Thanks very much, Jordan. Hello everyone. Good afternoon in the U.K., and good morning in the U.S. Thanks for joining us for Burford's interim results call for 2019. As usual, with me on the call are Jon Molot and Elizabeth O'Connell, Burford's Chief Investment Officer and Chief Financial Officer respectively. All three of us are going to speak to various portions of the presentation. Then we'll be happy to take your questions. We'll be working from the slides that were posted on the website this morning. We'll turn the pages and discuss some of the key messages around the business. We're obviously very pleased to be presenting such a terrific first half for the business. Really, the business performed extremely well during the first half of 2019. The numbers on slide two, while I could go through them in detail, they really do speak for themselves.
They reflect not only our continued growth and market position, but they reflect ongoing significant market activity in the legal industry generally. It's a theme that we have been sounding for a number of years, and it's a theme that is clearly continuing and accelerating, which is the legal industry, long a cash-only business, starting to become a user of capital. When you look across those numbers, what you really see is proof of that concept. I'd particularly highlight the fact, in addition to all of the accounting metrics, significant growth in income and profits. Portfolio returns have ticked up again, but we don't consider that necessarily a trend. At the same time, it's pretty clear evidence that we're not seeing any pricing compression in the market either.
I must say, as we think about being potentially in the late stages of a frothy market, it's awfully nice to have our cash flows be entirely uncorrelated from either market conditions or economic activity. If anything, we are, to some extent, enthusiastically awaiting a downturn so that we get some incremental insolvency business, which has been in short supply given the paucity of business failures recently. Turning to slide three, which highlights the continued and very substantial growth in investment commitments and deployments. Commitments really rose by a striking amount to an unprecedented level for us, and we believe that that puts us far and away in the leadership of the industry. In fact, we think we're probably doing in six months what some firms have done in their entire existence. Deployments, as always, lag commitments somewhat.
As just one example, the $130 million portfolio that's mentioned above the graphs was closed in the first half but doesn't yet have any deployments in it. That's exactly how the business has always run. While these numbers are terrific from our perspective, we would remind you that we've always said that these are just one indication of growth. That indication can be imperfect. The reason for that is our dependency on deal structure. We don't have a one-size-fits-all deal structure. It's not the case that you simply come in with a case and we finance it for you the way that some businesses do. You'll see when we talk about the diversity of what we do, just how broad the range today is.
Let me give you a real example of what I'm talking about there, and I'll use Petersen, a case that most of you are familiar with, as an excellent example. Our commitment to Petersen is very small, less than $20 million. If the only thing we did for all of 2019 was to do five more Petersens, we would commit and deploy less than $100 million, and I would not be more thrilled. These are important indicators of growth, but they are not the be-all and end-all. That being said, we're delighted to grow these numbers, and we're pleased that we're continuing to do so. Rapidly growing the business with commitments and deployments requires external capital, as the duration of our assets is such that we can't finance organically all of that high level of growth. That, from our perspective, is a very good thing.
We would much prefer to have higher growth in this business, which we then need to finance, than lower growth that we can finance entirely organically, even though we already are generating lots of cash. Elizabeth will talk a little bit more about capital structure later. We have multiple choices that we continually evaluate. Although we don't expect an equity issuance to be among those choices anytime soon. We have long been users of moderate leverage. We sit today at a 0.3 times net debt to equity ratio. We would expect to continue to be a user of debt on the balance sheet. On top of that, our sovereign wealth fund deal really permits us to take advantage of the structural leverage embedded in that deal, where we're paying in 33% of the capital and we're getting 60% of the profits.
That was a deliberate choice so that we actually don't need to deploy as much balance sheet capital to generate the same or better returns from across those deals that we have historically. Turning to slide four. This is a slide that you've seen before. We've simply updated it with H1 numbers. The reason that we have it in here is really to emphasize the breadth of our business. This is not just litigation funding. We have a core litigation finance business. It represented, in this current period, 51% of our new commitments. In fiscal year 2018, that number was 50%, so we're at about the same rate. That remains the economic engine of our business today. The fact of the matter is that we do a lot more than that.
