Emeth Value Capital, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio quarterly return of +35.91% was recorded by the fund for the whole year of 2021, while its benchmark, the MCI ACWI Index, by comparison, returned +18.67% over the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Emeth Value Capital, in its Q4 2021 investor letter, mentioned Burford Capital Limited (NYSE: BUR) and discussed its stance on the firm. Burford Capital Limited is a Chicago, Illinois-based finance service company with a $2.0 billion market capitalization. BUR delivered a -11.65% return since the beginning of the year, while its 12-month returns are up by 6.26%. The stock closed at $9.33 per share on February 21, 2022.
Here is what Emeth Value Capital has to say about Burford Capital Limited in its Q4 2021 investor letter:
“Burford Capital is the world’s largest funder of litigation assets. The group has an unmatched team of internal lawyers and more than a decade long track record of partnering with ninety-two of the largest one hundred law firms globally. Burford was co-founded in 2009 by Chris Bogart and Jon Molot, who collectively own more than eight percent of the outstanding share capital. Since inception, Burford has deployed more than $3 billion in legal claims and has achieved a thirty percent IRR on realized investments.
A Brief History of Legal Finance
Historically, the development of litigation funding has been restricted by hostile legal policy informed by the ancient common law doctrines of maintenance and champerty. Maintenance is the practice of helping another to maintain a suit, generally by providing financial assistance, while the related concept of champerty is the practice of maintaining a suit in return for a financial interest in its outcome. While these doctrines have been completely abolished in many jurisdictions, and are of decreasing relevance in those where they still exist, a historical perspective may prove informative. The rules prohibiting maintenance and champerty were first introduced in medieval England. At the time, corrupt nobles would acquire doubtful or fraudulent legal claims with the intent of exercising their status to secure unmerited judgments, often weaponizing the legal system as a tool for oppression. Since the powers of the courts were then too weak to control such abuses, a blanket prohibition on all third party involvement in litigation was appropriate. However, the necessity of these protections passed with time. The criminal and tortious liability for maintenance and champerty were formally abolished in the United Kingdom in 1967, but an exception that preserved the right to strike down any arrangement that was deemed afoul of public policy led to decades of ambiguity for would-be litigation funders. In effect, any litigation funding contract was subject to the risk of being held unenforceable. Nearly thirty years would pass before the insolvency sector became the first widespread adopter of litigation finance in the 1990s, as new legislation explicitly permitted its use. The rationale for allowing litigation funding within insolvency proceedings is rather straightforward. Meritorious legal claims are often the only remaining asset in a bankruptcy which themselves become worthless without external capital available to pursue litigation. Around the same time, the United Kingdom established its initial framework for permitting success based fee arrangements. Of note, while the United States has long permitted the use of contingency fees to compensate lawyers, its use was considered champertous in the United Kingdom until the 1990s and remains so in many other jurisdictions like Australia, Hong Kong, and Singapore. Soon, questions arose as to whether lawyers were the only actors permitted to provide such contingent funding for legal expenses, and early litigation funders began testing the waters beyond the realm of the insolvency sector. By the mid-2000s, caselaw had broadly established that litigation funding was not fundamentally in conflict with public policy, and instead limitations on how financing was provided came into focus…” (Click here to see the full text)
Source: pexels
Our calculations show that Burford Capital Limited (NYSE: BUR) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Burford Capital Limited (NYSE: BUR) delivered a -11.98% return in the past 3 months. In October 2021, we also shared another hedge fund’s views on BUR in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
