevity of the fund, not to mention investor returns.  In my mind, the equation is quite simple: if one creates a diversified set of investments of relatively equal size, and one maintains a sound underwriting methodology, industry data suggests that one’s investment thesis should work. So why jeopardize a sound strategy? Third, fund managers will live and die by their portfolio results, so why take unnecessary risk in haphazardly allocating capital? To illustrate the second and third points, let’s consider four potential portfolio outcomes: (i) non-diversified portfolio with poor performance, (ii) non-diversified portfolio with exceptional performance, (iii) diversified portfolio with good performance and (iv) diversified portfolio with poor performance. As an investor, I would look at situations (i) and (ii) and say “as a fund manager you are ‘dead in the water’”. Why? Situation (i) is self-explanatory: poor underwriting which impacts fund performance, and is buttressed by the fact that the fund manager isn’t astute enough to diversify the portfolio. Situation (ii) communicates the exact same thing, but in a different way. It tells an investor that the fund manager was ultimately successful, but in a way that was risky (in other words, the manager ‘got lucky’) and not likely repeatable (because fund performance was dependent on too few outcomes), which is not what attracts most investors who are looking for a measure of conservatism and persistence in their managers’ return profiles. I contend that this asset class should exhibit a return profile closer to that of growth or leveraged buy-out private equity (strong returns across the portfolio with a few losers for an overall strong return profile) and not venture capital (mostly losers with some exceptionally strong performers which contribute disproportionately to the overall portfolio return, which may be positive or negative).  Recent shifts toward portfolio financings by Burford and other private fund managers, suggest that there is a consensus as to the benefit of diversification on the volatility of portfolio returns. On the other hand, situation (iii) is an ideal one, where the manager was prudent and the results illustrate underwriting and portfolio construction acumen, with portfolio returns not being disproportionately impacted by a few cases. Situation (iv) is interesting because it is a scenario where a manager can potentially ‘live to fight another day,’ since he or she was prudent with capital allocation, but perhaps something went awry with underwriting, or the portfolio was negatively impacted by a Systematic risk which was beyond the manager’s control. Every fund manager should ask themselves, “why take the risk” in creating a non-diversified portfolio, because it is a lose-lose scenario?  Diversification will always provide the optionality of raising a subsequent fund, even if returns are sub-par. As we live in a dynamic world with a myriad of financial innovations being developed daily, managers should remain aware of new approaches to reducing risk in their portfolio (i.e. insurance, co-investing, risk-sharing with law firms), which may allow them to invest a smaller amount without taking on undue case concentration risk.  Of course, any instrument that reduces risk incurs a cost, and so one will need to assess the overall risk-reward equation to determine whether it is appropriate for both the manager and the investor. Diversification is in the eye of the Investor Managers should also keep in mind that each investor is different.  A manager may have one investor that has decided to maintain a single exposure to litigation finance through the manager, in which case the investor is likely counting on that manager to ensure application of portfolio theory.  On the other hand, an investor may be looking for specific exposures to complement his or her numerous allocations within the litigation finance sector, and so the investor is expected to apply portfolio theory to the various allocations within their portfolio and are less reliant on the fund manager for doing so in their specific fund. What is critical for managers is that they deploy capital in a responsible manner and not acquiesce to the demands of a given investor with respect to their perspective on portfolio construction and portfolio theory. We are all here to create sustainable long-term businesses, and a given investor may have different objectives that could derail the manager’s own goals. Slingshot Insights Investing in a nascent asset class like litigation finance is mainly about investing in people.  Most managers simply don’t have the track record of a fully realized portfolio on which investors can base their investment decision.  Accordingly, much time and attention is spent on understanding how managers think about building their business and in particular their first portfolio.  In addition to the underwriting process, one of the most important considerations for investors to understand is how managers think about portfolio construction and diversification. Portfolio theory plays an integral role in terms of how managers should be thinking about constructing their portfolios from the perspective of the number of cases in the portfolio, but managers should also ensure their own personal bias is not entering into the portfolio and that they have thought about all of the systematic risks that can affect like cases. My general rule of thumb is that most first time managers should be targeting a portfolio of at least 20 equal sized commitments, appreciating that it is almost impossible to achieve equal sized deployments due to deployment risk. It is also not in the manager’s best long-term interest to take a short-cut on diversification for expediency sake (i.e. to raise the next larger fund) and to do so may be interpreted as poor judgment from an investor’s perspective! As always, I welcome your comments and counter-points to those raised in this article. Edward Truant is the founder of Slingshot Capital Inc. and an investor in the consumer and commercial litigation finance industry.

