The following is the second of a two-part series (Part 1 can be found here), contributed by Ed Truant, founder of Slingshot Capital, Executive Summary

• Duration risk is one of the top risks in litigation finance
• Duration is impossible to determine, even for litigation experts
• Risk management tools are available and investors should make themselves aware of the tools and their costs prior to making their first investment
• Diversification is critical in litigation finance

Slingshot Insights:

• Duration management begins prior to making an investment by determining which areas of litigation finance have attractive duration risks
• Avoidance can be more powerful than management when it comes to duration in litigation finance
• There is likely a correlation between duration risk and binary risk (i.e. the longer a case proceeds, the higher the likelihood of binary risk associated with a judicial/arbitral outcome)

In the first article of this two-part series, I provided an overview of some of the issues related to duration in the litigation finance asset class.  In this article, I discuss some of the ways in which investors can manage duration risk, both before they invest and after they have invested. Managing Duration Risk The good news is that there are many ways to manage duration risk in litigation finance and you can use the various alternatives in combination to create your own portfolio to mitigate the risk. Before we look at how we can manage duration through an exit of an investment, let’s first explore how we can avoid duration risk before we even start investing.  That is to say which investments have lower levels of duration risk to begin with so we can avoid duration risk going into an investment. Case Type Selection On the commercial side, post-settlement cases have a low degree of duration risk as the litigation risk has mainly been dealt with through the settlement agreement and the resulting risks relate to procedural (generally timing) and collection risk.  Similarly, appeals finance is generally involved with cases that have less litigation risk as the issue at play is usually a specific point of law and the timeline for appeals tends to be relatively certain and short while the costs are fairly well defined. Consumer litigation cases (think personal injury cases, other than mass torts) tend to have relatively dependable timelines and so this can be a very attractive area in which to invest with less duration uncertainty, but it does come with some ‘headline’ and regulatory risk.  Mass tort cases, which technically are consumer cases, have different dynamics because of the sheer size of the claims and the complexity of the multi-jurisdictional process which require test cases to prove out the merits and values of the cases.  So, I would view these as being similar to large commercial cases in terms of their dynamics with respect to duration. Other case types such as international arbitration and intellectual property disputes tend to have much longer durations in general and so avoiding these case types is a way to mitigate duration risk within a portfolio. Case Sizes Based on some statistical analysis I had prepared from funder results (my demarcation point between small and large was based on one million in financing) and on review of a large number of case outcomes of different sizes, there appears to be some correlation between the size of the financing and the duration of the case. Smaller financings (and presumably, but not necessarily, smaller cases) tend to have shorter durations than larger financings.  The correlation could result from the fact that litigation finance is more effective in smaller cases or that there is generally less at risk in smaller cases and hence rational parties tend to resolve things more quickly when there is less to squabble over.  The exact reason will never be known, but there does appear to be some statistical correlation to support the finding.  Accordingly, one way to manage duration risk would be to focus on smaller sized cases. Case Jurisdiction Selection Not all jurisdictions are created equal in terms of speed to resolution.  Accordingly, one might want to investigate the best venue for their cases given their portfolio attributes to ensure they are in jurisdictions where duration risk is lower than others.  Of course, jurisdictions don’t offer duration risk in isolation and so you will need to know what you are trading off by investing in cases in jurisdictions with a faster resolution mechanism as there will likely be trade-offs with economic consequences.  This could involve different countries, different states within a given country, and different judicial venues (arbitration vs. court).  There are even certain judges that progress through cases at a quicker clip and are less prone to allow for unnecessary delays.  Of course, you may not be able to pick your judge and even if you can there is no guarantee you will end up with the same one you started. Case Entry Point  If you are a fund manager, another way to manage duration risk on the front end, aside from case type selection, is to focus on those cases that are already in progress and therefore should have a shorter life cycle because you are entering them later in their life cycle.  While this doesn’t deal with the situation where the case goes on longer than anticipated, it does decrease the overall length of the case by deciding to enter it at a later stage, but then you don’t always have a choice when you enter a case as it may be presented to you at a particular point in time and then you may never get the opportunity to invest in it again.  In this sense you could suffer from adverse selection if you only selected late-stage cases as you are only investing into a subset of the broader market of available cases. Liquid Investments Another way to mitigate duration risk is to focus on a liquid alternative that provides similar exposure through the publicly-listed markets, which is a topic I covered recently in a two-part article which can be found here and here under the heading of Event Driven Litigation Centric (“EDLC”) investing.  EDLC has the distinct advantage of being liquid through a hedge fund structure that provides redemption rights which allows the investor to somewhat control duration although ultimate duration is typically dictated by the timing of the event itself.  Of course, as investors move into the public markets, they start to add correlation to their portfolio which may be at odds with your duration/liquidity objectives. While it is beneficial to deal with duration risk on the front end through the case selection options outlined above, once an investor has concluded their investments, there are some options still available to deal with duration risk as outlined below. Secondary Sales  As the litigation finance industry has evolved, so to have the number of solutions in the marketplace.  While secondaries have been taking place informally for years (hedge funds, litigation funders, family offices, etc.) there has only recently been a formalizing of the secondary market and I am very keen to see how the early market entrant, Gerchen Capital, ultimately performs. Nevertheless, for managers and investors seeking liquidity and an end to duration risk entering into a secondary transaction may be a very viable solution. I believe it will be more economically viable in the context of a portfolio sale than a single case investment, but I am sure there will be some level of appetite and valuation for both.  It may be the case that the investor does not obtain 100% liquidity for their position but rather risk shares alongside another investor who doesn’t want to suffer from adverse selection and thus makes it a condition of their secondary offer that the primary investor retain an ownership position.  Other situations may allow for complete liquidity, but that will likely come at an economic cost.  And there are even other times when the case is moving along exactly as planned and the primary investor is able to sell a portion of its investment at such a high valuation that it produces a return on its entire investment, which is the case with Burford and its Petersen/Eton Park claims, despite the fact that no money has exchanged hands between the plaintiff and the defendant and there is still no clear path to liquidity. While selling a portion of an investment allows the manager to obtain some liquidity for its investors, it also serves to validate the value of the investment/portfolio to its own investors, which may in turn allow that manager to write-up its portfolio to the value inherent in the secondary sale transaction (again, this assumes that the transaction is completed with a third party investor).  As an investor, you really need to assess whether any secondary transaction is being undertaken for the intended purpose (liquidity or duration management) or whether there are alternative motivations at play (i.e. for the manager to post good return numbers to allow them to increase their chances of success at raising another fund).  And while third party validation may be comforting, too much comfort should not be derived by someone’s ability to sell an investment to another party, it could have more to do with sales acumen than the value of the underlying investment. Insurance Any discussion regarding litigation finance wouldn’t be complete without mentioning its close cousin, insurance.  In the early days of applying insurance to litigation finance, the focus was more on offsetting the risk of loss.  While that is still true today, there is an increasing focus being put on insurance as a way to deal with duration.  The thinking is that investors don’t want to get stuck in funds that take years beyond their original term to pay out and so they are prepared to accept the duration risk if there is a safety valve in place. The safety valve is the insurance which will pay out at the end of a defined term, which provides the investor with assurances that they will at the very least get their original principal repaid (and possibly a nominal return).  In essence, the insurance functions as a risk transfer mechanism between investor and insurer until the case is finally resolved. While it is more common to put insurance in place on making the investment, one could place insurance after the fact as well. Slingshot Insights   Duration management in litigation finance is almost as critical as manager selection and case selection.  I believe duration management starts prior to making any investments by pairing your investment strategy and its inherent duration expectations with the duration characteristics of your investments.  From there, you should ensure your portfolio is diversified and you should be actively assessing duration and liquidity throughout your hold period.  You should also assess the various tools available to you both on entry and along the hold period to determine your optimum exit point. As always, I welcome your comments and counterpoints 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.  Slingshot Capital inc. is involved in the origination and design of unique opportunities in legal finance markets, globally, advising and investing with and alongside institutional investors.

