Burford pioneered portfolio financing in 2010 in response to demand for more flexible capital structures that meet the needs of companies and law firms. Put simply, portfolio finance is the provision of capital tied to a pool of existing or future cases. Capital provided under a portfolio arrangement can be used for financing legal fees and expenses or for various business purposes unrelated to the underlying claims.
Portfolio arrangements take several forms and these arrangements have become a preferred tool among companies and law firms. As of the latest reported data, Burford has funded 129 such capital facilities as of 2021, representing a $3.6 billion total commitment value.
Below, we take five minutes to explore one type of portfolio financing arrangement: The going forward portfolio.
What is a going forward portfolio?
Portfolios can either be built around a group of existing cases or in anticipation of future cases to be added over time. Under a going forward portfolio arrangement, Burford commits capital at closing to be put toward new future matters, which law firms will vet and choose to take on full or partial contingency. Burford and the firm negotiate terms in advance and agree on criteria for the types of cases the firm will consider for the portfolio. The pool of capital can be drawn upon for current and future matters—dramatically improving the speed with which law firms can approach and respond to clients and finalize agreements for new cases.
How do law firms use going forward portfolios?
There are a variety of reasons why law firms choose to leverage going forward portfolios and these include:
Developing new business
Lawyers sometimes have to turn down promising high value cases because their firms’ level of risk tolerance won’t accommodate the clients’ desired fee structure. This is especially true in areas like international arbitration, where even affluent clients increasingly expect that firms will share the risk.
Going forward portfolios enable law firms to pursue new practice areas and to pitch existing clients on cases with attractive fee arrangements. As a result, going forward portfolios enable lawyers to initiate client conversations with capital already in hand, allowing for improved speed to market, an enhanced risk capacity and greater capital flexibility.
Pursuing market-based opportunities
In certain financing arrangements, law firms can earmark some of the capital for other business development needs, such as expanding into new geographic regions in order to take advantage of emerging business opportunities. Portfolio finance enables law firms to focus on revenue growth and enhancing operational efficiencies, even amidst a downturn. Law firms can expand or add practices, open new offices, or take more matters on contingency while sharing risk with a capital provider.
Expanding business opportunities for new partners
Legal finance can provide a competitive edge for new partners with meritorious cases who are trying to establish themselves at their firms. Six in ten GCs say either that their panel litigation firms have spoken to them about legal finance in the last five years or that the firm’s doing so would have contributed to the company's success.
Case study: Fueling a law firm’s expansion of its plaintiffs practice through portfolio finance
Challenge: Limited flexibility to take on new business
A top regional US law firm wished to significantly expand its plaintiff practice. The firm had identified multiple attractive antitrust matters but was struggling to balance client cost expectations with the firm’s risk tolerance levels. The firm had previously sought to finance some of the matters individually, but the cases were simply too small to meet the economic requirements for financing, despite having strong merits. As a relatively new entrant to the antitrust space, the law firm needed to act quickly to resolve its pricing challenge—or else risk losing clients to its better-known competitors in the space.
Solution: A $52 million portfolio to fund plaintiff practice
To give the firm flexibility to grow its plaintiff practice, Burford structured a $52 million facility that could be used by the firm across a pool of antitrust matters, including existing and future matters.
The portfolio financing structure ensured that the firm had access to the cash it needed to competitively approach new clients about pursuing cases they would not otherwise have been able to finance. By limiting the risk of taking on more contingency work and gaining access to the cash it needed, the firm was able to expand its client base and ultimately add more than 15 matters to its portfolio arrangement with Burford. A further benefit: By bundling the matters under a single financing arrangement, the firm received a lower cost of capital than if it had successfully secured financing for the cases on an individual basis.
Impact: Expanded growth opportunity
The portfolio finance facility gave the firm immediate access to a pool of capital that enabled it to attract new clients and grow its antitrust practice—without exceeding the firm’s tolerance for risk.
Read our case studies to see how portfolio finance helps facilitate growth and promote business opportunities for law firms.
Why use a going forward portfolio?
As companies continue to scrutinize legal costs and as the market for legal services becomes increasingly competitive, legal finance will continue to offer law firms a powerful marketing tool that can help facilitate growth.
Fundamentally, Burford’s capital allows law firms to pursue matters with potential value for the firm without being constrained by concerns about risk tolerance or the clients’ ability to pay hourly fees. Having going forward portfolio financing in place gives the firm a significant competitive advantage in securing new business—and enables lawyers to concentrate on what they do best: Litigate strong cases.