IMF Bentham Limited (ASX: IMF), the parent company of U.S.-based Bentham IMF (Bentham), has raised a USD $200 million litigation finance funding vehicle together with funds managed and advised by a large U.S. hedge fund (collectively, The Funds). The Funds will invest up to USD $150 million and IMF will invest up to USD $50 million.

The funding vehicle, Bentham IMF 1 LLC (Bentham IMF Funding Vehicle), is IMF’s first investment vehicle. IMF will direct all U.S. opportunities to the Bentham IMF Funding Vehicle for three years or such shorter period required to deploy the committed capital. By leveraging its investments in the U.S., IMF is aiming to generate a return from the capital it invests in the Bentham IMF Funding Vehicle that is far superior to the return it would expect to achieve by investing the same amount directly into litigation funding assets.

“Bentham has established an impressive track record within the United States over the past six years,” said Andrew Saker, IMF’s Managing Director and Chief Executive Officer. “The company has become widely regarded as one of the leading litigation finance firms in the country. This fund affords us additional capital to maintain that position while meeting the demand we expect to see in the market in the next three years,” he said. “It will also enable us to scale up our U.S. operations accordingly, with the launch of one new office this quarter and another on the horizon,” he added.

Bentham has, since its establishment approximately six years ago, concluded 14 of the 45 investments it has made in the U.S., and achieved an average internal rate of return (IRR) of 83%, a multiple on invested capital (MOIC) of 1.18x, a success rate of 64% and an investment period of 1.4 years. IMF has commenced and completed 187 matters since inception in 2001, which includes the above US matters, that has produced a MOIC of 1.55x, a success rate of 90% and an average investment period of 2.4 years. Over the past 5 years to 31 December 2016, IMF has achieved an average IRR of 59%, MOIC of 1.5x, and an average investment period of 3.2 years. 

“This capital raise underscores investor confidence in litigation finance and Bentham’s position as one of the top companies in the industry,” said Charlie Gollow, Bentham’s U.S. Chief Executive. “It will allow us to increase the average size of our investments.”

Additional benefits IMF expects from the funding vehicle include diversification of risk via a larger investment portfolio; satisfaction of capital requirements without recourse to debt or an equity capital raising in IMF; and freeing up capital that would otherwise be used for investments in the U.S. for redeployment to jurisdictions including Australia, Asia, and potentially any future re-entry by IMF into Europe.

IMF sees the Bentham IMF Funding Vehicle to be a significant opportunity and a major enhancement to IMF’s capital management. The company intends to explore opportunities to structure its capital management in similar ways for other jurisdictions, including the possible launch of a funding vehicle focused on non-U.S. investments in the next 12 months.