Burford Capital Limited ("Burford" or "Burford Capital"), the leading global finance and asset management firm focused on law, today announces the pricing of its private offering of $275.0 million aggregate principal amount of additional 9.250% senior notes due 2031 (the "Additional Notes") by its indirect, wholly owned subsidiary, Burford Capital Global Finance LLC (the "Issuer"), which represents an increase from the previously announced offering size. The Additional Notes will be guaranteed on a senior unsecured basis by Burford Capital as well as Burford Capital Finance LLC and Burford Capital PLC, both indirect, wholly owned subsidiaries of Burford Capital (such guarantees, together with the Additional Notes, the "Securities"). There is $400.0 million aggregate principal amount of the Issuer's 9.250% senior notes due 2031 (the "Initial Notes") outstanding as of the date hereof. The Additional Notes will initially be offered to investors at an offering price equal to 103.625% of the principal amount thereof, plus accrued interest from January 1, 2024, representing a yield to worst of 8.251%. The offering is expected to close on January 30, 2024. If issued, the Additional Notes will be issued as "Additional Notes" under the indenture pursuant to which the Issuer previously issued the Initial Notes, will have identical terms to the Initial Notes (other than with respect to the date of issuance, the issue price and the first interest payment date) and will be treated as a single class for all purposes under such indenture. Burford Capital intends to use the net proceeds from the offering of the Securities for general corporate purposes. The Securities have not been, and will not be, registered under the US Securities Act of 1933, as amended (the "Securities Act"), or the laws of any other jurisdiction and may not be offered or sold within the United States or to, or for the account or benefit of, US persons absent registration or an applicable exemption from registration under the Securities Act or any applicable state securities laws. The Securities will be offered only to persons reasonably believed to be "Qualified Institutional Buyers" within the meaning of Rule 144A under the Securities Act or non-US persons outside the United States pursuant to Regulation S under the Securities Act, in each case, who are "Qualified Purchasers" as defined in Section (2)(a)(51)(A) under the US Investment Company Act of 1940, as amended.