We're a full-fledged financial services provider to the legal industry. That is increasingly how we engage with our clients. On slide five, you see a snapshot of the current investment portfolio, along with some statistics on the side about our growth. Again, what this demonstrates is a combination of scale and evolution. We're not just doing one thing. We're not just doing that single case financing business, although that's an important business for us, and it's a business that we will always devote attention to. As you can see from these numbers, it's dwarfed by some of the other things that we do, which not only permits us to grow and expand the way that we have been, but also contributes to just our having a very widely diversified portfolio. As you can see from the side, we continue to grow the team.
We have some degree of operating leverage in the business, but the reality is that this is a human capital-intensive business. As we continue to grow, we will continue to add to our terrific team of people, now located around the world in six offices. We've reached something around 60 lawyers and 120 people, and that's really an unparalleled competitive advantage for us. On slide six, we have from time to time shown you the results of the market research that we do. That market research we do for a couple of reasons.
One is to inform ourselves about what's going on in the market, it's also so that we can publish market research that will let lawyers and other potential capital users realize that they are not doing something that's unusual or esoteric any longer, that litigation finance, legal finance is very much in the mainstream of the legal industry today. We expanded that research this year to include CFOs and corporate financial professionals. The results of that research are really striking. The whole research deck is available on our website if you're interested. Just looking at the left-hand graph, 95% of corporate CFOs are likely to recommend litigation finance as a solution to what they perceive as a pernicious problem, that of managing legal cost and legal risk in a world where those costs and those risks continue to rise.
I commend the entire research to you because it really does give a window for the blue sky version of this business, where we think we're heading over the next five or 10 years, which is towards a much greater level of ubiquity with respect to the use of capital in the legal industry. Turning to slide seven, we've just called out a few specific things here that I'll discuss. First of all, we announced previously that we had made another sale of a tranche of our Petersen entitlement into the secondary market that we have been trying to develop. That was for several reasons. One of them is simply prudent portfolio and liquidity management. As Petersen's value continues to rise, trimming our position seems to be an entirely prudent thing to do.
We're also excited about the broader benefits of building and developing a secondary market for litigation risk that we can use more broadly than just with Petersen. The fact that we've now had 40 different institutional investors participate in the Petersen process in various ways, I think is very significant for us. I would just add a footnote about Petersen. We're obviously thrilled with the developments in the case since we last talked to you. As we expected, the U.S. Supreme Court declined to hear Argentina's and YPF's further appeal. That issue, jurisdiction is now under Foreign Sovereign Immunities Act in the U.S., is now firmly decided, and the case has been returned to the trial court for further proceedings.
What that means is that Petersen is now going to be a more traditional piece of litigation, complete with all of the twists and turns and filings and motions and decisions that go along with any piece of complex litigation. Those are not things that we're going to be in a position to discuss publicly. Doing so would give too much of a public window into the litigation strategy that we're pursuing. All we can say is that nobody can read the tea leaves by reading court filings and trying to extrapolate from a single filing what's going on in the case. We regret that we won't be able to sort of hold people's hands as we walk through that process. We will obviously update the market as to any material development.
We'd also call out a new portfolio transaction that we did during the period, a $130 million portfolio transaction with a major global company. We're calling this out not merely because it's large, although it's not the largest portfolio we've ever done, but because it has such a degree of innovation associated with it. We have actually now spent a year or more working with this client hand in glove, developing a new model for a particular kind of litigation financing. Unfortunately, confidentiality precludes us from saying anything more about it, except that we're excited about having developed this, and we believe that it's a template that we can now use with a number of other firms, to develop yet a new ancillary line of what we do, a new subset, if you will, of portfolio financing. This was a transaction that we did collaboratively with the client.
It wasn't a competitive process. We're very excited about its prospects. Finally, I'd just call out what has been happening with asset recovery, which started really for us as a fee-for-service business. We migrated it to a business that took some risk on its fees, effectively becoming a contingent provider of services. Just as the core litigation finance business has gravitated from single cases to portfolio arrangements, it's fascinating to see the asset recovery business following suit, with two significant commitments during the period, to two portfolio style investments as opposed to simply single binary risk. With that, I'll turn it over to Jon to talk about commitments.
