Investment Completion: Connection Therium No2 LLP

News: Investment News | 30 August 2018

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Connection Capital raises another £9m from investors keen to add litigation funding to portfolios

  • Fund advised by Therium, whose previous funds have backed cases including Noel Edmonds’ claim against HBOS and iPhone users’ claim against Google

Connection Capital, the specialist private client investment business, has offered its clients another opportunity to invest in third party litigation funding with a £9million capital-raise for a fund advised by Therium Capital Management.

Connection Capital has a long-standing relationship with Therium, ( a leading global litigation funder, having completed several previous co-investments alongside major institutional investors.

The new fund brings the total invested by Connection Capital clients in Therium-advised funds to c£30m highlighting the strength of interest from private and small institutional investors in adding this asset class to their portfolios. Connection Capital’s model allows clients to participate in multiples of £25,000.

Previous Therium funds have backed several high-profile cases in the UK, including:

  • The shareholder action against Lloyds Banking Group over its acquisition of HBOS;
  • PCP Capital Partners’ claim against Barclays over its 2008 Qatar loan,
  • A group claim against Visa and Mastercard relating to interchange fees;
  • Emissions litigation against VW in the UK
  • iPhone users’ claim against Google over the ‘Safari workaround’; and
  • Noel Edmonds’ claim against Lloyds Banking Group for a ‘fraud’ scandal

Litigation funding is where a third party provides the financial resources to meet the cost of litigation or arbitration cases in return for a share in the proceeds if successful, either in court or via a settlement.

Therium invests in commercial claims, from IP, anti-trust/competition claims and group actions, to international arbitration across a variety of industry sectors. Third party litigation funding increases access to justice, as the high and uncertain costs of legal action can deter claimants from pursuing valid claims.

Therium has an impressive track-record in this space. Established in 2009, it has raised over £450 m and funded over 130  cases to date with a total estimated value of £30bn.

The third-party litigation funding market is growing rapidly – by the end of 2009, around $400m had been raised globally, but by the end of 2017 this had increased to $5bn*.

Private investors see appeal of risk-adjusted returns from uncorrelated assets

Connection Capital says there is increasing demand for this asset class from private investors because it offers attractive risk-adjusted returns, with potential money multiples similar to private equity, but expected to be generated within shorter timeframes, usually within five years.

Another key attraction is that, unlike most other asset classes which rise and fall with markets, returns from third party litigation funding are uncorrelated, since cases are resolved by the court system, irrespective of what is happening to asset prices in the wider economy. This can create favourable risk/reward dynamics.

As the asset class becomes more mainstream, Therium’s reputation, experience and approach are also a draw. Its close relationships with leading law firms means it has strong case-sourcing opportunities and a robust pipeline – to date, it has taken on just 7% of the cases it has been offered and looks to create diversification of case length, type and law firms involved.

It now has significant firepower in the market, having recently secured a further £200m of institutional fundraising earlier this year. One of the early pioneers of litigation funding, its principals are lawyers with extensive litigation funding expertise and it is a founder member of the Association of Litigation Funders.

Previous Therium funds have also seen efficient deployment of capital and early liquidity, with the first round of Connection Capital investment fully allocated in 18 months and capital repaid within three years. Following Connection Capital’s most recent fund-raise in 2017, capital was fully deployed within just eight months.

Claire Madden, Partner at Connection Capital, says: “We are seeing private investor desire to add litigation funding to the portfolio mix growing and growing.”

“As an alternative asset class, litigation funding is complementary to more traditional investments. Since its performance is non-cyclical and in no way linked to events in the wider economy, it can provide an opportunity to reduce portfolio risk and boost returns.”

“Private investors would never normally get the chance to co-invest direct alongside institutional investors in funds advised by one of the market leaders in litigation funding. But yet again, we have been able to provide our clients with exposure to the kinds of opportunities that would usually be closed off to them.”