The European Litigation Funders Association (ELFA) is pleased to announce that IVO Capital Partners, an independent French investment manager with nearly 10 years of active presence in the litigation funding industry, has joined ELFA. Paul de Servigny, manager of litigation finance strategy at IVO Capital Partners stated: “Active since 2014 we have witnessed firsthand the strong development of the litigation finance industry in Europe for claimants and lawyers seeking funding as well as for investors seeking different strategies and return profiles compared to typical illiquid offerings. Joining ELFA and being able to work with our fellow funders is the logical step as the market grows and further institutionalizes itself. We are very excited in actively participating to help guide and advise the various national and European institutions and governmental bodies who have shown, for good reason, more and more interest in litigation finance.” Charles Demoulin, Deminor’s Chief Investment Officer and ELFA Director, commented: “We are delighted to have IVO Capital Partners joini ELFA. Based in France, their team has extensive experience and expertise in litigation funding specifically bringing on board a French perspective. With IVO Capital Partners, we further increase the number of European jurisdictions being represented in the association. While litigation funding is a global phenomenon, the ability to acknowledge, understand and address the regional and local specificities from a legal and cultural perspective specifically in the EU remains a priority for ELFA and its members. We look forward to involving IVO Capital Partners in all our activities. We trust their contribution to ELFA’s mission, together with those of all existing and future members, will be highly valuable for the litigation funding industry and the legal community as a whole.” About The European Litigation Funders Association: ELFA was founded by three leading litigation funders with a European footprint, Deminor, Nivalion AG, and Omni Bridgeway Limited. ELFA was established to serve as the European voice of the commercial litigation funding industry. With the objective of representing the industry’s interests before governmental bodies, international organizations and professional associations, ELFA also aims to act as a clearinghouse and reference for relevant information, research and data regarding the uses and applications of commercial legal finance within the European continent. About IVO Capital Partners: Founded in 2012, IVO Capital Partners is an independent French management company specialized in various forms of corporate debt. They invest in listed and unlisted credit with a predilection for special situations offering yield premiums on international markets, particularly emerging markets and litigation finance. The company manages €1.3 billion in assets and employs around 30 people at its Paris offices.

LegalPay, India’s first litigation funder and legal solutions provider, has announced the launch of a zero-interest credit line for enterprises, startups, individual business owners, and freelancers to settle legal disputes while preserving their working capital. LegalPay aims to disburse INR 200 crore in 2024 through its own NBFC Padmalaya Finserve along with other partner NBFCs. Named Quick Settle, this innovative structured financing is designed to streamline the resolution of legal disputes with a flexible 6–12-month repayment plan, enabling parties to resolve conflicts without depleting their working capital. In a move set to transform legal finance in India, Quick Settle aims to facilitate amicable dispute resolution by enabling parties involved in disputes to settle claims without impacting their working capitalthrough a zero-interest credit line offered to the defendants with a flexible 6–12-month repayment cycle. Kundan Shahi, Founder and CEO of LegalPay, said, "Our vision is to bridge the gap between legal disputes and swift resolutions. Quick Settle is not just a financial product. It catalyzes change, fostering a culture of collaboration and resolution. By allowing defendants to manage their working capital efficiently through a zero-interest repayment cycle, we aim to foster a more conducive environment for businesses to thrive. Quick Settle embodies years of litigation funding expertise, adopting a tailored approach because we understand that one size does not fit all. This structured financing option enablesdefendants to settle claims seamlessly, alleviating the stress of legal battles without compromising their working capital." Quick Settle is expected to disrupt innovation in legal finance, specifically tailored to improve the efficiency of the Indian judicial system, which is currently burdened with an overwhelming backlog of 61 lakh cases in the country’s 25 High Courts. By offering defendants manageable repayment options and claimants immediate settlement funds, Quick Settle aims to streamline the judicial process and foster a culture of amicable resolutions. Founded in 2019, LegalPay has funded over 44,000 commercial cases and underwritten a staggering 92,000 cases nationwide. With Quick Settle, LegalPay aims to further disrupt a potential $200Billion market by bringing financial relief to businesses and having a positive social impact by expediting dispute settlements. Quick Settle ensures that the businesses receive their claim amount on day one, thus proving to be a game-changer for companies looking to bolster their financial strength. With QuickSettle, companies can navigate conflicts without lawsuits, preserving valuable business relations with vendors and customers. About LegalPay: LegalPay is a leading name in the Indian litigation funding market, dedicated to providing comprehensive financial solutions to individuals and businesses involved in legal disputes. Currently managing over INR 2800 Crores worth of claims, LegalPay has emerged as a leader in litigation funding, bridging the gap between legal expertise and financial solutions with a focus on innovation, transparency, and client satisfaction.

