Burford Capital Limited · LSE:BUR
Burford Capital — Investor Day (November 2021)
47 slides from Burford Capital's investor day presentation, Nov 2, 2021
Slide 1: Burford Capital Investor Event
NOVEMBER 2, 2021 Burford Capital Investor Event Transforming portfolio value into shareholder returns
Slide 2: Notice and disclaimer
Notice and disclaimer This presentation (“Presentation”) does not constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of any securities of Burford Cap
Slide 3: Notice and disclaimer (continued)
Notice and disclaimer (continued) Factors that might cause future results to differ include, but are not limited to, the following: • Adverse litigation outcomes and timing of resolution of litigation matters • Valuation uncertainty in respect of the fair value of our capital provision assets • Our
Slide 4: Agenda
Agenda [Burford
Slide 5: Agenda
Agenda 2 0 2 1 I N V E S TO R E V E N T Welcome Hugh Steven Wilson, Chairman Burford opportunity Christopher Bogart, Chief Executive Officer Portfolio potential Jonathan Molot, Chief Investment Officer Q&A Aviva Will & David Perla, Co-Chief Origination and business development Operating Officers Max
Slide 6: Welcome
Welcome Hugh Steven Wilson Chairman
Slide 7: Welcome
Welcome Board of directors Delivered on all corporate Hugh Steven Wilson, Chairman - Former Head of National Litigation, Latham & Watkins governance commitments - Former Managing Partner, Tennenbaum Capital • Board of Directors Christopher Bogart, Chief Executive Officer and Co-Founder - Three new n
Slide 8: Burford opportunity
Burford opportunity Christopher Bogart Chief Executive Officer
Slide 9: Growth and returns
Growth and returns • Returns have been rising as matter size has increased and as experience Portfolio capable of and data have continued to improve outcomes 1. generating significant gains • Our internal model suggests the current core balance sheet portfolio ex-YPF can generate cash proceeds of $3
Slide 10: Strong returns from a growing and uncorrelated business
Strong returns from a growing and uncorrelated business 1 Return on equity Total shareholder and benchmark returns 5-year rolling ROE 2 Annualized total returns Nominal total returns 2020 5-year Since inception 5-year Since inception 21% Burford Capital +15% +20% +102% +902% 2019 S&P Global 1200 Fin
Slide 11: Burford is the legal finance market leader
Burford is the legal finance market leader • Global specialty finance company Group-wide portfolio1 providing financing and risk management ($ in millions) services to the largest global law firms and Fortune 500 companies to unlock the value 4,765 of high-value commercial legal assets 4,483 4,209 5
Slide 12: Burford has generated strong cash-on-cash returns
Burford has generated strong cash-on-cash returns Legal finance life cycle Burford-only capital provision-direct—fully and partially concluded portfolio ($ in millions) Adjudication-gains 49% IRR TO TA L $939 85% of concluded case 30% ($270) of deployments commitments have been Recoveries 248% ROIC
Slide 13: Asymmetric returns on adjudications drive high total returns
Asymmetric returns on adjudications drive high total returns Favorable risk-adjusted return Concluded assets arrayed by ROIC since inception Burford-only capital provision-direct—fully and partially concluded portfolio dynamics exemplified by the ($ in millions) positive skew of the distribution of
Slide 14: New clients, new markets, product innovation
clients as litigation finance becomes mainstream, led by Burford’s marketing and market presence Drivers of growth Leading market position with 1. New clients significant growth opportunity Adding new clients and increasing our penetration at existing clients as litigation finance becomes mainstream
Slide 15: Drivers of growth: repeat client business and adding new clients
1. Drivers of growth ― repeat client business and adding new clients • Repeat business and increasing deal size are cornerstones of Burford’s strong growth - Often, clients move from single-case to portfolio financing, with portfolio commitments exceeding single-case since 2013 • Growing our roster
Slide 16: Drivers of growth: expanding into new markets
2. Drivers of growth ― expanding into new markets Total commitments by region1 Burford people around the world ($ in millions) $3.4B 1,406 1,187 $725M 590 • People in 10 countries and 9 US states 450 - Recently added Hong Kong, Switzerland, Texas • Clients in 35 countries and 41 US states; inquiries
Slide 17: Drivers of growth: scale economies of monetization and claim family assets
