Omni Bridgeway Ltd · ASX:OBL
Omni Bridgeway — Investor Day (March 2024)
71 slides from Omni Bridgeway's investor day presentation, Mar 27, 2024
Slide 1: Investor Day
Investor Day 27 March 2024 All figures are in Australian Dollars (AUD, A$) and financial information is at 31 December 2023 unless otherwise stated.
Slide 2: Introduction
Introduction Raymond van Hulst Mark Wells Managing Director and CEO Global Head of Portfolio Management Guillaume Leger Clive Bowman Global Chief Financial Officer Global Chief Investment Officer Jeremy Sambrook Tom Glasgow Global General Counsel and Managing Director and Chief Investment Officer –
Slide 3: Key takeaways and objectives
Key takeaways and objectives Legal assets and Fair value and OBL-only unique OBL platform attribution OBL value generation Key priorities and and valuation framework strategic initiatives 3
Slide 4: Mission for OBL
Mission for OBL To leverage our leading alternative fund management platform for diversified legal assets globally, realising stable and superior investment returns, which form the basis for accretive equity returns to shareholders. 4
Slide 5: Transition to global fund management platform
Transition to global fund management platform Future OBL The leading alternative fund management platform for legal assets OBL today (31-Dec-23) Focus on operational leverage and scale benefits Global, legal asset fund manager Broadened LP base IMF Bentham (30-Jun-15) 213 headcount | 15 countries Ma
Slide 6: Lifecycle of our platform – private equity comparison
Lifecycle of our platform – private equity comparison OBL entering the ‘maturing’ stage Source: KKR Investor Day presentation, 13 April 2021. 6
Slide 7: Value generation and valuation framework
Value generation and valuation framework + Value Value existing portfolio platform Value OBL = = OBL-only attribution Annual new portfolio fair value fair value generation 7
Slide 8: Platform value generation – business model
Platform value generation – business model Hypothetical example based on FY24 targets OBL fund management model Annual commitments 625 Commitments in this hypothetical example are based on our FY24 target. Pricing (fair value per dollar of commitment) 100% The fair value / commitment pricing ratio e
Slide 9: Agenda
Agenda Panel 1 Tom Glasgow Introduction to Legal Finance and OBL Clive Bowman Mark Wells Kristen Smith Q&A Panel 2 Raymond van Hulst Fair value Guillaume Leger Mark Wells Tom Glasgow Q&A Panel 3 Raymond van Hulst Strategic update Guillaume Leger Mark Wells Q&A Jeremy Sambrook 9
Slide 10: Cornerstone of the business
Cornerstone of the business Our track record of generating consistent and high investment returns over multiple decades and economic cycles is the cornerstone of the business and future growth. 10
Slide 11: Investment performance – full history
Investment performance – full history MOIC distribution for completed investments2 Matters with >10x MOIC 10.0x A B C D E F • Overall MOIC of 9.0x Negative 1-2x 2-3x 3-4x 4-5x >5x Total completed investments return MOIC MOIC MOIC MOIC MOIC at 2.2x. 8.0x # completions 106 81 70 39 29 58 383 % total d
Slide 12: Investment performance by completion vintage
Investment performance by completion vintage Fully completed investments3 MOIC by completion vintages 4.3x 3.5x 3.2x 3.0x 3.0x 2.4x 2.3x 2.3x 1.9x 1.9x 2.2x Life to date MOIC of 2.2x 2.1x 1.7x Average (FY2010 onwards) 1.6x MOIC of 2.1x 1.1x FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21
Slide 13: Introduction to Legal Finance and Omni Bridgeway
Panel: Session 1 Tom Glasgow Introduction to Managing Director and Chief Investment Officer – APAC Portfolio Manager – Legal Finance and Global International Arbitration XX Mark Wells Omni Bridgeway Global Head of Portfolio Management Kristen Smith Portfolio Manager – Australia Clive Bowman Global C
Slide 14: What is legal finance?