The following article was contributed by Peter Petyt, CEO of 4 Rivers Services, a third-party funding advisory and legal project management firm.   Peter is undertaking part-time doctoral research at the University of Westminster in London to explore how law firms can ensure that they are suitable for portfolio funding and how can funders best evaluate which law firms to support. In his thesis, he will be examining the different ethical and regulatory challenges in various jurisdictions and analyzing the characteristics of legal case types which make them suitable or unsuitable for inclusion in a funded portfolio. The research will complement the existing 4 Rivers know-how which has been developed to help law firms and claimants secure third-party funding. Below is a Q&A with Peter on his doctoral research findings: What led you to carry out this research? Third-party funding is becoming increasingly important, so I was particularly keen to create some thought leadership which would demonstrate how law firms can take benefit from portfolio finance and what criteria are necessary. This form of finance could be genuinely transformational for many firms. How do clients benefit from law firms which have this sort of financing behind them? The fees and expenses of running disputes can be substantial, so clients often require the law firm to offer fee arrangements which are success-based. However, law firms are naturally cautious about risking their own time and third-party costs if payment for these depends on an uncertain outcome, and they must ensure that they have adequate operating capital to survive. What is the essence of portfolio funding? Portfolio funding is a form of finance which is provided for, and secured against, a bundle of cases which are cross-collateralised.  The cross-collateralization diversifies and reduces the funder’s risk, enabling the funder to reduce its overall cost of capital, especially when compared to single-case financing. A law firm can use portfolio finance to provide it with working capital whilst the cases are in progress; to pay disbursements of a case (including court and arbitration fees, experts, e-disclosure etc); and potentially to fund other initiatives such as acquisitions, recruitment, marketing, and IT. Unlike bank finance or shareholder equity, portfolio finance is aligned with the successes and failures of cases. It is therefore an attractive non-recourse and non-dilutive source of capital. What are the traditional sources of law firm finance? Often, law firms simply use bank finance and other sources of debt finance which can be expensive and may not be attainable at all to plaintiff law firms. Banks do not accept unrealised contingency fees as collateral for credit, requiring instead more conventional security such as property and personal guarantees from the partners of the firm to counterbalance economic or financial risks or uncertainties.  Are public listings of law firms an alternative? Since 2012, UK law firms have been permitted to list and raise capital on a public stock exchange. A public listing provides cash which can enable a law firm to effectively back its own judgment when taking cases on a contingent or partially contingent basis. However, there has not been a flotation of a law firm on a UK market since 2019 and indeed the market appears to be generally less receptive at present. Additionally, the process of taking a firm to market is not straightforward and, post-listing, partners earn less per year. However, they do have equity ownership of a publicly quoted business which can have substantial capital value over time and can be more easily monetized than a share of a traditional partnership. What about external equity investment in law firms? This is permissible in the UK, as well as in US states Arizona and Utah, so it may well become a trend in the future. However, there must be a concern that if a funder becomes an equity investor in a law firm, it will impact on a law firm’s independence. This important issue was illustrated when Burford purchased a minority 32% stake in PCB Litigation and provided capital to fund a portfolio of litigation cases. Equity participation brings with it a degree of control and influence over operations and strategy, and the question is therefore whether a firm in a highly regulated industry such as legal services should be allowed to take investment from a party which has a direct influence in the financing of its cases. What are “pacts” or “best friends” relationships? These are where the law firm “partners” with a preferred funder which finances the law firm fees and expenses on single cases. One example was the Willkie Farr & Gallagher law firm partnership with Longford Capital in 2021, where a “facility” of US$50 million was made available. There was also Harbour’s venture with Mishcon de Reya, which was publicized as a “strategic partnership”; and a “strategic alliance” between Litigation Capital, DLA Piper and Aldersgate Funding to provide DLA clients access to £150m for funding large-scale litigation and arbitration. The “pact” structure is not a genuine portfolio structure, as the finance provided is for the client’s account, not for the law firm’s account. There is no cross-collateralzsation of claims and therefore the obvious benefits of diversification are lost. There is also no evidence that such pacts offer a better financial deal for a client than if the client were to conduct a competitive process either directly or through an advisor/broker, and indeed the negative impact of a pact/best friend funder declining to fund a case could have a negative impact on that case being attractive to other funders. Furthermore, whilst speed of execution is cited as a benefit of the pact structure, there is no evidence to support this. What portfolio funding deals have been announced in the market? UK litigation law firm, Provenio, has a £50 million fund in partnership with Therium to finance high value business litigation and arbitration claims. Provenio had been launched in 2019 by a team of senior litigation lawyers from DLA Piper to advise exclusively on high-value, national and international commercial disputes. Then, in March 2021, international firm PGMBM announced a £45 million “funding partnership” with North Wall Capital to support the funding of cases related to diesel emissions scandals, breaches of personal data and risks associated with drugs and medical devices, as well as environmental litigation.  This was followed in 2022 by a further investment of £100 million by North Wall, targeted at litigation arising from ESG issues, which is “in the form of a loan secured against the revenues from winning or settling cases brought by PGMBM”. This structure- a cross-collateralized loan which is repaid from the proceeds of cases- is typical of a law firm portfolio funding facility. Harbour provided financing for an acquisition of a division of a law firm in July 2023 in the UK, where Rothley Law acquired the private client team and business book of Shoosmiths; and Harbour was also the financier behind the acquisition of the UK law firm Hawkins Hutton by Bamboo Law in August 2023, as well as providing Slater and Gordon (S&G) with a £33m facility in one of the largest deals publicly announced during that year^.  The S & G facility is for expansion into high-value PI work as the UK fixed cost regime reduces profit margins on lower value claims, with the firm focusing instead on severe and life-changing injury cases, including catastrophic loss work, as well as consumer law developments. How does portfolio funding differ from single-case funding? A single dispute carries a risk which is binary, which is why TPF for single cases requires a high rate of return. Portfolio funding, however, is provided for a bundle of cases, so that the funder can offer a non-recourse credit-like solution which creates liquidity and leverages a law firm’s investment of its own time. The bundle can involve a group of specific cases, or it can include existing and future cases, including a large group of low-stakes cases, or a smaller group of high-stakes cases. Sizes of portfolios vary among funders but in general a minimum of three cases and a minimum investment size of $3 million are standard. Other specific uses include helping a new law firm launch, monetizing unpaid WIP, acquiring a new line of business, mergers and acquisitions, and geographic expansion. The funding can be used to increase revenues by opening new business locations and divisions in strategic markets, as well as hiring new individuals or groups of fee earners with client followings. Additionally, the capital might be used for remuneration to existing staff to secure their continued employment. It also seems likely that the funder will offer added value services to law firms to which they are providing portfolio financing, including mock trials, moot courts, and strategic advice. The research is showing that portfolio funding enables the law firm to secure funding more quickly, on pre-arranged terms, and, depending on the structure, the ability to benefit from the overall success of the portfolio. How does 4 Rivers use the know-how which is being created by this research to benefit its law firm clients? This know-how, combined with my own many years of experience in assisting corporations with securing capital from venture capitalists, private equity houses, family offices and banks, is vital in allowing us to advise our law firm clients on how to structure a portfolio so that it is investment ready and to optimise the chances of securing funding. In effect, a unique methodology has been developed.