Thank you, Chris, and thanks to everyone for joining. As Chris said, we're very pleased to be presenting our results for the first half of the year. It was a fabulous six months by any metric. I'm going to spend a little bit of time talking about commitments, what we've added to the portfolio that we'll use to generate profits in the future. We'll talk a little bit about the existing balance sheet portfolio and then spend some time on the harvesting of profits that's happened over the last six months and what our track record looks like. In terms of commitments, if you turn to slide eight, the following slide, this is a slide we've done year in, year out, and I'd say there's three takeaways.
The first and most obvious one is the headline number that commitments in the first 6 months of 2019 of over $750 million as compared to an already impressive $550 million+ last year, same period, is just a testament to the robust demand in the market for our capital and the ability of our team to meet that demand. As Chris said at the outset, I'll talk a little bit about that a couple slides down, that growth in investments has not come along with the sacrifice of returns. Anyone on the team will tell you that we are very rigorous in our risk analysis and pricing, and we're not going to reduce return demands simply to meet competition.
I think that this is a sign that the market demand is expanding rapidly enough that even if there are competitors, some of which they're new entrants, sometimes they fall away and sometimes they stay in place, that there's enough room in the market, and we're able to see robust demand at the same pricing that we've been able to enjoy in the past. I'd say the second key takeaway from this slide is when we break it down by segment, if you look at the first 2 categories, single case finance and portfolio finance, which are our historical core business that have driven our returns in the past. Those are the high octane pre-settlement investments. Those 2 segments are up significantly, by close to 50%, going to $80 million-plus in single case and $300 million-plus in portfolio finance.
Those are very large increases. We're very pleased with, as I say, the demand for our capital and our ability to put out that capital in very attractive deals. The third thing I'd say is that the performance in the other segments is very strong as well. Chris mentioned the asset recovery portfolio we did, and we do think that is a harbinger of additional opportunities that the asset recovery team is working on, where it just makes sense there are major financial institutions that are owed money and have trouble tracking down and securing assets. That's something we can help with on risk in a broad portfolio basis. Complex strategies has put out a lot of capital. Post-settlement is up, and that's an area where we maintain very good relationships with law firms who need our capital.
The only segment which we told you would likely be down and is not driving our business is the Legal Risk Management. We've said for some time now that we have that line of business because it facilitates the core business, that there could be an affirmative case where in addition to financing the affirmative litigation, the clients need some risk management to account for adverse costs. We make that available to facilitate closing the deal. We don't necessarily see that as a business driver. We're very pleased with the headline number and the components that make up that headline number. If you turn to slide nine, that now is looking at, okay, we've had six months more of adding good investments to our portfolio. Where does that portfolio sit? You can see we have a portfolio and balance sheet that exceeds $2.4 billion across all segments.
It's widely diversified. There's no one component. The portfolios are the largest component. Single case is next at 17%. That's a widely diversified. Each portfolio is diverse. You've got numerous portfolios in there. We're pleased with the size and makeup of the portfolio. You can see that roughly similar to what it's been in the past, the portion of the portfolio where the $ have already gone out and $ remain to be drawn. We're just very pleased with how that portfolio looks. That's what's going to generate our profits in the future. If you turn to slide 10, this is, well, what have we done in the past, looking at how the last six months has affected our track record. We're extraordinarily pleased with this as well.
We always provide three core metrics, which are IRR, return on invested capital on an absolute basis, and duration. As we've said in the past, the IRRs and the durations have remained roughly consistent from period to period. Ticked up a little bit, the IRR, to 32%, but it's hovering in that 30% range, and the duration ticked down to 1.7, but again, it's hovering in the same range it has been. The return on invested capital has gone up to 98%. As Chris said, and we've said consistently, we don't necessarily see that as a trend, that there's an upward movement. We've always said that the hardest thing to predict in this business is timing.