What is legal finance? Rapidly growing alternative asset class that is uncorrelated to economic trends Overview Who uses litigation funding? • Provides capital to litigants, usually the claimant, in exchange for a pre-determined portion of the monetary recovery from the lawsuit. • Funds lawyers’ fee
Slide 15: Growth of legal finance as an asset class
Growth of legal finance as an asset class Legal finance has received increasing attention from global capital allocators and investors • Unique class within alternative assets offering superior risk adjusted Growth in legal finance TAM4,5 returns given its binary and asymmetric risk profile. • Under
Slide 16: An underpenetrated market with high barriers to entry
An underpenetrated market with high barriers to entry ~$220bn4,5 United Kingdom $13bn Canada estimated total addressable $4bn Asia market in the rapidly growing $1tn global legal market $21bn ~$10bn Continental Europe in available funding capital from incumbent industry players $21bn United States E
Slide 17: Current supply / demand dynamics
Current supply / demand dynamics Increasing demand Demand • Broader awareness and deeper penetration • Rising interest rates – higher cost of self-funding • Escalating costs of litigation • Emerging areas of litigation – data breaches, cybersecurity, etc. Opportunity Reducing supply • Reduction of c
Slide 18: Regulatory landscape
Regulatory landscape Maturing industry pattern – overall supportive regulatory developments US • Certain US courts have implemented rules mandating the disclosure of UK litigation funding arrangements, but no further regulation. • In July 2023, in PACCAR Inc vs. Competition Appeal Tribunal, the UK S
Slide 19: Our differentiators in the global litigation finance market
Our differentiators in the global litigation finance market Competitive advantage Unmatched • Pioneers of global litigation finance industry expertise • 500+ years’ collective litigation and finance experience and experience • Un-matched know-how in case selection and management • Investment Committ
Slide 20: Evolution of the OBL platform
Evolution of the OBL platform • IMF Bentham established in 1998 in Australia, listed on the ASX in 2001. • First publicly listed legal financier to specialise in large scale non-insolvency litigation. • Expanded its international footprint starting in 2011 to locations across the Americas, the UK, A
Slide 21: Global leader in financing and managing legal risk
Global leader in financing and managing legal risk Fair value Fair value by region by investment type 24% 29% 31% 32% 6% 7% 31% 40% Americas APAC Arbitration Class actions EMEA Law firm Other10 Single party Fair value Commitment by case concentration by case concentration 14% 25% 26 15 200+ 120+ 75%
Slide 22: The leading international origination platform in legal finance
The leading international origination platform in legal finance Expansive origination network provides immediate access to quality investments, augmented by our expertise in various jurisdictions, marketing efforts, proven track-record, and invaluable personal relationships • Direct approaches to th
Slide 23: Industry acknowledgement: #1 or #2 in all relevant markets
Industry acknowledgement: #1 or #2 in all relevant markets THE ONLY BAND 1 BAND 1 RANKED • South East Asia • Australia • UK • Canada • Europe • Insolvency Omni Bridgeway is recognised with • Middle East • USA • Intellectual Property (US) the most Band 1 rankings – • Asia-Pacific • Latin America and
Slide 24: Distillation of the investment process and objectives
Distillation of the investment process and objectives Select the right deals Generate opportunities at the right price Size appropriately – Monitor to diversification vs efficiency maximise outcome 24
Slide 25: Risk underwriting and structuring
Risk underwriting and structuring Key risks Core pricing principles Additional structuring levers Priority return of OBL invested capital Capped budget Win / loss probability Return structured as: Increase returns over time Budget Percentage, and/or Multiple Greater of / additive Risk sharing to ens
Slide 26: Duration is a key risk – how we protect returns
Duration is a key risk – how we protect returns Nearly all funders have success ratios >50% OBL approach but many have disappointing returns due to: • Realistic assumptions informed by data: both OBL proprietary and market sourced Optimistic duration and • Fair value protection through pricing: dama
Slide 27: Risk underwriting and structuring
Risk underwriting and structuring The Group evaluates each opportunity in depth by assessing several qualitative and quantitative factors Application review & underwriting Assessment criteria • IMs determine whether to progress a funding application. Term sheet may • Type and strength of case: win/l
Slide 28: Investment process and portfolio
Investment A disciplined approach to the assessment process and of financial and legal risks portfolio risk management Monitoring and realisation An investment typically takes 39 funded between 1 and 5 years 18 IC approved & 1,723 applications 505 reviewed conditionally funded to complete. The IM wi
Slide 29: Platform drives origination: illustrative case studies
Platform drives origination: illustrative case studies Omni Bridgeway team has the range of skills to compete beyond price Portfolio corporate deal, international arbitration and enforcement IP infringement case Overview Overview • PE-owned media company seeking public • Cross-collateralised portfol
Slide 30: Platform drives origination: indicative case studies (cont'd)
Platform drives origination: indicative case studies (cont'd) Omni Bridgeway team has the range of skills to compete beyond price Australian class action Overview: Claim concerning a defective medical device. The device, intended for use in surgical procedures, experienced significant issues that af
Slide 31: Fair value
Panel: Session 2 Mark Wells XX Fair value Global Head of Portfolio Management Guillaume Leger Global Chief Financial Officer Raymond van Hulst Managing Director and CEO Tom Glasgow Managing Director and Chief Investment Officer – APAC Portfolio Manager – Global International Arbitration 31
Slide 32: Fair value
Fair value Fair value is the net present value of the expected loss-adjusted and probability-weighted investment cash flows • Omni Bridgeway is replacing estimated portfolio value (EPV) and implied embedded value (IEV), with fair value (FV) as its key investment value metric going forward. • Fair va
Slide 33: Fair value methodology: how much, when and how likely?
