Article, page-25

Denk re: your comment.

This is an enormous chunk of directed business - considering it has taken since 2001 to build up the IMF-Bentham Case Investment to AUD $3,370m.

Your right of course that collecting cases at the right ROIC has been a slow burn in the past.  But don't assume this will be the case going forward - especially in the US.  My opinion is that this funding deal is the first step in IMF transitioning from the case by case to more of a "Burford model" of becoming a provider of corporate finance to litigants.  See the attached Vimeo video below:



By this approach I suspect it will take a lot less time (and cost) to fill the $200mill of commitment and having a strong partner will allow us to scale the model up in the same way that a fund manager can scale whereas a LIC can't.  If you look at Burfords results for 2016 they actually filled $200mill of commitments (not claim value) in the first half of 2016.  90% of these were portfolio cases (as opposed to single case funding) and I dont know where I saw it but I think they did one large deal worth $175million of commitments in one go.

Why is this preferable and why does the opportunity exist:  
- Law firms don’t access the capital markets – they aren’t allowed to access capital markets in US;
- They are highly profitable in their own right (40% profit margin). So the returns that a litigation funder can get are not out of step with the returns that law firms are getting on their own business;  
- This is a very large (private) market.  Think $800Bill of global revenue but no access to the capital markets.  They therefore turn to an outside business to provide that capital (litigation funder).
- Business are more and more less likely to pay legal fees upfront and more likely to pay through a contingency.  Why?  Legal fees are a disaster as a corporate accounting.  Legal fees reduce profit but no asset (collection).  Further still if the company wins the legal revenue is usually an abnormal item so no benefit from that.

Does the Burford model work?
Burford shares 5 years to Sept 30 2016 have returned 296.1%;
IMF Bentham shares 5 years to Sept 30 2016 have returned 69%;

To me this is a very small move in a very undervalued stock.  If management can get this right shareholders aren't going to be in for a slow burn and I wouldn't be using history and the case by case analysis of the current book as a guide for what we can achieve going forward.