Sep 9, 2021
Operator
Hello. And welcome to the Burford Capital Interim 2021 Results Call.
On the line with me today is Christopher Bogart, Chief Executive Officer, Jonathan Molot, Chief Investment Officer and Ken Brause, Chief Financial Officer. I will now hand over to your host, Christopher Bogart, Chief Executive Officer.
Chris, over to you.
Christopher Bogart
Hello, everyone, and thank you for joining us for another Burford earnings presentation. We are delighted to have so many of you with us today on the phone or on our webcast or online.
And as usual, I am joined by Jon Molot, Buford’s Chief Investment Officer and for the very first time, Ken Brause, our new Chief Financial Officer. We're looking forward to introducing all of you to Ken.
The three of us as usual will walk through the slides that we've distributed and that are available on our website. At the end of our presentation, we'll open the floor to questions and look forward to having some further dialogue with you.
We are excited about the results that we were able to post for the first half of 2021. Really three key messages came away from those results.
The first is around new business growth. Not just commitments, but also a really strong record-breaking deployment position.
Having us deploy capital is obviously critical to our future potential profits from that capital. And so, smashing our prior performance there, especially in an era where we had seen some prior COVID-related delays and was really, very, very rewarding and sets the business up well for the future.
The portfolio itself was slower in terms of its turnover over this period, but we didn't come away with any bad news. Returns are up a little bit.
Losses are down and we completed the Akhmedov matter, which over time has brought in $108 million to us. Pretty impressive returns, 233% return on invested capital, 71% IRR.
And in addition to that, sort of underlining our ability to do large complex noisy matters like that and frankly the appropriateness of us doing them for all the reasons we said out in the past. I think the other part of the message that goes along with that is that, while these cases are going on, to the extent that our involvement in them has become public.
You just can't believe what you read in the media and we're not able during the course of pending litigations going to correct any of that. We make as Jon has outlined many times in the past and Douglas will continue to do so today.
We make our investment decisions based on rigorous underwriting and we have low loss rates and high levels of confidence in the matters that we do take on. And finally, and I'll talk about this in a little more detail in a minute as well, Ken, as to accounting, we see U.S.
GAAP in our future as we’ve been - we are pretty clear about with people and to facilitate us looking more like a U.S. GAAP issuer.
We are taking a series of one-time non-cash accruals that really just match up those accruals with the carrying value of the cases. And this from my perspective is really just what I'll almost call some accounting noise.
As you know, I've always focused on the cash performance of this business and not the accounting performance. And this stuff is all theoretical and while the cash actually comes in from the underlying investments.
And I'll take you through a slide on that in a minute. But the numbers on this page really are very pleasing to us in terms of the overall performance.
Before I go into any more details, I just note a couple of other elements; the sort of the non-financial part of the business. Our Board has continued to evolve exactly as we said that it would in 2019.
We've kept to all of our commitments there. Sir Peter Middleton retired as our Chairman at the AGM, Steve Wilson stepped into that role and now will serve a three year term.
And we are in the market recruiting for another new non-executive director. During the course of the year, we’ve already talked once before about the successful U.S.
debt offering that we generated earlier this year. That offering has been trading nicely as has the remainder of our UK debt.
So, we are very pleased with our capital and our liquidity position. And we've seen we've seen a nice run of the U.S.
market receptivity to the dual listing. We didn't do a flash bang approach with a big offering that would have generated all sorts of immediate coverage and interest.
We did it more organically instead. And I am pleased to say that about a quarter of our total trading volume went through the stock exchange, which is pretty nice from our perspective on a purely organic low resource approach.
So turning to Slide 4, the numbers here, this is all about our new business. The numbers here really speak for themselves.
COVID continues to have some impact on our business development and origination activities. But as you can see from these numbers, we've been able to post substantial numbers nevertheless.
And so we feel good about that in terms of what it says about our ability to write new business and it leaves us with some optimism about what our pace can look like once the world does come fully back to normal. The trend of a new business continues as it has over the last several years.
A mix of smaller one-off matters and larger high conviction matters with real scale to them. It's important from our perspective to do both of those things in our business.
We are simply – have such a scale now that if the only thing we did was a dial of small one-off litigation funding matters that would not be enough to continue to grow the business. But at the same time, it's very important to do those matters as there continues to be real growth in the market.
We still are just scratching the surface in terms of the proportion of litigants who are users of third-party capital. And so, mixing those in with the larger matters that have been successful for us in the past is from our perspective, a very desirable way of managing the portfolio.
I am sure that to first stall what you inevitably would be some questions. You'll notice here a bullet point on the bottom of this deck about one of those new large matters.
As usual, we don't have any ability to go beyond on the pretty limited public disclosure that we give in most of these matters and this is no exception. But, this is as you'll see in another chart, a large global antitrust matter that has hundreds of underlying cases associated with it.
As always, these kinds of large deals come with bespoke structures and a substantial amount of underwriting work on our part. The accounting for them is awfully complex and this won't be any exception to that.
We have a component of equity risk in this transaction as opposed to our more traditional credit risk and that will tweak the accounting somewhat. But obviously, we wouldn't be doing deals of that size unless we had quite a high level of conviction about them.
Turning to Slide 5, and Jon is going to talk in more detail about the portfolio. I'll just note quickly here that as we've always said, the speed of resolution of these matters is unpredictable.