Fair value methodology: how much, when and how likely? Scenario analysis Identify likely outcome scenarios. Assumptions • Outcome scenarios – the points during the life of an Probabilities Duration Budget Damages Return Material litigation investment when it may complete in whole or in part projecti
Slide 34: Fair value framework
Fair value framework Omni Bridgeway’s fair value approach is based on probabilistic scenario analysis At inception the fair value of an investment is determined: Typical material litigation developments include: • As the net present value of the future loss-adjusted probability-weighted investment c
Slide 35: Simplified illustrative fair value case study
CASE STUDY Simplified illustrative fair value case study Investment information The case study involves investment in a merits dispute with an estimated claim value (quantum) – based on expert reports – of up to $60m. Based on legal statistics for the relevant jurisdiction, the estimated timeline fo
Slide 36: Simplified fair value case study – Case start
Simplified fair value case study – Case start Outcome Scenarios Scenarios Cashflows Appeal Win for $60m Appeal Win after first instance win Year 1 Year 2 Year 3 Year 4 Probability: 40% Duration: 2 years Probability: 20% Duration: 4 years -1.50 -1.50 -0.50 -0.50 Deployment: $1m Fee: $21m Deployment:
Slide 37: Simplified fair value case study – Year 1
Simplified fair value case study – Year 1 Outcome Scenarios Scenarios Cashflows Appeal Win for $45m Appeal Win after first instance win Year 1 Year 2 Year 3 Year 4 Probability: 40% Duration: 2 years Probability: 20% Duration: 3 years -1.50 -0.50 -0.50 Deployment: $1m Fee: $15.8m Deployment: $4m Fee:
Slide 38: Simplified fair value case study – Year 2
Simplified fair value case study – Year 2 Outcome Scenarios Scenarios Cashflows Appeal Win for $45m Appeal Win after first instance win Year 1 Year 2 Year 3 Year 4 Probability: 40% Duration: 2 years Probability: 40% Duration: 3 years -0.50 -0.50 Deployment: $1m Fee: $15.8m Deployment: $4m Fee: $15.8
Slide 39: Simplified fair value case study – Year 3
Simplified fair value case study – Year 3 Outcome Scenarios Scenarios Cashflows Appeal Win for $45m Appeal Win after first instance win Year 1 Year 2 Year 3 Year 4 First Instance Win for $45m Appeal Loss Appeal Loss after first instance win Year 1 Year 2 Year 3 Year 4 Probability: 100% Duration: 0 y
Slide 40: Simplified illustrative fair value case study
CASE STUDY Simplified illustrative fair value case study Resulting fair value movement bridge Case start Year 1 Year 2 Year 3 completion FV: $5.06m FV: $4.68m FV: $10.29m FV: 0, Cash In: $9.9m • Material Litigation Event: • Material Litigation Event: • Material Litigation Event: Adjustment of quantu
Slide 41: OBL attribution of fair value
OBL attribution of fair value • Fair value equals the net present value of future cash flows of an investment at a specific moment in time. It is therefore a forward-looking cash profit metric, net of future deployments and excluding any past deployments. OBL attribution OBL attribution of existing
Slide 42: OBL attribution of fair value (cont'd)
OBL attribution of fair value (cont'd) Methodology Fund 1: The portfolio fair value included for Fund 1 only the OBL residual interest in fund cashflows. The OBL attribution Fair value model investment rate is therefore 100%. cash flows on an Funds 2/3: Given the European waterfall structure of Fund
Slide 43: Fair value attribution
Fair value attribution FV attribution split $2,519m $1,591m $2.5bn fair value of the balance sheet and funds investment portfolio at 31-Dec-2023. 63% Out of which, $928m or 37% is attributable to 100% OBL (excluding management fees). $928m Attribution rate for new investments in Funds 4/5 is 35%. 37
Slide 44: EPV, IEV and fair value reconciliation
EPV, IEV and fair value reconciliation -2% 4071 3,985 Reconciliation method 1 +3% • EPV has been assumed with a 5-year deployment schedule, 2,271 2,197 where year 1 equals the 12-month rolling forecast provided in the 1H24 results presentation, and the balance has been distributed evenly over the su
Slide 45: Validation of fair value approach with Fund 6