The following is the first of a two-part series, contributed by Ed Truant, founder of Slingshot Capital, Executive Summary

• Duration risk is one of the top risks in litigation finance
• Duration is impossible to determine, even for litigation experts
• Risk management tools are available and investors should make themselves aware of the tools and their costs prior to making their first investment
• Diversification is critical in litigation finance

Slingshot Insights:

• Duration management begins prior to making an investment by determining which areas of litigation finance have attractive duration risks
• Avoidance can be more powerful than management when it comes to duration in litigation finance
• There is likely a correlation between duration risk and binary risk (i.e. the longer a case proceeds, the higher the likelihood of binary risk associated with a judicial/arbitral outcome)

When you are speaking to an institutional investor about litigation, it doesn’t take long until the concept of “duration risk” enters the discussion.  Everyone seems to have a story about that one piece of patent litigation or commercial dispute that went on for over a decade that seems to have marked them for life even though they weren’t in any way involved. Yet, it’s a real risk.  Thankfully, it’s not a real risk for a well-constructed portfolio of different case types in different jurisdictions, which is one of the reasons that prompted me to raise a commercial litigation finance fund-of-funds in 2016 – it will ultimately serve as a very good proxy or index for how the industry performs. The whole concept of duration risk is critically important for investors in legal finance to understand, including ways in which duration risk can be managed in this specialized asset class. Private alternative asset classes, such as litigation finance, always need to deal with duration as part of their fundraising pitch to investors as the investments are inherently illiquid investments.  This means that in order for investors to obtain their liquidity, their needs to be a mechanism to allow for that to happen.  Within most private equity sub-classes (venture capital, growth equity, leveraged buy-out, real estate, etc.) the exit is typically a sale of the business.  An argument is often made that there is always a clearing price for any private company and the path to liquidity is generally through an investment bank or intermediary that canvasses the market to search for the best price for that asset at any given point in time.  However, with litigation finance, the pool of capital providers is relatively small, the complexity is very high and the nascency of the market means that beyond the settlement of the case (either through negotiation or a court/arbitral decision) there are not many options. But that is changing… Duration Risk Let’s start by defining duration risk for purposes of litigation finance investing, as the risk that the time horizon of a given investment is different than that which was originally underwritten without a commensurate increase in economics. Most Litigation Funding Agreements (or “LFA”s) have provisions to deal with duration risk such that the negotiated economics increase as time progresses, but often this ultimately gets capped as the claimant is concerned that the funder can end up with the lion’s share of the settlement amount.  Similarly, the funder does not want to put itself in a position where the claimant is not participating in the economic outcome of the claim, otherwise the claimant is wasting their time and effort (and stress). The two opposing forces work to keep each other “in check”. And while the LFA is typically structured to mitigate this risk, there is the potential that the case simply takes much longer than originally thought and investors want to get their money back to redeploy into another, perhaps slightly more liquid, investment.  And this is where many investors, individual and institutional, who poured into the space since 2015 find themselves today. Now, the duration risk inherent in commercial litigation is not to suggest they will rival Myra Clark Gaines (the longest-running civil lawsuit in the US at 57 years), but the difference between 5 years and 10 years can make a meaningful difference to an investor’s return profile if the economic benefits are not commensurate with the timeline extension.  While many funders quote an average hold period of 30+- months, one needs to be careful of the use of averages in litigation finance.  Many of those averages have been derived from the average length of settled cases only, which inherently ignore the duration of the unsettled cases, which is obviously not reflective of reality. Since there are very few fully realized funds in existence globally, it is difficult to determine an actual industry average for litigation finance but I would confidently say that the average will in fact be greater than the 30-month time period often quoted.  The other thing to consider is that any average should be weighted based on dollars invested to ensure that the early settlements, which by definition would likely have fewer invested dollars, do not contribute disproportionately to the average.  The reality is that funders rely on the relatively early case wins to produce strong IRRs (albeit lower MOICs) in order to offset the IRR drag of those cases that are not successful and that exceed the average duration. If we look at a case where the LFA calls for 3X multiple (200% return on investment) during the 3-year period and a 5X multiple (400% return on investment) thereafter, then the IRRs would look as follows for different durations:

Original Investment	Proceeds Received	Duration	Internal Rate of Return
100	300	3	44%
100	500	5	38%
100	500	8	22%
100	500	10	20%

