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Confidential and Under NDA, December 2016
December 2016
FULBROOKCapital Management, LLC
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Fulbrook Capital Management LLC (“Fulbrook”) is a premier third-party litigation advisor and financier that attracts and evaluates commercial claims, and
advises on and arranges for investment of institutional capital to prosecute and monetize
meritorious commercial claims
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Executive Summary
Experienced Team
Successful Operational
Record
Experienced Team • Management team led by Founder, Chairman and CEO, Selvyn Seidel, former senior litigation partner of
Latham & Watkins, Third Party Funding pioneer, and Co-Founder and former Chairman of Burford Capital• Internal core team of seasoned, senior professionals supported by external core team of 20 expert
advisers across a wide range of litigation and investment specialties • Structured formal investment and monetization processes designed to increase quality and speed of
decision making, and to mitigate risk
Successful Investment Strategy and Operational Record• As Co-founder and Chair of Burford Capital, involved in raising $300M from over 20 leading institutional
investors and deployed over $100M in the first year of operation• As Founder and Chair of Fulbrook, self-funded three years of operations to generate investments in eight
commercial claims with net projected recoveries in excess of $500M to investors• Robust pipeline of both claims and claimants• Recipient of numerous industry awards and distinctions at individual and firm level
Specialist Third-Party LitigationFinancier
Fulbrook Capital Management, LLC • Identifies, evaluates, arranges for investment in and subsequently oversees large commercial litigations
and significant arbitrations to a monetization event in exchange for a share of the financial recovery• Focuses specifically on international arbitration and litigation, patent, bankruptcy, general mediation, and
special situations (e.g. antitrust, whistleblower, serious breach of contract and/or fraud) claims• Targeted territorial jurisdictions: U.S. (New York, California, Texas, Washington D.C., and Chicago); Europe
(London, Western Europe and Central Europe); and Asia (Hong Kong and Singapore)
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Commercial claims increasingly being recognized and accepted as an investible asset class with characteristics similar to stock or securities and other investible assets, but requiring specialized knowledge and greater nuance in the investment decision making and monitoring process
Industry becoming more specialized, integrated, complex and difficult to analyze given its youth and its rapid changes
Industry becoming predominantly international in most funding practice areas
General market demand for DF is significantly greater than capital supply, with gap continuing to grow
Claimant demand vs. capital supply in specific complex practice areas outpacing overall industry, (e.g. international litigations / arbitrations and patent claims), and in certain international jurisdictions, (e.g. New York, London, Hong Kong)
Various legislative and regulatory initiatives governing investors possibly to be enacted in U.S., U.K., and Hong Kong, intended to improve both the overall market and industry, but increasing complexities of investing in commercial claims
Specialist experts increasingly becoming indispensable
Major Investment Trends
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New York, California, Texas, Washington D.C., Chicago
London, Western Europe and Central Europe
Hong Kong (also a bridge to Far East)
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Meritorious “high-end” claims requiring $1 to $10 million of investment (averaging $4 million to $5 million)
Realistic minimum projected recoveries of $25+ million (typically above $100 million and growing number in the billions)
Settlement or trial duration of approximately 3 years
Target IRR 25-35%
Investment Strategy
Specialized DF strategy focusing on superior quality cases within financially attractive legal practice areas and within territorial jurisdictions that leverage team’s expertise
International litigation and arbitration
Investor-state claims
Mediation and high-stakes disputes
Patent and intellectual property claims
Bankruptcy/Insolvency/Financial Distress
Other particularly compelling cases
Preferred Practice Areas Preferred Territorial Jurisdictions
Fulbrook Economic Criteria
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Steady net increase both in number of DF investors and capital under management.
– ~25-30 identified conventional litigation funders in the world; 3 public companies.
– ~13-15 serious conventional DF competitors (8-10 in U.S., 4-5 in U.K, 1 in Australia)
– Situational funders entering industry such as hedge funds, private equity funds, pension funds, endowments, family offices and high net worth individuals
Contingency law firms, and law firms backed by outside firms to pursue DF opportunities
Total number of investors and capital committed for DF is not known nor knowable
Known and knowable facts are that the gap between DF capital supply and demand continues to grow, increasing more opportunities for collaboration than competition
Starting to make portfolio investment of claims, and jumbo size investments, of $50M and more
Prominence of Fulbrook’s senior team is an important competitive advantage in a field where experience, expertise and judgment is fundamental to both litigation success and financial return
Fulbrook’s focus on both specific practice areas and specific jurisdictions, where Fulbrook expertise is differentiated and superior, results in both enhanced quality cases and enhanced profitability
Organization structure, and sophisticated processes, that enhance effectiveness and efficiency
Emphasizing technology, including artificial intelligence, in cases and operations
Speed
Industry’s complexity and rapid changes benefit an experienced and skilled advisor such as Fulbrook
Industry Trends
Participants
Fulbrook Competitive Advantages
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High returns are driven by:
Major risk to the financing provider – when a case is lost, there is a total loss on the financing
Typical financing terms are 3 to 5 times return on capital and/or 5% to 10% share of recovery
The amount of the financing is relatively small compared with the recovery – claimants are comfortable paying a high cost on a small amount of financing, because the amount of the recovery far outweighs this cost
Dispute Finance enables and facilitates great value creation for all involved parties – claimants, financing providers, lawyers and investors
Investors obtain outsized, uncorrelated returns without being exposed to the binary win or lose risk of individual cases
Industry participants create investment opportunities which benefit from portfolio effects that diversify away binary risks
In a portfolio of cases that have been financed by a Dispute Finance provider, roughly speaking, one-third of the cases can be lost and the portfolio will still generate a high return – half of the cases can be lost and the portfolio will still generate a good return.