We can look at a case and make a call on whether we think it's a good case and it's likely to win, but whether the defendant will come around to seeing it through the same lens we do and would settle the case, and on what time it will take for a defendant to do that's much harder to predict. We always underwrite based on the merits, thinking if we have good matters that going to trial will produce good outcomes, then some of those will settle because the defendant will see it some way. Some of them will go to trial. We've built the portfolio so that we can be largely indifferent to that and generate similar IRRs regardless.
I will say, though, and echoing Chris's point earlier, that the uptick in return on invested capital just reinforces what I said a couple of slides ago, namely that we've been able to grow this business dramatically over the years, and not sacrifice returns, right? There's not a downward trajectory in returns associated with growth. The team well knows that this is our driving impulse here, that we are growing the business, meeting the demand of our counterparties and clients, but we are always doing it with rigorous attention to maintaining our return levels. If you turn to slide 11, that's the one that provides some further granularity on our track record and how we've performed by investment vintage. We provide this same slide every period, or every year, and we're providing it in a half-year period as well.
You'll recall that we have more granular information still on our website we always post, which breaks it down case by case without identifying characteristics, but it breaks down individual cases, which is just too cumbersome to include on a slide of a slide deck or on a page of our mid-year report. The only additional information we've provided for your convenience is we've always broken it down by concluded investments, ongoing investments, and partial realizations. One could have done the math, and people did from the website to figure out of a partial realization, how much of the original commitment went to the portion of a portfolio, for instance, that was resolved, and how much went to cases within that portfolio that remained outstanding.
We've gone ahead and broken that down for your convenience here so you don't have to transfer back and forth between the website information and this slide. For instance, if you look on the slide at the 2017 vintage, you can see there are three partial realizations. Those are three investments where there could be a portfolio of investments and one or more of the cases within the portfolio have resolved and others continue on. There you see $22.2 million of what we invested was invested in the cases that resolved and that generated $33.2 million of recoveries. $109.4 million of the invested of $120 that's been committed remains outstanding on matters that have not yet resolved or are still subject to litigation. Another example, 2014. You look, there are four partial realizations.
$11.9 million went into the portions of those investments that have been resolved, generating $23.9 million in recoveries. There's still $25 million of investments of an original $36.5 committed that remain outstanding on ongoing matters. The way we handle partial realizations is just the way any of you would if you bought 200 shares of stock in a company and you sold 50 shares. You would say, "Of the 200 shares, I sold 50. What did I pay for those 50 shares? How much money did I realize upon sale of those 50 shares?" You take a profit or loss on the 50, leaving the 150 outstanding. Same thing for us.
If you have a portfolio of a number of lawsuits being litigated by a company or a law firm, and you've committed, say, $30 million to that portfolio, and let's say one of the suits, you spent $5 million on that, and let's say it resolved and you ended up with $10 million from that suit alone, with everything else remaining outstanding. You would compare the $5 million you had invested in that suit to the $10 million you had realized, and take $5 million you would treat as profit from a realization event, and the remainder would stay outstanding. You would not, by any means, say, oh, you got in $10 million, but your original investment was $30 million, therefore you lost $20 million because only one of the matters that you spent $5 million on had resolved, and the rest remains outstanding.
I thought it was worth just breaking down how we do partial realizations. You can see there's a great deal of information about our performance in the past, and that's the breakdown of how we end up with those headline numbers of a 98% return on invested capital and a 32% IRR net of all losses. That's on $1.2 billion of recoveries. Which generated profits of $573 million across 99 investments. Here you've got the breakdown of them with the website providing more granular information. That's a bit of information about the new investments we've put on, the nature of our existing portfolio, and our track record to date. I, of course, focus on putting the capital out and bringing in profits.
I'm going to turn it over to our CFO, Elizabeth O'Connell, who makes sure we have the capital available to deploy.
Thanks, Jon. As Jon did say, he does focus on the investments, and you just heard him talk about our results and our opportunities, and I will spend a few minutes now on how we finance those investments. Turning to slide 12. This slide provides the highlights of our funds business. Burford's the largest investment manager in this space, with $2.8 billion in assets under management across eight separate funds. In this period, we closed our $300 million post-settlement fund. Just as a reminder, Burford's balance sheet does not invest in this fund given its return characteristics. We announced at the end of last year the path to financing the next $1.6 billion in core litigation finance investments.
