Six years after Adam Gerchen and Ashley Keller sold their litigation finance company for roughly $160 million, they’re back with a new plan: Buying up pieces of lawsuits from their old competitors. The pair’s new venture has raised $750 million for the first litigation fund aimed at secondary transactions. Gerchen’s new fund has deployed about $225 million, and one of its deals became public for the first time last week. It purchased a 30% claim from Omni Bridgeway in an Australian class action over “combustible cladding,” building materials prone to catch fire. Gerchen Capital paid $19.5 million, generating a $16 million profit for Omni Bridgeway, according to a regulatory filing.
Burford Capital’s $72 million annual loss—the first in its history—shows the risk litigation funders face in growing their caseloads while the Covid-19 pandemic slowed court dockets, delaying payoffs for investors. Burford last year invested $447 million in cases, about twice the $225 million it deployed in 2020, the company said in its annual report. But with fewer cases being decided through trials and settlements, payoffs from those investments—and others made in prior years—weren’t realised. “Burford turned in an excellent 2021,” the company’s chairman, Hugh Steven Wilson, said in a March 29 statement disclosing results. “This may seem odd to say as we report the first loss in our history, but that is a matter of timing.”
Litigation funding companies in the U.S. committed $2.8 billion toward new deals in 2021, according to an annual survey by Westfleet Advisors. This represents an 11% increase from the prior year and can be attributed in part to rising interest from the world’s biggest law firms. While more money was spent overall, the average size of deals has declined by around 20% since 2020 to $6.5 million. The survey showed that new funds have popped up specialising in smaller deal sizes.
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