That's what gives us our uncorrelated nature of our business we are wholly predictable as to both duration and outcome, then you wouldn't need people like us doing it and you wouldn't be able to generate the returns that we can. So, we're satisfied with the quality of this underlying portfolio and we think about where the returns and the loss rates have come.
And Jon, as I say will address the dynamics of the portfolio a little bit more. Before we get to Jon, on Slide 6, I need to take you through a couple of accounting points.
As I mentioned upfront, we are having a serious eye towards U.S. GAAP and we thought not only about what that looks like as we convert to U.S.
GAAP, the answer is not a huge number of changes. But also given that we want to make the most of the New York Stock Exchange listing and the dual listing, we want to try and look like other U.S.
GAAP issuers as well as part of our goal to make the stock as investable as possible to as many shareholders as possible. And even though the practice is mixed on the subject among European companies under IFRS, there is more consistency practice under U.S.
GAAP when it comes to matching accruals against fair value changes and so that's just what we've done here. As we explained in August, we've taken some one-time non-cash accruals, but basically take prior fair value gains a whole big chunk of which are in the Peterson and Eaton Park cases and accrue the potential expense against those.
This is all to me, as I said earlier, this is sort of accounting noise because this only becomes relevant when the cash rolls in. And the cash numbers - to make the accruals work, the cash numbers have to be big.
So, for example, the YPF-related cases, Peterson and Eaton Park would have to generate in litigation more than I think $1.6 billion in cash before the accruals become fully an issue. So, that's what we're doing here.
It's required a one-time accounting charge. But it is from our perspective something that is accounting-related and doesn't relate to the cash performance of the business.
Before I turn you over to Jon, while, I've been talking about Peterson here, just a word about Peterson that’s first all, the inevitable question. As you know, given the cases in active litigation, we can't discuss our views about it or really very much at all, but we can tell you factually that the case is proceeding now through the litigation process, and at the end of August, fact discovery did close - it did come to a close in the case, which is the longest tent-pole if you will in the post-jurisdictional elements of this case, which means under the current schedule, the case would go to trial in the middle of next year.
There is now some extra discovery and some briefing. Obviously, every court schedule continues to be subject to potential change, but finishing fact discovery is a pretty significant milestone in moving the case forward.
And with that, let me turn you over to Jon Molot.
Jon Molot
Thank you, Chris. Thanks to everybody for joining.
Speaking of court schedules, I would say that, Chris pointed out that sort of slowdowns we experienced in doing new deals and putting new money out during the COVID-related effects on the economy. That really feels like it's behind us.
We've bounced back. When it comes to how our portfolio has performed, like what kind of realizations have we've seen, there, we still do see COVID-related delays.
And if you look at Slide 7, I'll walk you through how we are doing in terms of realizations. On the one hand, there is good news that although our realizations are down from the first half of 2020, they are up from the second half of 2020 and to the extent that realizations haven't yet returned to earlier levels, it's not because anything bad has happened, it's not because we've lost cases.
It’s just been because of delays. In fact, our realized loss rate decreased to 0.5% in the first half of 2021, down from the second half of 2020.
But, close to half of our matters have been delayed by COVID. And we see the courts picking up.
But there is no doubt that that slowed things down. Now those delays are just bad delays.
There is not a single case in our portfolio that was discontinued because of COVID. All the money we put out the assets, we've got in our portfolio, the deals we've done, they are all there.
And so, in fact, delay is not necessarily a bad thing for us because often our deals are negotiated with increasing returns that are a product at the time and therefore they can lead to greater profitability. So the fact that you can sort of see a graphically represented on the lower left, where you see realizations by vintage year.
The red lines are the realization that came in and the black lines below the middle line are the ongoing costs that are out. And on the one hand, we've said before, we have begun to see those years with greater deployments.
The real growth we've enjoyed since 2015 have started to produce the red lines of significant and an example of that was the success Chris talked about earlier in a fairly prominent asset recovery matter where we collected more than $100 million. But you also see that the black lines below are quite big.
And that's the dry powder. That's the – or those are the deals we've already put on that we are sitting on and managing and are watching for future performance.
And actually, if you turn to Slide 8, you'll see why I am quite bullish on our portfolio, on what's in those black lines. And we've shown you this slide before, but just to tell you how I think about this.
You've basically got a business where we do a deal and we put out money and we are going to end up with a result that falls it one of three general buckets. We can get more granular and I will on the next slide.
But the big buckets are, we go to full adjudication and we win. We go to adjudication and we lose or the case settles.
The majority of our investment dollars do result in settled recoveries. And those are quite attractive returns generating a 31% IRR and return on invested capital that's of almost a half, meaning you are getting your money back, and then half your money back again on average in those cases.
The adjudication education losses, they are not complete losses and it's only 10% of our cases. But then the adjudication gains, which is 30% of deployment so far, that's where it's really generated really phenomenal returns where we've gotten invested back and 2.5 times your investment back.
So when you take the big gains from the adjudication wins and combine them with the still attractive gains from settlements, it obviously much more than offsets the smaller number of adjudication losses and generates the returns you see on the side with the 95% return on invested capital, which Chris points says actually ticked up from the past in a 30% IRR. And so to the extent those black lines I talked about are matters that we have taken on using the same rigorous underwriting process that we adhere to.
