Burford Capital CEO Talks Evolution of the Business, Client Motivations and YPF Award
The litigation finance industry become an increasingly competitive space in recent years, with new funders looking to secure their own piece of this growing market. However, those funders who have been established for over a decade are often able to provide a view of the industry that underscores how far this market has come and the ways in which it is still evolving. In a profile on Law.com, Christopher Bogart, CEO of Burford Capital, discusses his launch of the litigation funding company, the evolution of the industry, and Burford’s business model. Bogart begins by explaining the formative ideas that shaped the launch of the funder in 2009, recognizing the difficulties faced by law firms’ business models that relied on hourly billing and the opportunity for a third-party funder to provide these firms with greater flexibility. Burford’s foundation is best placed within the context of the 2008 financial crisis, as Bogart explains that “law firms were going crazy looking for capital.” In the 14 years since its inception, Bogart has overseen the changing nature of the litigation finance market, noting that one of the most significant areas of development are the increasing volume of situations where “rather than just having distressed claimants, you now have large corporates who see a sophisticated way of risk transfer.” Addressing Burford’s current business model, Bogart says that on average Burford’s litigation investments have a two-and-a-half years life cycle, resulting in Burford “bringing back about 90-or-so cents on the dollar.” He also highlights how the funder’s business model has expanded far beyond single-case investments, stating: “We actually monetise the underlying value of claims. We do multi-case portfolio arrangements. The business is much larger and broader than it was when it started.” Bogart also sheds light on what is driving Burford’s clients to seek third-party funding, explaining that whilst many of these large corporates already have sufficient internal capital, but “they would prefer not to divert funds away from their operating business to spend on collateral activities like litigation.” Bogart succinctly summarises the position by saying that he’s never encountered a CFO “who is happy about spending money on legal fees”, and so if a funder can “give him or her an opportunity not to do that, then they get pretty interested.” In a brief exchange on the landmark $16 billion award in the YPF case with Argentina, Bogart acknowledges that whilst there have been public assessments of what portion of the award Burford may be entitled to, “everybody in the world realizes that, realistically, you’re going to end up applying a discount to that face value.”