A Few Basic Industry Economics
The Dispute Finance asset class enables investors to achieve extraordinarily high returns that are uncorrelated to other asset classes
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Conventional Third-Party Financers
$1.4 B
$1.2 B
$900 M
$500 M$300 M (2015 only)
$300 M (approx.)
$250 M
Gerchen Keller
IMF
Burford
HarbourTherium
EJF Capital
Calunius
Selected Industry Participants
Capital Raised / Committed to CasesSource: Company websites, annual reports and press reports
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Actual Returns from Dispute Finance Portfolios
Case study: Burford Capital
NOTE:
(1) For the years 2010 onward a significant number of cases are still in progress; results from these can increase IRRs significantly
(2) Three large cases in trial; one or more successful judgments expected to increase IRR significantly
Accumulative IRR 2009-2014
Returns from Concluded Cases (1)
(2)
Source: Burford Capital
Total Amount Reovered
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Assumption Portfolio of 8 investments, with following averages:• Each has chance of success at 70%• Investment: $5 million• Recovery: $100 million• Time: 3 years
Year 1 2 3
Return Multiple3,0 4,0 6,0
Return on Recovery as Part of
Net Recovery 5% 5% 5%
Recovery 100
Investor Return 35,0
Loss Factor (1) 30% -10,5
Risk adjusted cash flow after
Loss Factor 24,5
Investor IRR 70%
Hypothetical Example of Deal Economics
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Burford Capital
Overall IRR from concluded cases: 28%
Total recoveries to date: $347.5 million
Duration of case investments: primarily 1.9 to 2.3 years
5-year stock price appreciation (including dividends): 34%
Fulbrook Capital Management
Modelled IRR to investors, $200 million invested capital for 5 years: 35%
Modelled total recoveries to investors (based on 70% case success rate): $400 + million
Current 5-case portfolio transaction offered IRR: 39%
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Selected Actual Results and Projections
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Founder, Chairman & CEO Biography
Selvyn Seidel founded and chairs Fulbrook Capital Management, LLC. Before Fulbrook, in 2007, Mr. Seidel foundedand chaired Burford Advisors, an expert advisor in third party finance, and then, in October of 2009, co-foundedand chaired Burford Group Ltd., the investment manager for Burford Capital, LLC, which went public on the U.K.AIM market of the London Exchange. Burford Group Ltd is now among the leading and the largest institutionallitigation funders in the world with over $500 million under management.
Before Burford and Fulbrook, Mr. Seidel practiced as a litigation attorney for over 40 years in complex internationallitigations and arbitrations. In 1985, he co-founded the New York office of Latham & Watkins, a premierinternational law firm.
Until December 31, 2006 and for almost 25 years prior, he was a senior litigation partner at Latham & Watkins andwas, at different times, the Chairman of the firm’s International Practice, the founder and Chairman of Latham’sInternational Litigation and Arbitration practice, and the Chairman of its New York Litigation practice.
Mr. Seidel has been and is an active educator. He was for ten years an Adjunct Professor of Law at the New YorkUniversity School of Law, teaching courses related to litigation and arbitration. He is an Alumnus Lecturer atLinacre College, Oxford University. He chaired for a number of years the Advisory Board of Oxford Law Alumni ofAmerica, and chaired the Advisory Board of Columbia’s Law School’s Center on International Commercial andInvestment Arbitration. He currently works with the New York University Law School’s Center for Justice. Helectures on dispute finance and participates in conferences and presentations at various law schools in the U.S. andU.K. (including Harvard Law School, Columbia Law School, Oxford Law, New York University School of Law and theUniversity of Iowa Law School), and at various Institutes (such as the RAND Institute of Civil Justice, and at LEXISNEXIS programs on litigation costing and funding). He has authored many articles and papers in the industry, (seewww.fulbrookmanagement.com for references to lectures, presentations, articles and papers), the FulbrookPrimer on Third Party Finance of Commercial Claims (November 2014), and the Fulbrook Snapshot on Third PartyCapital Finance of Commercial Claims (October 2015).
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Contact Information
Selvyn SeidelChairman & CEO
Fulbrook Capital Management, LLC
+1 (646) [email protected]
870 Fifth AvenueNew York, New York 10065
Louis SampanisManaging Director
Fulbrook Capital Management, LLC
+44 7748 676 [email protected]
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Disclaimer
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