As you've now heard from both Jon and Chris, we've seen growing demand in our core lit fin business, such that 39% of that $1.6 billion has been committed after just seven months of investing. The $300 million Burford Opportunity Fund, that's our two and twenty fund, is now 63% committed, and the $660 million sovereign wealth fund is 27% committed. Slide 13. This is our cash waterfall chart that we've been including in our slides for a while. The chart shows Burford-only cash that's moved over the last six-month period, and it excludes any third-party interest cash that appears on our cash flow statement in our consolidated results. The key message to take from this slide is that Burford's balance sheet is in a strong cash position.
We have $297 million of cash heading into the second half of the year. I'm going to walk you through the chart. The inflows of cash are the black bars, and the outflows of cash are the red bars. Starting on the left-hand side, we started the period with $277 million of cash. The balance generated $184 million of cash from investment activity and from income from other segments. We had outflows of $36 million to operating expenses and $38 million to interest and dividends. We deployed $198 million to investments. We closed the period with $171 million of cash after accounting for a net change in receivables and payables. As you already heard from Chris, in early July, we received $126 million of cash from investment receivables.
This was simply a timing issue over period end. Adding these proceeds to our ending cash balance has us holding that $297 million of cash heading into the second half. In my last slide 14, is a slide you've seen before. It's simply a recap of our capital structure. This slide shows how we capitalize the business and finance our new investments, and we continue to think through the optimal structure for financing these new investments. You'll note that we have a low net debt to equity ratio, and accessing incremental debt is certainly a possibility for us. We're also enthusiastic about the economic structure of our sovereign wealth arrangement, and the synthetic leverage that that arrangement provides. We continue to consider private fund capital for appropriate strategies.
I'll now turn it back to Chris, who will conclude our presentation, and then we'll open it up for questions.
Thanks very much, Elizabeth. I think at this point, given that I promised to be short and wasn't as short as I would have liked to have been, why don't we go straight to Q&A? Anyone who would like a question, we'd be delighted to have it.
Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. And when preparing to ask your question, please ensure your phone is unmuted locally. Our first question comes from Julian Roberts of Jefferies. Julian, your line is open.
Thanks very much. Hi, guys. I've got a question on Petersen as a proportion of the investments data provided in note seven. Net realized gains are just under $140 million. Am I right in thinking that Petersen is 98 or so of that? Total realizations are 317, and I think Petersen's 100 of that. Therefore, can I reach a first half return invested capital number by dividing, excluding Petersen, by dividing 139 minus Petersen into 317 minus Petersen?
Elizabeth, do you want to do that?
I'm sorry. I was dropped off the call and I've just joined, so I didn't hear Julian's question. I apologize.
I think that the short version of the question, and here, why don't I take it, Julian? Julian, we're happy to have Elizabeth talk to you offline about the precise computations.
Thanks.
We've certainly been clear that when we have a realization, that we show it as realized gain. Absolutely some of the realized gain that you're seeing there is definitely attributable to the sale of Petersen, which we sold and got cash from irrevocably in June. In terms of the computational bit, though, left, I get out over my skis. Why don't I let you and Elizabeth do that offline?
Cool. Thank you.
Sure.
Our next question comes from Trevor Griffiths of N+1 Singer. Trevor, your line is open.
Thanks very much. Good afternoon or morning even. In relation to the innovative $130 million portfolio deal, what your narrative and the wording in the report suggests a fair bit of IP is embedded in this, I just wondered how have you sought to protect this so you can use this again and again, but that your clients who may use this can't show it to your competitors?
We are very pleased with the portfolio that we've developed. I think the simple reality, like any corporate finance transaction that an investment banker would do, is that it's pretty difficult to protect the IP, as you call it, in a formal sense. The best way to protect it is not to publicize the details of it too widely, and to go and implement it with other people, which is exactly what we're doing at this moment. Does that mean inevitably this will come out into the market? Yes. I think that it does, and I don't think even that that's necessarily a bad thing in much the same way that we originally invented and introduced portfolio financing for the litigation finance industry generally, and now it's a widespread tool used by a number of people.