3. Drivers of growth ― scale economies of monetization and claim family assets Monetizations provide scale benefits Attractive related asset exposures • Monetizations provide upfront capital in • We build portfolios (“claim families”) of excess of budgeted legal fees and expenses related high-convic
Slide 18: Drivers of growth: high returns from monetization and claim family assets
3. Drivers of growth ― high returns from monetization and claim family assets Claim families can achieve high returns at scale Asset deployments and realized gains across federal statutory claim family Group-wide • Systematically building a portfolio of ($ in millions) 2019 vintage related high-conv
Slide 19: Burford has strong attributes and protective moats
Burford has strong attributes and protective moats Attributes fuel innovation High barriers to entry―Burford’s “moats” • Human intelligence: Premier experts Substantial capital requirement • To avoid portfolio concentration risk and meet client • Client service: Exceptional problem solving needs • P
Slide 20: YPF: Approaching initial adjudication
YPF ― Approaching initial adjudication • YPF matters—the claims of the Petersen entities and Eton Park against Argentina and YPF—are expected to go to trial in May 2022 • The cases have already won on jurisdiction, a critical element of suing a sovereign in another country’s courts, with that issue
Slide 21: Burford opportunity
Burford opportunity ✓ Highly attractive asset class characterized by large and uncorrelated expected returns ✓ Business with an established, leading and sustainable position in the market ✓ Proven platform with demonstrated capital deployment and return track record ✓ Focused on strong growth and lo
Slide 22: Portfolio potential
Portfolio potential Jonathan Molot Chief Investment Officer
Slide 23: Trends suggest significant portfolio potential
Trends suggest significant portfolio potential • Our ROICs have been increasing across: 1. Portfolio returns have increased - Recent financial periods - Younger vintages - Larger assets • Our modeling of potential asset performance measured against actual 2. Modeling predictive recoveries from concl
Slide 24: Current portfolio broadly diversified
Current portfolio broadly diversified By client type By geography Group-wide capital provision-direct commitments Group-wide capital provision-direct commitments June 30, 2021 June 30, 2021 1% 2% 1% 4% 17% 41% 41% $3.4B $3.4B 58% 35% Corporates Law firms Other North America Europe Global Asia Africa
Slide 25: Portfolio returns have been increasing
Portfolio returns have been increasing Aggregate ROICs of cases concluded within relevant 169% periods show rising return trend in recent years Burford-only capital provision-direct assets June 30, 2021 133% 128% 116% 104% 91% 95% 83% 81% 86% 76% Last 4.5 years Last 3.5 years Last 2.5 years Last 1.5
Slide 26: Larger matters and more recent vintages returning more on invested capital
Larger matters and more recent vintages are returning increasingly more on invested capital • Returns are increasing among larger matters and more recent Cumulative ROIC since inception of matters arrayed by size1 Burford-only capital provision-direct assets—fully and partially concluded portfolio v
Slide 27: Quantitative modeling as a proprietary trade secret
Burford has invested substantially in its quantitative modeling and considers it a proprietary trade secret Mid-2017 1Q 2018 • We started to evolve our legal finance asset • All ongoing matters in our portfolio and nearly all modeling tools by utilizing multivariate new opportunities were modeled un
Slide 28: Burford's probabilistic modeling
Burford’s probabilistic modeling 60 concluded assets • Forecast recoveries for each asset generate observations that can be used to study trends in our expectations probabilistically modeled • Quantum of historical recoveries has largely been in line with model forecasts, demonstrating underwriting
Slide 29: Probabilistic modeling has been predictive of actual recoveries
Our probabilistic modeling has been predictive of actual recoveries • Forecast recoveries for each asset are measured Accuracy of portfolio modeling among 60 on a quarterly basis analyzed matters that have concluded • Our modeling has produced 379 discrete Burford-only capital provision-direct asset
Slide 30: Modeling suggests recent trends of increased ROICs could continue
Our current modeling suggests recent trends of increased ROICs could continue • Quarterly modeling of each matter generates real-time understanding of potential recoveries Modeling of capital • The accumulation of greater experience and proprietary data provision-direct portfolio should increase our