It's our belief and hope that those have a lot of dry powder left. So, turning to Slide 9, you'll actually see even greater granularity, which we've shown before here instead of just lumping the cases into the investments into three buckets, you have every individual resolved case, which is represented by one of the bars on the bar chart ranging from the very high end wins to the losses.
And you can see from the shape of the curve, which the curve doesn't quite help you. The categories above really do give you a sense of why this is such an attractive business.
You've got - on the one hand, you look at a D, the number of matters and the size of the matters that have produced returns greater than 200% return invested capital. I mean, you're doing better than your money back plus two times your money.
15% of the money out has produced 77% of our returns, which fall in that bucket. And so you've got these asymmetric, very attractive upside returns from a slice of the portfolio.
And yet, those are the kinds of returns you'd expect from a high risk strategy of a venture capital type strategy, which would also carry with it a large loss rate. But when you look at the left side, where we've gotten a zero percent or less return invested capital, meaning you've made an investment, you haven't gotten your full investment back.
It's a relatively small portion of capital, right? It's under $100 million that fall into that category.
And the vast bulk of investments are not just - in terms of dollars out in number of investments are cases that are producing still attractive returns. You see the ones and see that are producing greater than 1 x return on invested capital.
You are somewhere between getting your money back in 1 x or your money back in 2x and the ones in column B, which are providing more modest returns, but still attractive. So, the thing about the strategy and to the extent that those black bars are subject to the same that I talked about a couple of slides ago, the money is still outstanding to the extent those are - were deals put on with the same rigorous underwriting process as these that have concluded.
We believe there is a fair bit of promise left in there, because it's very hard to find an investment where you can combine the attributes we have. Usually, if you are going to have the asymmetric upside potential that we see in the right-hand side of this Slide 9 with the very large returns, you're going to have to take a risk - a very high risk of loss or you might decide you want stuff that looks much more like the middle of this chart where you're getting more modest returns, but you wouldn't necessarily in order to avoid losses and reduce your risk you are taking modest returns.
What I love about this and what makes me happy not just to be an employee and a manager, but to be a shareholder is that we are able to produce these levels of returns without the accompanying loss rate that you'd expect from producing that level of returns. And mind you, these are all unlevered returns.
This is without leverage that we're talking about. So, it is this theme you've heard from me before and I am just showing you based on past experience from realizations, but of course, we are focused every day on the new deals, both the ones we're putting on and the deals that are in our portfolio that haven't realized yet and I really love what's in our portfolio.
And with that, I will turn it over to Ken.
Ken Brause
Well, thanks, Jon. And Chris, thank you for that nice introduction and glad to be here today.
It's been just over four months since I joined Burford and pleased to be at my first results call. Since Chris has already addressed some of the key operating and financial results for the period, I thought I'd start by discussing our liquidity and funding and then follow that with some comments on a few components of our financials.
And just for the record, unless I state otherwise, the figures I mention are going be on a Burford only basis. So turning to Slide 10, you can see here we ended the period in our strongest liquidity position ever.
Our cash and cash management assets at the end of June was $430 million, a new high for us. And this strong level of liquidity reflects a robust $215 million in deployments in the first half, but knocks the $103 million we collected in July for the Akhmedov realization, which represented the majority of our due from settlement receivable at period end.
The largest contributor to the increase in cash assets in the first half was our $400 million U.S. Bond issuance April that Chris mentioned, our first in the U.S.
And as intended, we utilized the portion of the net proceeds of that offering to repurchase £24 million or US$33 million of our nearest bond maturity, which occurs in August of 2022. And I'll discuss the details of that tender in a few minutes.
You’ll also notice on the graph that cash management assets constituted a much larger proportion of our total liquidity than in the past. These cash management assets consists predominantly of high quality and liquids fixed income assets and are managed by one of the top fixed income managers in the United States.
The establishment of these accounts enables us to earn an incremental yield on our cash assets without taking undue risk. We believe the maintenance of a relatively high level of cash assets on our balance sheet is prudent in order to take advantage of new opportunities when they arise while also recognizing the sometimes unpredictable nature of our cash inflows.
So turning to Slide 11. You can see here that we generated $63 million of cash receipts in the first half of 2021, a relatively low figure as this was a quiet period for realizations.
We've already exceeded that amount in the second half. And although we recognize the $103 million realization I mentioned in the first half, that cash was not received until July and therefore not as included - it's not included here in the first half cash receipts.
Cash receipts, excluding capital provision indirect assets were up from $54 million in the year ago periods, which were significantly impacted by the onset of the pandemic. I think the chart in the lower left-hand side of this slide demonstrates how variable our cash receipts have been over the past few years.
Cash receipts in this period were derived predominantly from realizations from capital provision direct assets and from asset management income. Capital provision indirect assets contributed $170 million in total cash receipts in the year ago period as a result of a decision we made to monetize certain assets in the strategic value fund in light of economic conditions at the time, but none in this period.
We believe that excluding the impact of capital provision indirect cash receipts is the best way to evaluate our performance relative to the year ago period. Turning to Slide 12, you can see our liability structure remains conservative.
Our debt maturities are well laddered and our leverage levels remain modest and well below the covenant levels in both our UK and U.S. bonds.