We certainly had a head start on it, and I think the same thing is true here. That's really the best answer I can give to that.
I might reinforce that this is a perfect example of where our counterparty client has looked to us for smart money. I don't think this is the sort of arrangement that someone simply coming along and saying, "I'd give you the same $130 million on slightly cheaper terms" would've satisfied the client's needs. We're adding value beyond just the financing we're making available, and that's why I do believe, as Chris says, it's something we can replicate with other clients, and to the extent it gets out in the market, it's likely to inure to our benefit because if others try to replicate it, I think the clients are still going to come talk to us about it, and they'll find that we can meet their needs better than anybody else.
Okay. Thank you very much.
Sure.
Our next question comes from Neil Welch of Macquarie. Neil, your line is open.
Hi, guys. If I may, I'll have two questions. The first is, at the Capital Markets Day last year, you talked about the geographical development of your opportunities, in particular the liberalization of legislation in Hong Kong and Singapore. I would be interested to know how that region is doing, but also how that opportunity is starting to play out, particularly in the context of where you've grown your offices. That would be helpful as one. The second, I just wondered whether you might update us on any changes in terms of what might be loosely called the regulatory background. I obviously noticed the Australian Law Reform Commission report in relation to class actions there, but I wonder were there any developments that were either positive or a little concerning, that you might want to bring to our attention? Thank you.
Sure. Thanks, Neil. On geographic development. To start with Asia, which you asked about specifically, Asia has been very interesting for us. You're absolutely right that Singapore first and then Hong Kong liberalized their regimes so that arbitration matters in those jurisdictions are capable of taking on financing from people like us. We were involved in trying to make that happen, and we responded to it by opening an office in Singapore and having someone on the ground there. The interesting thing has been, these are markets that not only have just been able to do this with people like us, but have never before had any sort of capital or legal risk arrangements in place. There are no contingency fees, no DBAs, no CFAs there.
Those markets, in terms of direct utilization of capital, have, as we suspected they would, been quite slow to have an uptick. We've done some business there, but it's not needle-moving business. The thing that has been most interesting, though, is that we've actually done more business now from Asian clients using our capital in other jurisdictions, principally the United States, than we probably have in Asia itself. An unintended but very welcome consequence of setting up shop in Asia was increasing our profile there so that we are financing Asian companies on inbound litigation into the U.S. We're also separately doing a fair bit more in Europe than we have historically. That really is down to the continued growth that we've put into our hub office in London and the team that we've developed there.
I think those are areas that you'll see continue, along with Australia, of course, where we are active in the Australian competitive mix today. As to regulation, the answer is no, not really. Of course, law goes through a fair bit of internal self-examination about broad questions that usually relate to things around access to justice. This is not just unique to Australia, but other jurisdictions do this as well because, of course, courts and policymakers are concerned about what you do about the fact that litigation cost keeps on rising. It really makes it extremely difficult for smaller firms or individuals to bring what I'll call normal cases. Our market is at the larger and more complex end of the legal spectrum, and so those issues don't really affect us so much.
My gosh, it's pretty darn tough if you're a small business in the U.K. to figure out how to afford to make use of the English courts. A lot of the regulatory activity that you see is around those kinds of things. When it comes to litigation finance itself, the clear trend in litigation finance globally, is to recognize it as a necessary and important part of civil justice. The realization now that a firm, just looking at Burford alone, the fact that we're writing more than $1 billion a year of new business in the legal industry, that's a fair bit of money, and that's money that the legal industry is excited to have as part of the availability of bringing things into the mix.
Thank you, Chris.
As a reminder, ladies and gentlemen, to ask a question, please press star one. Our next question comes from Jonathan Rogers of Engadine Partners. Jonathan, your line is open.
