Harvard Invests in Litigation Strategy That Has Posted Big Gains

Harvard University is committing more capital to a strategy that backs plaintiffs in commercial disputes, delivering robust uncorrelated returns.

The strategy is run by IMF Bentham Ltd., a publicly traded company which last week finished raising $500 million for a fifth litigation fund that will focus outside the U.S. Harvard, the world’s richest university, also committed capital to a $500 million fund that IMF Bentham raised last year to finance plaintiffs in the U.S., according to the company.

Litigation finance has made inroads with law firms and litigants around the world, with investors committing an estimated $9 billion over the long-term to the growing industry, according to Bloomberg Intelligence. The funds, which have been knocked for fueling more lawsuits, pursue strategies from financing cases against corporations to providing cash advances to individual plaintiffs in exchange for a share of settlements.

“We see ourselves as providing the capital for the Davids to take on the Goliaths,” said Andrew Saker, chief executive officer of IMF Bentham, which manages about $1.4 billion. “More and more plaintiffs are aware of litigation finance as an alternative.”

Litigation finance funds have posted internal rates of return of more than 30%, according to the Bloomberg report. IMF Bentham’s strategies have delivered an IRR of about 60% since July 2011, according to a March 2019 investor document.

Saker said the industry attracts institutional investors because returns aren’t correlated with markets and claims can increase in times of distress.

A spokesman for Harvard’s endowment, which manages $39 billion, declined to comment.

IMF Bentham, which was founded in Australia in 2001, is one of the older players in an industry that has been drawing new entrants. In addition to commercial litigation and class actions, the firm also represents creditors in insolvency cases, according to its website.

The company, which expanded to the U.S. in 2011, has settled 144 cases, won 14 and lost 17 through June 2018, according to an annual report. It has notched $1.5 billion in total recoveries.

Investors in IMF Bentham’s fifth fund include London-based Partners Capital, which oversees endowment and foundation portfolios, Amitell Capital Pte Ltd. in Singapore and Canada’s Balmoral Wood, according to a statement from the firm. The size of the fund could double to $1 billion if investors exercise the option to roll over into a successor pool.