As I mentioned, we successfully completed our first U.S. debt issuance in April, which was also the largest in Burford’s history.
We issued $400 million U.S. dollar bonds that mature in 2028.
We were pleased by the strong investor interest in that issue, which enabled us to upsize the offering and drive down the anticipated coupon and we utilized some of the incremental cash from the upsizing to repurchase through a tender offer a portion of our nearest debt maturity, our 6.5% notes due in August of 2022. Through the tender offer, we repurchased £24 million or $33 million U.S.
dollar equivalent an aggregate principal amount of these bonds at a price of 105%. The remaining principal outstanding is therefore down just $86 million.
And we've seen pretty consistent improvements in the yields on all our outstanding bonds, the offering and with our strong liquidity position and our low leverage, we believe Burford is well positioned to take advantage of the significant growth opportunity we see ahead. On the next two slides, I'll talk about some components of our total income or revenue.
As Chris mentioned, the first half of 2021 was a strong period for new business, but was a relatively quiet period in terms of portfolio progress. In addition to the normal factors that influenced the judicial process, COVID also impacted the progress of several cases within our existing portfolio.
If you turn to Slide 13, you'll see that while our unrealized gains in the period exceeded our unrealized losses. The transfer of unrealized gains from prior periods to realized gains in this period more than offset the fair value adjustment.
So as a reminder, when we have a realized gain on an asset for which we've recognized unrealized gains in prior periods, those prior period unrealized gains are reversed out in the period of the realization. You can think of this as a transfer of the unrealized gains to realize.
So the net impact on total income in any period is just the incremental gain realized above the gains already taken. As a result of these transfers exceeding unrealized gains in the first half, fair value adjustments net of transfers to realize had a modest $8 million negative impact in the period.
Our aggregates cumulative unrealized gains at the end of June continued to consist substantially of our YPF-related assets. Excluding our YPF-related assets, aggregate cumulative unrealized gains declined in the first half to 14% of those assets’ carrying value.
Again, that was primarily due to the transfer of previously recognized unrealized gains to realized gains. So turning to Slide 14, asset management income was $12 million, up 50% from $8 million in the year ago period.
We earned management fee income from m BOF base and the strategic value funds. Although the growth in fee income was primarily the result of growth in realized and unrealized gains in m BOF-C, compared to the year ago period.
Although we had $163 million in capital provision derived group-wide realizations in the period, there was no performance fee income recognized due to the European waterfall structure of our funds. That said, if partners one in two return capital to investors over their expected lives and maintain their current levels of returns, those funds together would generate in excess of $50 million of performance fees.
This estimate does not include any performance fees from other funds including BOFs that are still in their investment period. Well, let me now turn it back to Chris who can make some concluding remarks.
Christopher Bogart
Thanks, Ken. And on Slide 15, we've just got half-a-dozen key bullet points to really sum up the remarks that we just made.
I am not going to dwell on them, so that we leave lots of time for question., but it's really back to what I said at the beginning, three fundamental points; number one, a terrific period for new business, both commitments and the deployments shattering our deployment record. Number two, a strong portfolio that has grown a little bit had a relatively quiet period for realizations, probably in part due to some COVID delays, but at the same time, saw the returns tick up a little bit with really low loss rates.
And number three, a strong position overall liquidity, cash and the accounting noise that we discussed previously. So, we are pretty happy, especially in the middle of the ongoing global pandemic with where things stand.
We are looking forward to getting back into real business development and origination to show you what we can do then. But for now, let's take any questions that you may have.
Operator
The first question comes from David Chiaverini from Wedbush Securities. David, please go ahead.
David Chiaverini
Hi. Thanks for taking the questions.
The first one, I wanted to touch on, you mentioned about the record level of new business with commitments over $500 million. Can you talk about the pipeline for new deals on the go-forward basis?
Christopher Bogart
Sure. Although we don't do a lot of forward-looking commentary in this business, because for a whole variety of reasons that we've laid in the past.
But what I'd say, just as a general matter is, just sort of echo what Jon said before. We saw a sharp reduction in the pipeline and in new business, which was we believe entirely COVID-related in the first half of 2020.
We saw resumption of activity, but not to historic levels in the second half of 2020. And then in the first half of 2021, we obviously saw a meaningfully greater ability to deploy capital.
It's a little early probably to determine exactly how the Delta variant is going to impact the legal world and in turn how that's going to impact us. But we are certainly seeing opportunities to invest at this point of the cycle.
David Chiaverini
Great. Thanks for that.
I appreciate how the business can be lumpy and volatile quarter-to-quarter or interim results stand through results period. Shifting to - you mentioned about how the delay in resolving some matters could be more profitable for Burford.
I was curious what level of time value on average is built into the deal structures?
Christopher Bogart
Jon, do you want to address that?
Jon Molot
Sure. Thanks for the question.
It really does vary by matter. We are always trying to be protective of ourselves of things - if things trigger a delay, but I think we've said historically that our returns usually consist of two elements.
There is going to be a preferred return, which is going to be dependent upon how much money we've put out on what schedule and then there is going to be a percentage of the recovery, which is going to depend on how much rather than when. Although both of those elements can be toggled with time as such that you could say if a matter resolves early, we get this preferred return and this percentage of the net.