Thank you. I've got two questions, Chris. I might just do them one by one for clarity. Firstly, on asset recovery, which is 15% of commitments this half. If we look at the data in the 2018 annual report, it looks like a very high return business. I think you reported 75% return on capital, 167 IRR, but on a very small sample size of investments. Given that you continue to put reasonable commitment amounts into this, could you help us understand a bit better the pricing structure or targeted IRR just so we can understand the likely dynamics as that business continues to grow?
Did you say two questions or just?
Well, the second one is around the participation in the legal firm, which you talk about in the half-year report within Asset Recovery. Just if you could give us a bit of more information about that, what sort of sector that could be or geography, why you sort of went into that structured arrangement, whether they become a sort of preferred partner and you direct business to them, what the sort of terms are for how long the arrangement lasts, and I guess ultimately, why?
Yeah. Let me comment, and then I'm sure Jon will have something to say about these as well. I'll take them in reverse order. I think when you think about the participation of the legal firm, it's just another example of the breadth of capital solutions that people are looking for in the market. From our perspective, it's us coming along and saying, "What are the best ways in which we can take our capital and make profitable use of it, at the same time to develop client relationships?" The law firm arrangement, I'm constrained in what I can say because as you saw in the footnote, this is subject to regulatory approval, and it's confidential at the moment.
The fact of the matter is that we're able to not only provide financing to somebody or to their clients, but we're also able, as part of that sometimes, to get an equity kicker from that process as well. You saw us do that not only in the Asset Recovery space, but we also mentioned that we've done that in the core litigation finance space. We gave some financing to a relatively early-stage technology company that has, in our view, a meritorious dispute. Because of the relative competitive dynamics in play there with the financing, we were able to structure an arrangement that gave us both a litigation financing return and also an equity return in the future.
As to pricing, what I think Jon will tell you is that we priced a risk and asset recovery in the same way that we do in the core business. Jon, you can
Sure. On asset recovery, it can be a very high octane business line, very similar to pre-settlement litigation, and it depends, as Chris says, on the risk profile. Just as in a single case pre-settlement litigation finance deal, there'll be a variation of the terms depending on whether this is at the outset before any suit has been filed versus there's already a judgment and we're financing it or monetizing it subject to an appeal. Very different risks. You could imagine an asset recovery scenario where a judgment has not only been won, but the assets have been identified and even frozen, and there's some battle and there's fee fatigue and a desire for quick cash by the judgment creditor, and they would like to sell it at a discount.
More frequently, usually, if people wait that long and they're just waiting to get paid, and it's pretty certain they're going to be, they're not looking to take a discount to us. They would sooner settle with the defendant. More often, it is going to be higher octane. It's going to be very large potential recoveries that hinge on the identification and freezing of assets, being able to pierce the veil for some corporate entities, that sort of thing. Therefore, we can command returns for those kinds of deals that are very similar to what we can in a high octane, single case, pre-settlement investment. The trend toward portfolios actually helps to defray the risk, to spread it across a portfolio.
It stands to reason that in some cases with Asset Recovery, you have a single judgment creditor who's at a loss of what to do on this particular matter, comes to us both for our expertise and our capital. You can imagine someone who is a repeat judgment creditor or financial institution that people default across a large book of loans, and wants a solution that's going to cover a wide swath of its business, and that's what we're gravitating toward. I would say even though it is behind in terms of size, the core litigation finance business, it does have some similar return metrics to that business. I would say in contrast to post-settlement, where we've said from the beginning, those are lower risk, lower return, and that's why we don't use balance sheet capital. It's all fund capital for post-settlement.
Whereas asset recovery, it's the opposite. It's all balance sheet capital.
Okay. Thank you.
Sure.
Our next question comes from Melwin Mehta of Sterling Investment. Melwin, your line is open.
Good afternoon, Chris and team. Again, all I can say is very good performance really. There is little fault to find here.
Thank you. We appreciate it.