NEW YORK (March 10, 2020) – Litigation funder Validity Finance announced two noteworthy additions to its investment team in New York and Chicago. Joshua J. Libling, an experienced commercial and appellate lawyer joins Validity from Boies Schiller Flexner. He becomes a portfolio counsel in New York. Also arriving is James Amend, a renowned patent trial lawyer, mediator and former partner at Kirkland & Ellis. Mr. Amend becomes a senior investment advisor based in Validity’s Chicago office. As portfolio counsel, Mr. Libling will help identify, vet and oversee litigation investments in stand-alone lawsuits and law firm portfolios of hybrid contingency cases. With a broad background in complex commercial disputes, Mr. Libling was involved in some of Boies Schiller’s highest-stakes cases including plaintiff and defendant-side actions at all levels of the federal courts. As former Pro Bono Coordinator at Boies Schiller, he also bolsters Validity’s commitment to high ethical standards in dispute funding, including cases with claims related to social justice and exoneration. A magna cum laude graduate of New York University School of Law, Mr. Libling clerked for two federal judges: Judge Chester Straub of the Second Circuit Court of Appeals, and Judge Kenneth Karas of the Southern District of New York. “We’re thrilled to have a lawyer of Joshua’s caliber join us,” said Validity CEO Ralph Sutton. “He brings outstanding trial experience in big-ticket commercial disputes and is an expert at case evaluation. His commitment to social justice cases while at Boies Schiller suits him admirably for our client-first approach to funding.” Julia Gewolb, Validity’s Head of Underwriting, worked with Mr. Libling at Boies Schiller for several years and added “Josh brings substantial case experience and understands the key milestones over the life of a litigation matter. I know firsthand how much analytic and strategic strength he will add to our underwriting process.” The addition of Mr. Amend reflects a growing pool of complex patent disputes under consideration for funding by Validity. In addition to his three-decade tenure as a Kirkland partner, Mr. Amend served as chief mediator for the United States Federal Circuit Court of Appeals from 2007 to 2013. In that role, and in subsequent years as a JAMS neutral, he has mediated over 600 patent and intellectual property cases. Mr. Amend also authored the federal judges’ patent treatise, Patent Law – A Primer for Federal District Court and Magistrate Judges (Eds. 1998 and 2006). “Few practicing lawyers — or judges for that matter — have the breadth and depth of courtroom experience Jim brings to Validity,” reports Validity CEO Ralph Sutton. “We are exceptionally fortunate to have his help reviewing the expanding opportunities we’re seeing in the intellectual property area.” Surge in Cases for Funding The U.S. market for litigation finance continues to grow at a healthy pace. Validity has screened over 650 potential matters since its launch in June 2018, including over 150 patent opportunities. Validity’s acceptance rate for investments remains under 5%, however. These investments include commercial lawsuits, arbitrations (domestic and international) and law firm portfolios, as well as asset enforcement matters. “We suspected there would be significantly more demand for dispute funding than we’d seen previously when we entered the market in 2018. But we’ve been pleasantly surprised by the strong uptick in funding requests in each subsequent quarter,” Mr. Sutton said. He noted the firm reviewed over 120 new cases in the fourth quarter of 2019 alone. Overall, Validity has reviewed cases from 30 states and 20 countries internationally. “We’re pleased with the steady advance of the firm, especially the robust bump in investment opportunities after just 18 months from launch,” Mr. Sutton said. “Our call-out message that litigation finance must focus on clients and building trust has clearly resonated with the market. We’re committed to using our capital to expand equal access to the civil justice system and look forward to supporting more worthy cases in 2020.” About Validity Validity is a commercial litigation finance company that provides businesses, law firms and individuals with non-recourse financing for a wide variety of commercial disputes. Founded in 2018 with $250 million in financing, Validity believes that capital and legal expertise combine to help solve legal problems on behalf of clients. Validity’s’ mission is to make a meaningful difference for clients by focusing on fairness, ethics, innovation, and clarity. For more, visit www.validity-finance.com.