If it could takes longer, which is often a question both of whether it takes longer and if we put out more money, then our preferred return goes up by half an x or an x and our percentage of the net goes up by 5% or 10%. So that if it goes the full distance and the full duration, we end up with our maximum returns.
And I can't - I don't have the numbers handy. We haven't sort of broken down across our portfolio, how much of an effect time has on returns.
I can just say as a general matter, it's a feature that is often incorporated into the terms of our deals.
David Chiaverini
Great. Thank you.
And then, the last one for me, I saw a media report about how a law firm that's not a Burford client, but I had a question about it nonetheless that this law firm was pledging assets to multiple litigation finance firms without each of those firms knowing about it. So it was amounting to fraud.
But I was curious is Burford taking any measures to mitigate any sort of risk that this issue could present whether it's creating escrow accounts or cash flows, just curious about any commentary there?
Jon Molot
Sure. The case that you're talking about is a fairly well-known case for a variety of reasons.
It's a California lawyer whose wife - sort of a very high profile California lawyer whose wife who is also a very high profile. And I think was an actress on one of the Housewife series.
And he is in an entirely different business from us. He was a sort of class action sort of contingency fee lawyer and so what he had were a very large number of smaller most claims and clients.
That business - that business consists of amalgamating thousands and thousands of cases and then pursuing them on a group basis. And so, you can't in that business have the same kind of corporate arrangements that we have.
So we're able by contrast to do traditional institutional financings with full and negotiated documents the other side has counsel and they negotiated those, inappropriate cases, we take a security position. It's a very - and we established payment conduits usually through the law firm.
So it's just an entirely different part of the legal industry.
David Chiaverini
Thanks very much.
Jon Molot
Thanks, David.
Operator
The next question comes from Julian Roberts of Jefferies. Julian, please go ahead.
Julian Roberts
Hi there. Thanks for taking the question.
I was just wondering if you could expand a bit on the new largest asset by deployments, which I think between you and the Sovereign Wealth Fund Partners $277 million of commitments and a large number of underlying claims. And also there is a point you make in the report that there is an equity element to your exposure.
Is there any more detail you can give us on that, please?
Christopher Bogart
My - obviously my peroration of saying that I'll talk a little bit about it now, because I won't be able to say anything more about it was unsuccessful I guess. So, as is always the case with our investments unless for some clients or judicial reason they become public, what we've said in the disclosure is all that we're going to be able to say publicly.
If you look at the disclosure, what we've said about this case is that as you say it's a large manner, but it's an antitrust matter. It involves a major global company.
There are more than 500 underlying claims underlying cases. So, we've released at least that much information.
But beyond that, I am afraid that's all that we're able to stay at the moment.
Julian Roberts
Okay. And on the pre - the matter that was previously the largest by deployments, it looks like, you've added a couple of cases to that investment.
And I think I can tell from the investment data especially you released that there may have been a little bit more of a recovery in one of those underlying cases. Am I bucking up the wrong tree or has there been a bit of positive movement from there?
Christopher Bogart
Let's see, Jon Molot, are you able to address that? Maybe doing as well, yes, may have to come back to you.
Jon Molot
Yes.
Christopher Bogart
Maybe doing as well, yes, we may have to come back to you.
Jon Molot
Right. You have to come back to on the specifics.
So I can say as a matter as a general matter with respect to where we take a position across multiple cases, where we have a high conviction and we see profit opportunity. It's increasingly common that we will continue to make additional investments either with the same counterparties who want additional capital or with new counterparties that we've talked to who are in the same situation, businesses in the same situation.
And it's also not uncommon in something with that many things involved that there will be smaller settlements along the way that will generate some returns. It is always - for your question about do you extrapolate from those?
It's always a tricky question and particularly I understand given the constraints we have on disclosure about when you take - how much you read into early resolutions? And you can imagine if there is a large category of litigation, multiple pending suits against people in the same industry and maybe guilty of the same misconduct.
If they settle - if one or two if on the outskirts end up settling that may not will tell you very much, you may not set a benchmark, say for what the other settlements will be. But there could be some more significant ones that do tell you more.
So, I guess, I'd say, it's not unexpected that there would be both additional and follow-on investments and there would be some resolutions whether the resolutions are a marker of when and the quantum that is involved in the future ones, I don't want to - that - it does happen, right? Things start to settle and then there will be multiple settlements.
And a benchmark can be established, but I can't really say whether in this particular instance, that would be a warranted conclusion.
Christopher Bogart
And I just add to that, I’d just sort of add that, Julian, a really good example of what Jon just described is what you saw in the large pool of investments that we concluded in the first half of last year. So I make that the years run by one year but the spacing is right.
In 2016, for example, we started investing in that area and we only had one deal at the time. And so we closed one deal and we waited and we watched and we - our conviction grew.
And then in 2018, we did more deals with more counterparties and in 2019, we did yet more deals with more counterparties. And we amassed a position, which then resolved satisfactorily for us very successfully for us in 2020.
So that's an example of how you see Jon's concept playing out in practical reality.
Jon Molot
The only difference I would point out is in that case, we kept putting on more money, which did reflect our conviction. But then all of the successes came at the end whereas in the one I think you've identified, we've continued to put out more money, but we also have seen some settlements that before we get to the end.
So, we were on the right track there, but I can't - I can't draw conclusions about what it means for the future.