Validation of fair value approach with Fund 6 Experience indicates relative stability at a portfolio level Number of cases • Omni Bridgeway has introduced the fair value framework in EMEA at the inception of Fund 6. 100 • Fund 6 has 98 investments which had completed by 4Q23 and for which initial fa
Slide 46: Portfolio fair value analysis
Portfolio fair value analysis Portfolio implied loss rate and implied duration • The portfolio fair value models have an overall implied probability-weighted loss rate of 28%12 which aligns with our historical loss rate of 25%. Discount rate sensitivity on 12% discount rate base • The portfolio fair
Slide 47: Strategic Update
Panel: Session 3 Raymond van Hulst Strategic Managing Director and CEO Update Guillaume Leger Global Chief Financial Officer Mark Wells Global Head of Portfolio Management Jeremy Sambrook Global General Counsel and Company Secretary 47
Slide 48: Key drivers and strategic initiatives
Key drivers and strategic initiatives Platform business model – value framework Focus on OBL attribution as the key value driver Focus on value per dollar of commitment generated Volume – value optimisation through enhanced pricing and structuring New fund raising to support commitment growth, Fund
Slide 49: Platform business model – transition
Platform business model – transition* Hypothetical examples based on FY24 targets Balance sheet Growing fund Maturing fund model management model management model Management fees basis None Deployed Committed Duration 4 4 4 Annual commitments 625 625 800 Pricing (fair value per dollar of commitment)
Slide 50: Value generation and valuation framework
Value generation and valuation framework Value existing portfolio Value platform + $928m ~ $150m per annum with growth potential Value OBL = = OBL-only attribution Annual new portfolio fair value fair value generation Note: to be read in conjunction with slides 41-43 and 49. 50
Slide 51: Volume – value optimisation: pathways to $1bn annual fair value generation
Volume – value optimisation Pathways to $1bn annual fair value generation target 0.6x 0.8x 0.9x 1.0x 1.1x 1.2x 1.3x 1.4x 600 360 480 540 600 660 720 780 840 Commitment ($m) 800 480 640 720 800 880 960 1,040 1,120 900 540 720 810 900 990 1,080 1,170 1,260 1,000 600 800 900 1,000 1,100 1,200 1,300 1,4
Slide 52: Capital raising for our Funds
Capital raising for our Funds • High profile institutional investors, with extensive legal finance experience, anchored all three generations of our funds. • Recurring and increasing commitments by these anchor investors is a strong validation of OBL’s leading investment returns and underwriting pro
Slide 53: Full cost coverage on management of existing portfolio
Full cost coverage on management of existing portfolio Existing portfolio New investments Management and administration Origination and underwriting 25% to 30% 70% to 75% of platform time and resources of platform time and resources ~$25m ~$70m ~100% cost coverage Low but increasing cost coverage Fu
Slide 54: Transaction fees
Transaction fees What they are and how they work Example • The Fund includes a Transaction Fee (TF) in the LFA with the funded claimant counterparty. Start of investment • The TF is paid by the Fund to OBL. • The TF is added to the outstanding amount deployed to the claimant Funded claimant Fund OBL
Slide 55: Transaction fees
Transaction fees Impact: potential to significantly increase early-year fees for OBL-only 39.3 40.0 Example scenario 36.5 35.0 34.3 31.8 31.5 • Fund size: $500m Transaction fee + deployed management fee 27.2 25.0 • Commitment period: 4 years Committed management fee 21.7 • Fund fully committed at st
Slide 56: Management of cost base
Management of cost base Benchmarking Differentiated platform expertise and quality OBL LitFin listed peers High correlation between ROIC (value generation) and volume. Cost coverage 25% 0% to 5% Large volume investments typically correspond with lower ROIC. Origination efficiency • E.g. originating
Slide 57: Cost coverage aspirational target
Cost coverage aspirational target Our aspiration is to achieve > 70% cost coverage over the medium term 100% 90% Levers: 80% 70% • Growth of FUM 70% 60% • Improvement of fee terms 50% • Transaction fees 40% • Cost management 30% 20% 25% 10% 16% 0% FY23 FY24 FY28 57