The first two data points illustrate that where the cap on the proceeds move in lock-step with timing, it has little effect on IRRs. However, the last three data points illustrate the punitive impact that duration has on internal rates of return. When duration moves from 5 to 10 years for a fixed outcome the internal rate of return decreases by approximately half. In addition to the duration necessary to get to a decision (after the potential for an appeal), you may then get caught up in additional enforcement and collection timelines which could add years and additional investment to the original investment proposition.  A good example of this is the “Petersen” & “Eton Park” claims that Burford invested in involving a claimant that is fighting Argentina & YPF over the privatization of energy assets without due compensation. The Implications of Time on the Value of Litigation  In a prior article written about the value of litigation, I describe how a piece of pre-settlement litigation starts off at the risky end of the spectrum due to a lack of information about the various parties’ positions, it then starts to de-risk as each side goes through discovery (approaching the optimal zone of resolution) and then the it starts to re-risk as each side becomes entrenched in their positions and pushes on to a third party decision.  This then leads to a bifurcation in value because the more the outcome of a case is dependent on the outcome of a disinterested third party (a judge, jury or arbitral panel) the more binary the outcome becomes as displayed in the chart below. This of course begs the question, if the timeline of a lawsuit extends beyond its original timeline, what does this say about the value of the case itself? Is it that the case is seen as a win by both sides and therefore each side ‘digs in’ to ensure the other side loses (hence a more binary outcome), or is this just a reflection of healthy sparring between parties to delay the inevitable and increase the friction costs to force the claimant to drop its case? Sadly, because every case has its idiosyncrasies and different personalities involved, we will never know the answer.  But what we do know is that any case that does get decided by a third party results in a binary outcome and as an investor “binary” doesn’t make for a good night’s sleep. I have written about this issue in an article about secondary investing, and in that article I make the argument that secondaries, if not valued properly, likely have a higher risk profile then the rest of the portfolio in which they reside because they are moving into the re-risk zone which inherently has a higher level of binary risk attached thereto.  I think this is important for investors to understand because it suggests that if you are concerned about duration in a litigation finance investment, it is probably (although not always) in your best interest to get out earlier than later.  Of course, the counter-argument is that the longer the case has elapsed the more you know about its merits and how the other side has conducted itself during the case and so your case may in fact be less risky than when it started. However, in these cases you are going to be asking the secondary investor for a premium to reflect that fact and that means you need to convince them of the merits, the likely duration and any credit/collection risks, which is a difficult task by any measure. We must also not lose sight of the fact that the longer a case proceeds, depending on the size and financial capacity of the defendant, the risk of collection may increase due to the financial condition of the defendant especially those with multiple lawsuits or those whose fortunes (profits and cashflow) are tied to more cyclical industries.  What looked like a good credit risk five years ago when the case commenced may look very different coming out of a recession or a commodity cycle.  Similarly, if the plaintiff is not of sound financial condition, the risk that the plaintiff runs out of money or interest in pursuing the case is also a risk that you are implicitly assuming. Given that the secondary industry is in its infancy and there is very little in terms of empirical results on secondaries, it remains to be seen how secondary portfolios will perform but if I were an investor in the sector I would go in with ‘eyes wide open’ and a deep value mindset.  The reality of most litigation finance is that the economic benefits tend to be somewhat capped, and so whatever premium is paid on a secondary, it means it reduces the overall economics available to the secondary investor. Dissimilar to private equity where a secondary investor can still benefit from growth in the value of the underlying company it acquires, the same does not generally hold for litigation finance investments and in fact the risk is to the downside with most LFAs. In the second article of this two-part series, we will look at the various ways in which investors can manage duration risk, both before they start investing and after they have invested. Slingshot Insights Duration management in litigation finance is almost as critical as manager selection and case selection.  I believe duration management starts prior to making any investments by pairing your investment strategy and its inherent duration expectations with the duration characteristics of your investments.  From there, you should ensure your portfolio is diversified and you should be actively assessing duration and liquidity throughout your hold period.  You should also assess the various tools available to you both on entry and along the hold period to determine your optimum exit point. As always, I welcome your comments and counterpoints 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.  Slingshot Capital inc. is involved in the origination and design of unique opportunities in legal finance markets, globally, advising and investing with and alongside institutional investors.

Litigation funding specialists Apex Litigation Finance have announced the upcoming appointment of Timothy Fallowfield as interim Chairman. Tim will commence the new position in January 2024, assuming overall responsibility for guiding Apex through its next growth stage. Tim brings a wealth of experience to the table, having honed his skills on both the buy and sell sides of the financial spectrum. His diverse background includes managing risk at Black River Asset Management and latterly for Noble Resources HK, where he managed a medium-sized absolute return Macro fund with AUM of $480mm. On the sell side, Tim has lent his expertise to financial powerhouses such as Chase, UBS, and ING, gaining valuable insights into the dynamics of financial markets. With an impressive track record spanning 35 years, Tim has consistently demonstrated his proficiency in managing risk and generating consistent returns for investors. Having built a fund business from the front to the back office, this extensive experience positions him as a seasoned professional capable of navigating the complexities of the financial landscape. Apex will look to leverage off his risk management background to build a robust investment process. Tim says: “There were three elements that attracted me to Apex: our CEO, the opportunity to generate uncorrelated returns and the focus on the small claims, which allows Apex to build a diversified investment portfolio. We do this while helping those who may perhaps not usually have access to legal recourse. With Crestline’s participation, we will look to expand our investments significantly.” In leveraging Tim's skill set, Apex is well-positioned to benefit from his proven ability to establish and manage funds successfully. Tim's strategic approach and in-depth industry knowledge make him an invaluable asset to the Apex team as they chart a course for success in the ever-evolving world of litigation finance. Apex CEO Maurice Power says: “Having recently secured investment capital from Crestline Investors Inc., Apex is expanding to position itself as the litigation funder of choice for small to mid-size commercial claims in the UK. Being able to bring in someone with Tim’s drive and experience to guide us through this period will hugely benefit the Apex team. We welcome Tim’s appointment and look forward to the exciting times ahead.” About Apex Litigation Funding: Apex Litigation Finance Limited brings together experts from the legal and finance sectors to provide third-party litigation funding to litigants (corporates, liquidators, and individuals) who are unable to pursue a claim due to the prohibitive cost of litigation. Although the claim may have merits, uncertainty over the total costs and the potential risk of being ordered to pay the defendant’s cost, should they lose the claim, prohibits access to justice for many claimants. Our process is augmented by artificial intelligence systems to assess risk. As a professional litigation funder, Apex will make available funds to pay legal and other costs associated with a claim in return for an agreed share of any successful return. If there is no recovery or the claim is lost, there is nothing to repay.