Julian Roberts
Yes. Understood.
That I remember, I remember watching the ones that Chris has just referred to as they went through the spreadsheets getting bigger and then with some just I am under thinking when they all seemed to conclude or lots of them conclude once I was thinking they're probably not that many defendants. But, of course, there's no way of telling with this new lots.
I mean, there are. But thank you, guys.
That's. That's very helpful.
Thank you.
Christopher Bogart
So we are going to introduce first questions between the phone and the webcast. So don't spare a few things, many questions on the webcast, but I think we're going to go next to one more telephone question.
Operator
The next question on the telephone comes from Andrew Shepherd-Barron of Peel Hunt. Andrew, please go ahead.
Andrew Shepherd-Barron
Great. Thanks good afternoon.
Thanks for taking my call. This is a sort of follow-up question into the call to that question about where the new money is going and obviously that this large antitrust portfolio of cases.
Can you make - can you make a comment about in terms of your business over the years and sort of more to sometimes it’s between doing single cases and cross-collateralized portfolio portfolios. Might be a purchase from an existing case, which this one looks as the purchased of existing interest because the cash is being deployed in the same period that it was committed.
But typically, I’ve always understood the form of legal - future legal expenses rather than buying into an existing case and also the split between whether you are all supporting legal firms, i.e. taking cases from them and therefore equivalent to the contingency arrangement paying their legal fees or by or taking corporate i.e.
bit basically taking other cases from a corporate and replacing their balance sheet and bringing all the advances that you can. What - is there a trend that's going on here?
Could you talk a little bit more about, that I am trying to understand where we should expect in the next two to three years where we are likely to see a focus.
Christopher Bogart
So, why don't I start on this and Jon, I am sure will chime in, as well. But even before I start, what I'm going to do is, actually knit your question together with a couple of the other questions that we've had of a similar vein from the webcast.
So, for example, we've had also Mark Clabber asking, is it fair to say the much of the existing book of cases is corporate versus corporate, whereas the new very large case looks more like the class action? And if this is the case that that represent a shift in strategy and we've similarly had Derry O'Callaghan ask – well, first of all, say, congratulations to the Burford team for stellar results.
Thank you very much for that. And my question relates to some of the new deployments.
As you pointed out, case sizes are becoming larger and more complex, can you give us some color on this complexity and how it impacts on the risk profile of the overall portfolio? So, I think the way to approach this discussion is to think about what we do and the context of the development of the legal finance market.
So, when we started, we were predominantly providing as you say, Andrew fees and expenses financing. And that was the corporate desire was for companies to get the cost to the increasing cost of litigation off their P&L and to put it on to someone else.
And frankly, they've been care that much where it went. And so, in those days, the typical dynamic was the company would go to the law firm and say, figure out a way to do this case for me without me paying your high hourly fees on a current basis.
And it was sort of up to the law firm whether they took the risk themselves, whether they look threw out a capital, whether they threw up their hands and random circles. And so, we were initially a very desirable solution for both the law firm trying to land the client and the clients who wanted the P&L right.
And that continues to this day. We have an active and vibrant single case fees and expenses financing business.
Really the only thing that has changed much about that business is the rather dramatic increase in the cost of legal services even just over the twelve years we've been doing this. And so, you've seen the investment sizes rise.
It's actually not the case that we're leaving the small cases behind. It's the case that it costs very considerably more to have the same law firm do the same work in 2021 than it did in 2010 for frankly no particularly good reason, other than other than demand.
But what happened - what the evolution that has happened, both in our business and in the market is that as companies started to make use of that capital they’ve said there are other things that we can do when we think about litigation as an asset instead of thinking about just cost avoidance. And we can start tending to the balance sheet side of the business as well.
And so, you've seen us lead the market in terms of developing, first of all multi-case portfolios. And more recently a drive towards monetizing some of the underlying potential value beyond just covering fees and expenses in these cases and when you see large deployments, that's often deployments that close, that's often is what is happening.
So before I turn you over to Jon, just a couple of other points along the way, I don't think you can necessarily correlate volume as the question is one of the webcast questions did with type of litigation. So just for reference, we would show a class action as one asset, we wouldn't show it as multiple assets.
So just to correct that assumption. Jon, do you want to add anything there?
Jon Molot
Sure. I actually think the questions really and obviously your description, but captured the evolution of our business.
And I don't think that simply because there has been a trend toward expansion and growth, meaning we went from single cases to law firm portfolios to doing deals with corporates that involves not only covering their costs but to litigate a series of lawsuits, but actually monetize their litigation receivables and accelerated recoveries. It is true that the evolution has been to grow and expand and deploy capital in new ways that's useful both to corporate clients and law firms, but that has not meant we are leaving behind the businesses where we already were seeing - enjoying success.
And I mean, we still do single cases and some of those single cases in the past you've seen from our results have produced very attractive returns that have been meaningful and we have lots of single cases in our portfolio right now that we're monitoring that have a great potential. And it is true that when you do a portfolio, you are putting out more money at a time and you are mitigating risk the single case there is a risk of a complete loss of binary risk.
But as part of our portfolio, we still think they are attractive. And you never really know as long as there we have the kinds of law firms and corporate clients, we want to have as our counterparties, we want to do business with.