Slide 31: Approach to determine ultimate expected realized gains of current portfolio
Approach to determine ultimate expected realized gains of current portfolio Framework analytical approach constructed Aggregate ROICs of cases concluded from public disclosure within relevant periods show rising 169% Burford-only capital provision-direct return trend in recent years portfolio, exclu
Slide 32: Portfolio potential
Portfolio potential ✓ Recent-period, younger-vintage and larger-matter returns exceed cumulative ROIC ✓ Progress in the reliability of our predictive models for legal asset performance with concluded matters producing 96% of the average estimated recoveries predicted ✓ Our model’s output suggests th
Slide 33: Q&A
O&A [Burford
Slide 34: Asset origination and new business
Asset origination and new business Aviva Will and David Perla Co-Chief Operating Officers
Slide 35: Maximizing profitability and returns
Maximizing profitability and returns Ken Brause Chief Financial Officer
Slide 36: Maximizing profitability and returns
Maximizing profitability and returns 1. Dual listing expands global profile 2. Significant liquidity and cash flow generation 3. Low leverage and proven access to capital markets 4. Demonstrated outsized returns Burford Capital 36
Slide 37: Benefits of expanding global profile
Benefits of expanding global profile • First legal finance firm to trade publicly in the US or have dual-listed equity • Dual listing on NYSE and LSE broadens equity demand and enhances liquidity of shares - US ownership increasing - NYSE trading constitutes 25% of total trading volume since US dire
Slide 38: Highly cash-generative business model
Highly cash-generative business model Cash bridge from inception Burford-only ($ in millions) 2,675 (2,854) ONGOING (1,118) CONCLUDED (1,736) 1,099 (451) (231) (178) 536 (166) 430 Equity Debt Cash Deployments Operating Interest Dividends Acquisitions Liquidity at raised raised receipts expenses and
Slide 39: Liability management to support growth
Liability management to support growth • In 1H 2021, issued $400 million in senior unsecured notes due 2028 and repurchased Maturity of debt outstanding4 ($ in millions) $33 million of notes due 2022 WAL of debt: 5.1 years WAL of capital provision-direct assets: 2.3 years 5 400 - Extended weighted a
Slide 40: Fair value adjustments typically modest and occur near case conclusion
Fair value adjustments typically modest and occur near case conclusion • Capital provision assets initially valued at cost • Objective case milestones in litigation process drive valuation changes • Carrying values low relative to expected realizations, reflecting litigation and other risks Aggregat
Slide 41: Asset management income enhances returns
Asset management income enhances returns • Opportunity to leverage core legal Asset management income finance operations and maximize Burford-only ($ in millions) returns for balance sheet assets 16 • Fund strategy to balance profit 15 and returns 4 12 11 • Funds earn management fees and 6 1 8 perfo
Slide 42: Human capital is the primary driver of operating costs
Human capital is the primary driver of operating costs Operating expenses and headcount1 Operating expenses1 as a % of 5-year Burford-only rolling average income ($ in millions) Burford-only 133 129 33% $86 30% 105 28% $77 26% 25% $65 81 28% 22% $49 15% 75% 72% 78% 85% 2017 2018 2019 2020 2017 2018
Slide 43: Business model provides opportunity to improve upon attractive ROEs
Business model provides opportunity to improve upon attractive ROEs Five-year rolling ROE1 20%+ five-year rolling ROE 2020 Multiple opportunities to improve ROE 21% ✓ Increase realized gains from portfolio + performance 2019 24% ✓ Recognition of performance fees in private funds + 2018 27% ✓ Operati
Slide 44: Attractive financial profile
Attractive financial profile ✓ Dual listing broadens demand and enhances trading liquidity ✓ Demonstrated access to capital markets ✓ Significant cash flow generation and low leverage ✓ Record level of liquidity ✓ Large and uncorrelated expected asset returns ✓ Opportunity to improve upon attractive
Slide 45: Q&A
O&A [Burford
Slide 46: Burford opportunity
Burford opportunity ✓ Highly attractive asset class characterized by large and uncorrelated expected returns ✓ Business with an established, leading and sustainable position in the market ✓ Proven platform with demonstrated capital deployment and return track record ✓ Focused on strong growth and lo
Slide 47: Burford Capital
Burford Capital 47