Lexolent, the trailblazing force in the legal finance industry with offices in Dubai and London, is thrilled to announce the forthcoming launch of LexHub, the world's first online platform for legal finance professionals. Scheduled to go live on Monday, January 8th, LexHub represents a seismic leap forward for the industry, offering a unique one-stop-shop experience for legal professionals worldwide. About Lexolent: Lexolent stands as the world's first globally coordinated network for legal finance professionals. This community of professionals is dedicated to generating investment opportunities and benefiting from referrals of work. Lexolent provides its members with access to a suite of services through LexHub, LexInvest and LexTrade, including SaaS, e-learning, conferencing, legal finance accreditation, recruitment and commissions for referrals. The online marketplace facilitates primary, secondary and syndicated investments in legal assets, offering investors access to origination from the network and the option for secondary or syndication of Lexolent’s executed investments. LexHub: LexHub, the crown jewel of Lexolent's offerings, is the world's first online platform for legal finance professionals. Positioned at the forefront of the industry, LexHub constantly evolves through cutting-edge technology and innovative solutions. Members gain access to SaaS in case management, Customer Relationship Management (CRM), Artificial Intelligence and predictive analytics. LexHub serves as a one-stop shop, leveraging advanced technology to connect capital with origination, providing a legal finance marketplace for primary, secondary, and syndicated transactions. LexInvest: Within the LexHub portal, LexInvest offers a dedicated marketplace for primary investments. Network Members upload their origination and in just three simple steps, a case is created and triaged by the Lexolent underwriting team. The case is then matched with a global network of Investor Members who can bid on the cases they wish to view. All case activity is recorded in the members' dashboard, ensuring transparency, efficiency and efficacy. LexTrade: Lexolent's commitment to swift execution of investments is embodied in LexTrade, the trading platform for secondaries, syndication, and 'copy' trading. Every investment made by Lexolent is immediately available for syndication or secondary trading on the LexTrade platform. LexTrade provides access to pre-qualified, underwritten and fully assessed legal finance investment opportunities, catering to a vast number of investors who are new to the asset class and were previously unable to access the market. Lexolent’s CEO and legal finance veteran, Nick Rowles-Davies stated, “I am beyond excited about the launch of the most innovative and  ground breaking project I have ever worked on.  The Lexolent platform will positively disrupt and elevate the legal finance space in a way we have never before experienced. I would also like to take this opportunity to thank the team who have worked tirelessly to turn my initial ideas into a Lexolent reality.” About Lexolent: As the first ever legal finance business to be based in Dubai, Lexolent is a pioneering force in the legal finance industry, dedicated to fostering collaboration, innovation, and global connectivity among legal finance professionals. The company's comprehensive suite of services and platforms aims to redefine the landscape of legal finance, making it accessible to a broader audience.

LitFin Capital, a Prague-based litigation finance provider and one of the largest players in Europe, has enriched the investment landscape by launching one of the first qualified investor funds for litigation finance in continental Europe. Developed in partnership with WOOD & Company, a major Czech investment firm, this innovative fund presents a unique opportunity for investors seeking uncorrelated market returns. "We're extremely thrilled that after significant preparation time, as this is still a new asset class, we came to the successful setting up of the fund," says Ondrej Tylecek, partner at LitFin overseeing the investments of the group. Primarily focused on investing in significant LitFin cases, the fund aims to deliver an impressive net return of around 15% per annum. "This venture marks a strategic move by LitFin to take advantage of the lack of competitors in this space and introduce a distinctive investment path that remains resilient and independent of traditional financial market fluctuations," adds Tylecek. By entering this territory of regulated investment funds, LitFin aims to provide investors with an exclusive opportunity to diversify their portfolios and tap into a niche market with significant potential. Partnering with WOOD & Company, known for its prestige and expertise in investment management, further solidifies the fund's credibility and promise of delivering exceptional results. The creation of LitFin SICAV not only represents a milestone for LitFin Capital, but also allows to offer litigation finance participation to smaller investors seeking strategic opportunities in alternative assets. Investors are encouraged to take advantage of this unprecedented opportunity to participate in a venture that promises both financial rewards and new diversification possibilities. The development of litigation finance in the European market is very promising over the next few years, thanks to the growing understanding of its benefits and the maturing legal environment inspired by common law countries. This shift is likely to widen the range of cases eligible for funding and boost the volume of capital invested.