As you already have a Jon in your life, I'm searching to find my Jon and partner, but let's see how that goes. I'm delighted that you share my enthusiasm of joining the FTSE 100 company, not before too long. I had to read it twice to really confirm my eyes, really. As I go about talking of various businesses, including Burford, to especially people in the London market, Chris, I often kind of get two pushbacks. I need your help to counter that pushback the next time I get one. One I often get is that if the management is really serious on playing that big game, why not really be listed on the main market? And how do you think I should reply to them next time I get this question?
What's the other pushback so I can do them all at once?
Well, the connective, really, question is probably be the CEO and the CFO being on the board because often that is taken as kind of normal, Chris.
Anticipating that question, because sometimes we get it from people as well, we actually have a couple of pages in the interim report, pages 13 and 14, that touch on just those issues. Let me refer you there for the full argument. I think the short answer is that we don't perceive an actual benefit, especially one that outweighs the cost of making that market transition. That's not only our view, it's also a view taken by a number of our advisors. What we have said, and I think it's important to bear in mind that while Burford is listed in London, and has a significant European presence and a London office, the majority of Burford's people and income comes from the U.S.
Yeah.
Where there are obviously, first of all, a set of active securities markets, and second, a somewhat different approach to board structure and governance. There are also tax issues to take into effect. On the market question, the short answer is, I think we would be more likely to consider a second listing on one of the U.S. exchanges, either Nasdaq or the New York Stock Exchange.
Yeah
than we would on the London main market, just purely from a dispassionate cost-benefit analysis.
Yeah.
As to the board, that really is a combination of culture and tax. There is a cultural difference between English companies and American companies. English companies have a board structure that has, generally speaking, a number of operating executives that sit on the board, and American companies do not. We inherited our board structure from a time when the public company was a separately managed fund. It had a board of entirely independent directors. That board works well, and it doesn't feel like there's any reason to change it. As we set out in the discussion, there are also some constraints in our articles that are tax-driven around changing the composition of the board if you add Americans to it. Again, it's just not something that we think warrants the cost and the benefit. Jon and Elizabeth and I participate fully in all of the board meetings.
The question of whether we should be formal members and with the tax result that that might incur is probably not in the best interest of the business in our view.
Sure. Well, you know me little enough to know that both of us, we are not designation hungry. As long as the team players know what jobs they're doing, that's the whole thing, which I've got no doubts in my mind that's the case here. The reason I bring this up is, somehow, I don't know, there's a feeling that is Burford trying to hide something? Is Burford wise? There are questions in investors mind. You know me by now that I'm not talking of shock price one day going up and one day coming down. That will take care of itself. In terms of the brand of the company, the perception of the company, it kind of tends to be lingering on.
Well, I certainly appreciate the comments, and as you can tell, it's something that we've studied quite carefully.
It's a not insignificant undertaking.
Yes
to add a listing. Given that, first of all, we try to direct as many of our resources as we possibly can to running the business and making profits in it, that's really a key driver for us in considering these kinds of issues. When we look at something that has a degree of what I'll call conventional wisdom or emotive appeal to people, but doesn't seem to be borne out in actual economic benefit, I think our reaction to that is that we would rather husband the money, and devote both the money and the effort to increasing our profits, than to just sort of giving in to that emotive appeal or conventional wisdom. If you look at Burford's numbers, we operate at an extremely high operating margin, because that has always been our collective operating philosophy.
I think, much as I occasionally hear the sentiment, although frankly, as we say in the report, it's pretty rare for me to find an institutional investor who says, "I'd really like to buy Burford stock. The thing that is preventing me from doing that is the fact that it's listed on AIM instead of the main market." That really doesn't happen in my dialogue with investors. If you look at the level and quality of our disclosure, it's main market quality. There's nothing that we would be adding to our disclosure, frankly, if we were listed on the main market compared to the disclosures that we give today. I am being told that for an interim call, we have somewhat run over our allotted time, and that the expectation was that we would do this in something more approaching 45 minutes.
I think at that point, I will apologize to those of you who have questions still to be asked, and instead invite you to pose those questions directly to us. As you know, we're always happy to be responsive to those questions. For now, I would thank everybody very much for joining us. Again, we couldn't be happier with the first half of 2019, and we're excited about what lies ahead for the business. Thank you all very much.
Thank you.