Bench Walk’s new funding calculator puts funding economics on display

Litigation funding economics can be difficult for lawyers and claimants to model at the outset of a case, particularly when recoveries depend on shifting assumptions around budget, damages, duration and drawn capital. Bench Walk Advisors is aiming to make that analysis more accessible with a new publicly available litigation funding calculator, developed by Mike Cumming-Bruce, Vice President in the funder’s London office. The tool allows users to input a proposed case budget, potential outcome ranges and case characteristics to estimate claimant recoveries net of funding costs under a Bench Walk-style funding package priced on a multiple of drawn capital. We spoke to Mike about why Bench Walk decided to make the calculator public, how it can help lawyers assess whether a matter may be fundable, and why greater transparency around funding outcomes matters for the industry.

1. You have launched a publicly available litigation funding calculator designed to estimate claimant recoveries net of funding costs. What problem were you trying to solve for lawyers, claimants and advisors?

We want to make litigation finance economics more transparent. Claimants seek litigation funding because they believe that it may be in their economic interests to do so. To make that assessment on an informed basis, claimants need to have information about what they can reasonably expect to receive on a successful outcome, net of finance costs and ancillary costs like ATE and CFA uplifts. This analysis should drive the decision about whether to proceed on a funded basis at outset, as well as other crucial matters like litigation budget and strategy.

2. The calculator models outcomes under a Bench Walk-style funding package priced on a multiple of drawn capital. Why is it important for users to see how the economics change across different damages, budget and duration scenarios?

Again, this comes down to us wanting claimants to have the tools to make decisions that are in their own economic interests. As litigation finance professionals, we invariably run this sort of detailed scenario analysis on all our deals because we know it can be a powerful way to illustrate the economic context and thereby assist with decision-making. We also know that most claimants do not have the luxury of making strategic decisions in big-ticket litigation without regard to economic cost/benefit calculations (and arguably should not, even if they do). As a consequence, we think that they may benefit from having access to similar technical tools.

3. Many lawyers understand litigation funding conceptually but can find the economics difficult to explain to clients. How do you hope the calculator changes those conversations?

We hope it makes it very straightforward! The calculator has been designed to be as easy to use as possible and we think that most lawyers will be intuitively familiar with what the inputs and outputs mean. However, despite that simplicity, the tool gives claimants and their advisers the ability to view detailed outcome analyses that would previously have been accessible only to those with bespoke financial models.

4. The tool also gives users an indicative view on whether a matter may be viable for funding. What are the key inputs that most often determine whether a case is likely to work from a funder’s perspective?

Much will come down to the individual funder. But in general, funders want claims to produce good net returns for both funders and claimants within a manageable timeframe, which makes budget, quantum and duration inputs of particularly high importance.

5. Funders are sometimes criticised for opacity around pricing and recoveries. Why did Bench Walk decide to make this tool public, rather than keeping it as an internal or relationship-driven resource?

We have no desire for funding to be a ‘black box’, which helps no one. While sharing our models in a form that makes them vulnerable to reverse engineering causes issues that we have to be sensitive to, we think the nature of this tool avoids those technical issues and thereby allows us to be transparent, as we always strive to be.

6. What does the calculator reveal about the relationship between case duration, drawn capital and the claimant’s net recovery?

Duration is often the piece that is most overlooked. I think it is well known that funders are keen on shorter duration profiles. What I think is less well known is that shorter duration profiles are often in the interest of claimants as well, given the time cost of money. We hope that this helps equip claimants to make decisions that are in their own economic self-interest during long-running proceedings.

7. Are there common misconceptions about litigation funding economics that you think the calculator will help correct?

I think that because most claimants are principally interested in claim proceeds, and because funders’ principal role in litigation is providing capital for a share of those proceeds, commentators sometimes see a tension between funders’ interests and those of claimants. Personally, I think that's regrettable and that funded litigation should proceed on the basis that alignment of interests between claimant-side stakeholders is paramount. I hope that this tool helps to highlight the extent to which funder and claimant economic interests should be fundamentally aligned on any properly structured funded matter.

8. Do you see this as part of a broader move toward greater transparency in the litigation funding industry, particularly at a time when courts, policymakers and clients are paying closer attention to funder returns?

I think the impetus behind this is more about helping claimants to make informed commercial decisions than it is reacting to broader regulatory or quasi-regulatory currents. However, it is also true that the kind of sophisticated claimants that Bench Walk wants to work with increasingly and rightly see transparency as a positive differentiator when choosing between capital providers. Ultimately, sunlight is not only the best disinfectant, but also makes good business sense! But don’t just take my word for it, try it first yourself!