In a landmark decision by the International Trade Commission (ITC), Apple's highest-grossing wearables faced unprecedented importation restrictions, marking a pivotal moment in the protracted patent dispute with medical device-maker Masimo. To put the magnitude into perspective, Apple's wearables, home, and accessory business raked in a staggering $8.28 billion in revenue in the third quarter of 2023. This ruling disrupts the very core of Apple's most popular and revenue-generating wearables, adding a seismic impact to the already intense legal battle with Masimo. This article delves into the transformative capabilities of Generative AI platforms, shedding light on how these technologies are reshaping both proactive and reactive litigation practices against the backdrop of such a significant industry development. Elevating Efficiency in Patent Litigation: A Generative AI Perspective Strategic Edge for Law Firms and Litigators:

1. Streamlined Data Management:
   • Generative AI platforms streamline the upload and organization of voluminous case documents, enhancing law firms' and litigators' capability to manage data efficiently.
2. Automated Analysis:
   • Leveraging Generative AI, legal professionals can automate analysis processes, extracting valuable insights from complex datasets swiftly and accurately.
3. Dynamic Adaptability:
   • Future-ready Generative AI platforms empower law firms and litigators to dynamically adapt to new information or shifting circumstances, providing a real-time strategic advantage.
4. Investor Collaboration:
   • Building and maintaining a comprehensive roster of investors becomes more manageable, facilitating efficient collaboration and attracting funding partners for legal fees.
5. Tailored Content Creation:
   • Generative AI platforms excel in generating tailored content for legal motions, analyzing writing styles and logic to ensure persuasive arguments that resonate effectively.
6. Communication Excellence:
   • Acting as central communication hubs, these platforms foster seamless collaboration and information exchange among legal professionals, enhancing overall communication efficiency.

Empowering Patent Owners in Proactive Management:

1. Organized Patent Portfolio:
   • Generative AI facilitates the creation of well-organized rosters of patents, providing patent owners with strategic control over their portfolios.
2. Capital Attraction:
   • Patent owners can leverage organized patent portfolios to attract funding for growth and innovation independently, reducing reliance on traditional fundraising approaches.
3. Self-Funded Litigation:
   • Generative AI platforms empower patent owners to gain better economic control, enabling them to self-fund litigation cases when required.
4. Global Coverage:
   • Future-ready platforms offer a comprehensive overview of patents, covering multiple regions and facilitating global enforcement.
5. Quality Assurance:
   • While maintaining human-in-the-loop functionality, Generative AI ensures robust quality checks and efficient data management.

Masimo vs. Apple: A Glimpse into the Future of Patent Litigation The recent ITC ruling in Masimo vs. Apple serves as a poignant reminder to businesses about the critical importance of being in the driver's seat when it comes to managing their own patents and capitalizing on innovation. While Masimo, a sizable player in the industry, successfully navigated the legal terrain to secure favorable outcomes, it prompts reflection on how smaller companies might face more significant challenges in achieving similar results. This underscores the significance of businesses taking control of their intellectual property and innovation strategies. For smaller companies, such as those without the resources of a Masimo, being in the driver's seat is not just a strategic choice but a necessity. The Masimo vs. Apple case illuminates the power dynamic in patent disputes and the role that control over one's intellectual property plays in shaping the outcomes. Smaller entities, with limited resources, may find themselves at a disadvantage in legal battles, making it imperative for them to proactively manage their patents, navigate legal landscapes, and capitalize on their innovations. Generative AI platforms emerge as a leveling force in this scenario. By harnessing the power of generative solutions, smaller law firms gain a more competitive edge without the need for extensive headcount. This democratization of legal capabilities levels the playing field, allowing smaller firms to stand shoulder to shoulder with their larger counterparts. The transformative potential of generative AI platforms extends beyond just litigation; it opens up avenues for smaller entities to actively participate in the competitive capital market. In essence, a more equitable competitive capital market is crucial for fostering innovation. Generative AI platforms become the key to sustaining this trend. They empower businesses, regardless of size, to actively shape their legal strategies, manage patents efficiently, and capitalize on their innovative potential. As the legal landscape continues to evolve, embracing generative AI not only ensures a fairer competitive environment but also fosters a culture of innovation where businesses of all sizes can thrive.  As the patent community adapts to the demands of complex patent disputes, Generative AI platforms emerge as indispensable tools, revolutionizing both proactive and reactive litigation practices. This nuanced approach empowers law firms, litigators, and patent owners alike, offering a glimpse into the future of patent litigation where efficiency, data-driven strategies, and collaboration take center stage amidst the landmark shifts brought on by significant industry developments. About the author: Joshua Masia, Co-founder & CEO of DealBridge.ai, brings a wealth of experience from leadership roles at JPMorgan Chase, BlackRock, and iCapital. With a BS in Electrical Engineering, Josh has spent 15 years shaping technical and business solutions. At DealBridge.ai, Josh leads the charge in transforming private markets. Their platform, powered by Generative AI, automates deal complexities, streamlining origination, due diligence, and distribution. Eliminating traditional processes, DealBridge.ai empowers seamless connections, enhancing the human experience in deal-making. Under Josh's vision, DealBridge.ai maximizes revenue potential through automation, redefining legal, insurance, and financial transactions. As a trailblazer, Josh and DealBridge.ai usher in a transformative era in deal relationship management.