Constructing a Litigation Portfolio

How do you think about constructing your portfolio?

Obviously, you want to have a diversity, in terms of the types of cases, the value of cases, the investment that each of those cases is going to require, the jurisdictions in which those cases are being brought. One of the main focuses of Omni Bridgeway’s growth over the last five years or so has been expansion, both in terms of geographic footprint, but also the types of cases that we are adding to our portfolio. We’ve just completed a five-year plan and we’ve got another five-year plan on foot. One of the resounding successes over the last five years was the increased diversity throughout the business, which brings a lot more comfort to investors.

Do you have parameters for that?

I’m not sure if there are specific targets, in terms of the fund structures. There may be. It’s not really something that is a clear issue, here in Asia, because the natural stream of cases we have is just, by its nature, very diverse.

What about around concentration?

One thing we would look at is concentration risk against a particular defendant or respondent who we are seeking to recover from. Particularly in relation to states, this might come up. You don’t want to have too many cases against one particular entity or you need to make a careful assessment of their ability to pay. You don’t want to have too many cases that are going to turn on the same point of law. For example, if it’s not yet clear and, all of a sudden, one decision goes not your way and then the rest of them fall into the same category. We do have to look at that. One of the advantages is that we have two investment committees; one for the US and one for the rest of the world. Largely, they have a more global view of the investments that are being put into the funds, universally, so they would raise any concentration issues that might come up on a particular case and think about how we might mitigate that risk.

What’s your view on concentration, more broadly? I guess it is a natural part of the industry, where you can have large cases that are really successful and, therefore, funders have a claim on that that could be a large part of the balance sheet.

I think you need to have diversity, in all different respects. In terms of size of claims, you can’t simply rely on investing in large claim value claims, because they require significant investment and, if they lose, obviously, being non-recourse, that is going to be a significant loss. You really need to have a mix of cases with smaller quantums that require smaller investment, as well as the fact that it’s very nice to get big returns from big cases. That is really the point of diversifying the portfolio, to spread the risk.