Slide 58: Liquidity management
Liquidity management Pathway to positive OBL-only free cash Secondary market transactions OBL-only Improve cost cash flow • Initiatives underway Transaction coverage fees are contributing to Performance fees improvements across all the levers available to OBL Co-invest profit to increase free cash f
Slide 59: Liquidity management
Liquidity management Liquidity runway Annual OBL-only cashflows Sources of liquidity Performance Co-invest fees profit Cash and receivables $123m Secondary Access to market debt facility $60m Co-invest capital return 59
Slide 60: Mature portfolio – driving increasing investment returns
Mature portfolio – driving increasing investment returns Historical duration profile versus outstanding commitments duration profile Completed investments by duration14 Deployment by investment vintages15 ($m) 30% 100% 180 110% 90% 160 100% 25% 25% 90% 80% 140 135 121 122 80% 70% 118 20% 120 70% 17%
Slide 61: Secondary market sales executed in FY22 to FY24
Secondary market sales executed in FY22 to FY24 120 1 investment 100 • Used for risk management, portfolio construction and duration/liquidity 80 Gross proceeds $m management 14 investments • Developing secondary 60 Fund 1 asset plus sidecar market for legal assets 40 15 investments • Increasing num
Slide 62: Platform stabilisation with concurrent portfolio growth
Platform stabilisation with concurrent portfolio growth Value profile attributable to OBL vs cash opex net of management fees • With the platform build out now complete, the portfolio is strategically positioned to offer growth potential in all regions. • In line with the 35% attribution $217m descr
Slide 63: How do we anticipate reporting FV
How do we anticipate reporting FV The fair value figure will be reported on a half yearly basis, at a total portfolio level only A periodic movement waterfall will be presented We are working towards a non-IFRS OBL only fair value based P&L Fair value OBL-only P&L $ million 1H24 Commitment 259.8 FV
Slide 64: Non-IFRS OBL-only cash P&L
Non-IFRS OBL-only cash P&L $m FY21 FY22 FY23 1H24 Litigation investments proceeds 101.6 109.4 73.4 60.1 Investments Proceeds from secondary market transactions – – 47.7 6.3 Interest payments (7.4) (7.5) (19.4) (11.0) 94.2 101.9 101.7 55.4 Management and other fee income Management 16.0 15.8 15.1 7.6
Slide 65: Key takeaways from today
Key takeaways from today • We have built a leading fund This will be delivered via: management platform for legal assets. • Increased cost coverage through increasing fund • We have generated a valuable portfolio fees and focused management of our cost base of existing investments. • Improved pricin
Slide 66: Appendix
INVESTOR DAY Appendix
Slide 67: Senior management overview
Senior management overview Omni Bridgeway has an experienced senior management team with an established track record of success and effective risk management. Highly credentialed executive management, with decades of relevant legal finance and investment experience +22 Years Raymond van Hulst +22 Ye
Slide 68: Senior management overview (cont’d)
Senior management overview (cont’d) Omni Bridgeway has an experienced senior management team with an established track record of success and effective risk management. Highly credentialed executive management, with decades of legal finance experience +5 Years Paul Rand +22 Years Jurriaan Braat +8 Ye
Slide 69: Footnotes
Footnotes 1. Relates to all funds and assets under management, whether in investment, or harvest mode. 2. Reflects completions in Funds 1 to 5 and OBL balance sheet since inception, excluding partial secondary market sales, including partial completions. Reflects Fund 6 completions since OBE acquisi
Slide 70: Disclaimer
Disclaimer This presentation contains certain forward-looking statements that can generally be identified using forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” and o
Slide 71: This presentation is authorised for release to the market by the Board.
This presentation is authorised for release to the market by the Board.