You do a single case with someone it works well, that is the next portfolio. That's the next monetization opportunity with a corporate.
And so, I think are not leaving behind, instead, we just continue to expand.
Christopher Bogart
So, let's switch gears to some other questions that we've had from the webcast. And we'll start with a question from Trevor Griffiths.
There is the definition of undrawn commitments included in total portfolio on Slide 5 refer to commitments from investors in funds you manage or commitments entered into by the company in respect to case investments or both. I am trying to understand the movement in BOF-C, which seems a bit it lack with the other elements of the portfolio.
Yes, it has - I have - we settled on the term commitment before we were a fund manager and I had long regretted the fact that we now have two different kinds of commitments in the business, which does cause this confusion from time-to-time. But to be clear, when we talk about commitments to investments or commitments in our portfolio, we are talking to the commitments that we have entered into by Burford to finance matters.
We're not talking about commitments that the private fund investors have made to give us capital. And we address the latter in an entirely separate asset management discussion.
The reason I think Trevor that you're seeing a little bit of aberrant movement around BOF and BOF-C and so on, I think is because of the combination of the maturity of BOF. And so, just to refresh everybody, while we raised BOF and BOF-C at the same time, BOF-C is the sovereign wealth funds arrangement and BOF is the traditional multi-investor June 2020 fund.
They have different – they were different sizes obviously and they have different lengths of investment period. The other thing is that BOF-C is excluded from a certain category of investments as we've disclosed before.
And so, what has happened is that BOF has filled up more rapidly and has a short investment period. So BOF is full and actually became full at around the end of 2020 or at the beginning of 2021.
And so, it's not receiving any new investments at all and so, we've instead realigned the distribution of the allocation investments between the balance sheet and BOF-C on a 50:50 basis subject to that carve out. So that's really I think what you are seeing going on there.
Next, we have a question from Paul Degruchy. I am sorry if I am mispronouncing that.
How to value Burford is always a matter for debate with some believing it should be treated as a financing company and others as an asset holding company? Without judging which approach is correct, what would be Burford’s NAV be if it were treated as an investment company, accepting that there would be a very fine management company alongside the assets themselves.
In other words, what is the value of Burford’s underlying investments in its own name or as a co-investor using its funds unless any debt? So, interestingly, of course, Burford started life in the asset holding company, investment company structure with an external fund manager and we figured out by 2012 that that was not the optimal structure for us to use.
And so, we converted to our current structure and have been living happily in that rubric ever since. But I think the question, because we have quite a straightforward balance sheet and capital structure, I think the question literally is the net asset value on balance sheet, because, especially when you look at this on a Burford-only basis, what you see there, are simply the case investment that we've gone and made values it exactly the same way that they would be valued regardless of corporate structure or corporate form.
The obvious question though is, how you then look at them and I think when you consider the growth rates that the business has had, and this is what sets us apart I think from a pure asset manager investment company - publicly traded investment trust, the growth rate that we have had in the overall business, not only just in capital dollars, but in scope of strategy and the returns is where I think you - at least in our judgment would appropriately see a more premium valuation. Next, we have a question from Jerome Hobs, given the liquidity is at an all-time high and the lumpy performance in 1H due to COVID-19 delays, wouldn't this be an ideal time for the Board to introduce a normal course issuer bid?
And I think we've talked - we've had this question in various forms at various times over the last several years. And I think our continued philosophy well, it's certainly something that we look at along with all of the other shareholder and corporate finance questions that we address, which include - should we be paying a dividend ?And if so, at what level?
Should we be buying back stock and so on? Should we be using capital to prematurely retire some of our bonds and so on?
I think we put all of those things in the hopper and we also though look hard at what we think is coming in terms of not only of new business from the market, but also we have a very significant level of undrawn commitments in the business, something above $900 million of both combination of definitive and discretionary commitments. And so we look at those numbers and we also candidly look at the volatility of capital markets and the unpredictability of our cash inflows and we say, in a world where we deployed $400 million in the first half of this year and we're generating very nice returns and did better to take the capital that we're able to get our hands on and use it to continue to grow the business and make what we hope our high quality asset additions to the book.
One can obviously have the corporate finance debate about that issue and one can also have the corporate finance debate about dividends. And I think one’s position on those issues depends on a number of factors and it's certainly not something that we ignore or take lightly.
But that's the present situation that we find ourselves in. Now, I think this is the question for - a couple of questions that I think are for Jon.
The first from Ed Quail. Has the business has evolved to new business lines?
Has your pricing for new commitments been kept such that you expect future investment returns to keep pace with the historic 30% IRR? And Jon will of course, comment generally on this, but as you all know, we don't predict the future and guide about where we think individual returns are going to go.
Jon Molot
That's right. Thanks for the question.
We don't – yes, I would never project what our IRRs would be in the future. I will say that our underwriting process become no less rigorous that the expansion into new lines has been because of the presence of new opportunities.
And I don't see that we've had for the risk involved sacrifice pricing. There is always the question, we've always said that we price differently depending upon risk and duration.
It's risk-adjusted returns that we pay attention to and we model everything very carefully. So, for single issue, one year appeal, where we feel fairly bullish that there is going to be an affirmance of an existing verdict and you already have all the information because that the trial judgment has been rendered, that's going to commend different pricing from a suit that's just being filed, where there is factual uncertainty.