Litigation Capital Management Limited (AIM:LIT), a leading international provider of litigation financing solutions, is pleased to announce the first close of a new third party fund of up to US$150 million, LCM Global Alternative Returns Fund (the Fund). In accordance with the Company’s strategy and as previously communicated to the market, the close of this Fund marks LCM’s return to managing third-party funds, following the building of a permanent source of balance sheet capital through the equity markets. Managed by LCM, the Fund will supplement the deployment of capital from LCM’s own balance sheet, significantly increasing its ability to invest in new opportunities in line with its stated strategy. The Fund will target global dispute finance investments including both single disputes and corporate portfolio transactions, further detail on the investment pipeline is set out below. Fund participants

• The Fund’s cornerstone investors include firstly the large endowment of a US University and secondly, the asset management division of a large global investment bank. Both have extensive experience of investing in the litigation finance asset class and entrenched rights to participate in future funds raised by LCM, demonstrating their commitment to LCM and also to the asset class more widely.
• Three further participants in the Fund include: a further US-based university endowment, a Swiss-based fund manager specialising in investing in litigation finance and a substantial European family office with significant investment experience in litigation finance.

Structure

• The Fund will co-invest with investments from LCM’s balance sheet on a 75:25 basis
• LCM’s balance sheet contribution (25%) will be invested and advanced on a monthly basis over the term of each investment, no upfront contribution will be required
• Performance fees will be payable to LCM as fund manager on the basis of a deal by deal waterfall
• In addition to receiving its 25% share of any profit from each investment from its co-investment, for the provision of its management services LCM will also receive:

-        25% of profit on each Fund investment as and when it matures over a soft return hurdle (full catch up) of 8%; and -        an outperformance return of 35% for all Fund returns over an IRR of 20%.

• The Fund has a term of six years including an inception period of two years during which investments can be entered into (the Inception Period)

The Fund as at first close has raised US$140 million, leaving a balance of up to US$10 million to be raised in due course. The decision to hold a first close of the Fund before all commitments were ready to be made, was driven by a strong pipeline of quality investment opportunities with which the Fund could be seeded. The Fund will be seeded with nine single-case investments which include international arbitrations, class actions, commercial litigation and investor state treaty claims. These investments are not being seeded from LCM’s existing balance sheet portfolio which it will continue to manage. The total capital commitment of the seeded investments amounts to approximately US$33 million representing a total commitment of 22% of the Fund upon inception. LCM is confident that the Fund will be fully committed comfortably inside the two-year Inception Period. Patrick Moloney, CEO of LCM, commented: “The entry into this external fund provides a significant increase to our available capital and a boost to our investment capability, enabling us to broaden and accelerate the expansion of our portfolio with a view to ultimately delivering greater returns for shareholders. “It also constitutes the first step towards LCM operating a funds management business. Indeed, future funds will be underpinned by the entrenched rights of our cornerstone investors. “It is testament to our disciplined approach and track record that the Fund attracted such significant international investment in the sector, giving us scope to accept investment from only the very best and most experienced global providers of third-party capital into the asset class.” Nick Rowles-Davies, Executive Vice-Chairman of LCM, added: “The fact such high-calibre investors have insisted upon entrenched contribution rights in future funds is a very valuable endorsement of LCM’s ability to attract blue chip investment capital on a global scale. “We are delighted to welcome our new partners and look forward to working closely with them to capitalise on the growing number of attractive opportunities available in the global litigation finance space.” Further updates with respect to the Fund commitment and its performance will be made as appropriate. LCM Contact: Angela Bilbow Global Head of Communications abilbow@lcmfinance.com +44 (0)7469 816818 NOTES Litigation Capital Management (LCM) is a leading international provider of litigation financing solutions. This includes single-case and portfolios across; class actions, commercial claims, claims arising out of insolvency and international arbitration. LCM has an unparalleled track record, driven by effective project selection, active project management and robust risk management. Headquartered in Sydney, with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM in December 2018, trading under the ticker LIT. www.lcmfinance.com