Elizabeth O’Connell, CFA is Chief Strategy Officer of Burford.
As a former investment banker at institutions like Credit Suisse and Citigroup (and a rare non-lawyer at Burford), you have a different career trajectory than most of Burford’s staff. What’s the one thing you wish lawyers knew about finance generally?
I’d say that what I’d like lawyers at large firms to understand is how investors and the market differ in the way they consider time-value of returns. Investors are especially concerned with annualized returns—they are more focused on the IRRs rather than nominal dollar returns. Lawyers, on the other hand, focus more on simple returns without much consideration as to the time element. In other words, lawyers see a $5 million profit at the end of five years as a success, whereas investors may consider that outcome to have too low an IRR depending on the capital initially at risk.
This is probably the most critical disconnect between how the market and investors think of returns versus how lawyers think of returns—and it’s an important distinction, because it informs how Burford prices its capital. To that end, Craig Arnott, Managing Director of our London office, spoke in detail about pricing in the Autumn issue of the Burford Quarterly.
What’s the one thing you think all finance executives should know about legal finance?
Particularly for in-house lawyers and CFOs, the main appeal of litigation finance is that we can take direct expenses off a company’s P&L and consequently boost the bottom-line. The knock-on effect of reducing operating expense is the enhancement of market valuation as reported profits are increased—which makes litigation finance an incredibly attractive tool for large corporations, and especially publicly-listed companies.
As one of Burford’s founders, you’ve been with the company since the beginning. What’s been the most surprising change since 2009?
For me it would be the sheer growth, both of Burford itself and of litigation finance as an industry. In 2009, this was a burgeoning industry—I would attend cocktail parties, and litigators from large AmLaw 10 firms would be incredulous at the idea of developing a business around financing litigation—lawyers just don’t tend to think about finance in that way. So, naturally, there’s been an education process. But once lawyers started seeing the benefits that accrued to them by using litigation finance, the resulting pickup was—and still is—extraordinary. Now when I see those those same lawyers, they freely admit how wrong they were!
We often talk about Burford’s team being one of our greatest strengths. What’s special about Burford’s finance team?
Our greatest asset is how collaborative the team is—not just within the finance group, but across the business. We are completely enmeshed with the underwriting team and are involved at all stages of the investment process. The finance team works with the underwriters on financial matters and tax and accounting issues. This makes for an incredibly robust investment process.
You originally came from an industry that—like law—has pronounced gender disparities at the executive level. How do you see an initiative like The Equity Project playing a role in helping to close the gender gap?
I think it’s great that—because of our access to capital—Burford has the opportunity to shine a light on an ongoing problem in the legal industry: Women still remain vastly underrepresented as to firms’ senior levels. Because there is a direct link between lawyers’ success and their ability to originate new business, The Equity Project earmarks capital for matters led by women. Burford is uniquely positioned to highlight law firm inequities—and the fact that we can do it without diminishing our returns or the quality and scrutiny of our underwriting is a fabulous win-win. We are urging law firms to reflect on ways that they can put women forward but without lowering our standards to do so. From a corporate responsibility standpoint, the initiative is excellent.
Top 5… Canadian exports?
- Canada Goose
- Beer (according to my son)
- Civility and tolerance