There is many ways you could - there are obstacles along the way and the duration will be longer. So our pricing has always varied depending on risk, but our approach to pricing has not markedly changed.
I think probably if anything with experience our underwriting continues to get better or modeling has much more data to draw upon and we have much more experience but haven't changed our underwriting standards.
Christopher Bogart
But I am conscious that it's now one minute past the hour. With your indulgence, I think we can probably have time for two more questions.
But I think after that, we'll probably close this and but always of course welcome your direct interaction with any of us. Why don’t we next do a question from Dennis Twak .
Commitments have been fairly flat over the recent years. What's limiting the growth in commitment?
Is it capital? The size of your sourcing team?
Or the fact that there is simply not that many attractive cases in any one period to be funded? So, Jon, Jon why don’t you comment on that?
But I think I think that, one of the elements obviously is, Dennis is, our selectivity as well. We continue to say yes to a single-digit percentage of the things that come in the door.
Jon Molot
Right. It's interesting.
I would say that is the flip side of Ed Quail’s question in terms of the way Chris described our standards. Our standards remain the same and that means we say no to most things and we ensure that our pricing is commensurate with the risk to generate the returns we think are justified.
I think frankly COVID slowed us down, right? I think when you say they are flat, it's not just that the commitments were flat, right?
We did see a dip and then we came back up and now we've come back up further still. And I feel like the market is quite robust right now.
I am seeing lots of great opportunities that I like and want to invest in. So, I don't have the data at my fingertips.
But I don't - I think there has been a period that we had to get through then. And we mentioned before, the core process is still delayed, but the flow of deals has come back.
And I am optimistic that the flow of deals can increase when our business development origination teams are allowed to get back out into the market and meet with people in person. And so, actually plenty of good opportunities and I am hopeful that the growth resumes – we are on a growth trajectory from where we were, but we’d like to see more.
Christopher Bogart
And finally, a question from Bruce Anderson. We've talked about some of this.
Let me read the question and then we'll sort of say - dissect it a little bit. Can you comment on the level of new commitments and the fact that only 14 new commitments were made in the period?
While the value of new commitments in the period is very high, the level of new commitments in terms of numbers was less than in the prior periods. And then, Bruce, cite some numbers and let me come back to that in a second why were their associate commitments made in H1?
It’s because the market really has yet to pick up or was it the conscious decision not to go after more business? And if so what was behind it?
By going further up market in terms of value, are you allowing the competition to take the space in that sector of the market than you previously occupied? So, just on the subject of the actual numbers, we provide two different sets of numbers.
We provide total business activity numbers across the - all of the platforms in which we invest. So, traditional core litigation finance that we put on the balance sheet and in BOF and BOF-C, pre-settlement - sorry, post-settlement things that we put in the base fund, strategic value investments and so on.
And then, we separately provide in tabular form a huge amount of detail both in our interim report and then even more on our website tables information just about the capital provision direct assets. And so, one of the targets I see in your question, Bruce, is that you mismatch the total number against the capital provision direct.
So we did 14 capital provision directs matters in the first half, just by comparison. We did - so that would annualize to 28 and in 2017, we did 25, in 2018, we did 39 annualized.
So, we're not off our historical path although as Jon just said, we look forward to a world of, yes, more. But leaving the numbers aside and going to sort of substance of the question, it really goes back to what Jon and I were talking about earlier.
It's a combination of the evolution of the market and the upsizing of litigation costs. So it's - we just are not seeing, I'll pick on a firm, Fresh Fields used to do an international arbitration case for a few million dollars a dozen years ago.
And today, that number is going to be five times that. The - and so, we are not seeding the market at all in the kinds of cases that we've historically done and like to do.
It's just that those cases have become more expensive, which is frankly not a terrible thing for us. It's not wonderful for the underlying clients, but it's not a terrible thing for us.
But then, what we're doing is, we're really adding. It's not that we're shifting, but we're adding whole new areas of capital provision opportunity and endeavor.
And so that's really how we think about it. But as Jon says, it would be nice if we were not having all of that evolution happen with the ghost of COVID hanging over what might otherwise be a more active period.
So we're very pleased with the level activity that we did have. And in the portfolio, we're pleased that nothing went to rye, but at the same time, it will be awfully nice to come back to normal, not only for us but for of course, everybody else in the world.
So, with that, and having gone gentlemen, it's over time, I think we'll call it the day. But we really appreciate all of your participation and attendance today.
We're available to talk to any of you about anything that you'd like about the business. We know that we give you a whole lot of data, some of which some of which need some explanation.
And Rob Bailhache and Jim Ballan are delighted to aid on that Ken Brause who is getting out to see investors and make the rounds and so we'll be excited to introduce Ken to you. And we're looking forward to interacting with you in a number of different ways, not only through some traditional meetings, but through some group and investor engagements.
And finally, we hope that all of you will participate in our investor event, our Capital Markets Day in early November. We’ve put out an announcement this morning about the date and time of that, as well.
And that will be an opportunity for us to spend a more concentrated period of time with you going through some key elements of the business and some things that we think you'll find very interesting about how we look at the portfolio. So, with that, thank you.
Thank you all very much.
Operator
This concludes today's conference call. Thank you for joining.
You may now disconnect your lines.