Gentlemen, thank you for joining. Welcome to the Burford Capital Investor Call. On today's call, you will have the opportunity to ask a question. For doing so, please press star followed by one on your telephone keypad. I shall now hand over to Christopher Bogart, the CEO of Burford Capital, to begin.
Thank you very much. Good morning, everyone. Thanks for taking a few minutes with us this morning. As you know, we've put out a trading update this morning. It isn't something that we've historically done, but given the level of investor interest in some news flow, we decided we would go ahead and do this, and we're delighted to share from our perspective, a very positive 2019 with you. I think the most exciting part of this is the level of growth that we see and continue to see in this business. We've posted the highest level of new business in our history. We're finding continued strength in the litigation finance market. We're finding sustained interest in our offering, and we see a significant amount of runway ahead of us.
Part of that is just the sheer growth in demand for capital in the legal sector, and part of it is a continued evolution in the way that capital is used and the kinds of demands that we see for our capital. For example, this year we saw an uptick in corporate interest in corporate monetizations, which really does open an entire new front of business for us. It's just one example. One of our largest deals of the year was such a monetization with a Fortune 100 company, for a substantial litigation position. This is not just a world of small companies and people who need capital. This is corporate finance applied to legal assets. We're very excited about what lies ahead. The other very rewarding piece of this is that we, on concluded matters, continue to be able to demonstrate stability of returns.
Our returns have remained consistent. They've actually ticked up somewhat, this year to a 93% return on invested capital and a 31% IRR. Again, you've heard us say for some years that returns move around from period to period. We don't hold that out as a trend. We nevertheless are very pleased that for years now we've been able to deliver high returns in this business. One of the pieces of market research that is particularly compelling to us is that price for capital in this industry is cited by clients as one of the less important criteria for selecting a capital partner. Some of the other attributes that we bring to the table are our unique scale, our global reach, the quality of our people. Those are things that clients value very much and that drive them to do business with us.
Deployment in our business also remained strong. We did, again, $1.1 billion of deployments out the door. That is an extraordinary amount of capital for us to deploy in a single year. We've now done it twice in a row, which really sets the business up for years ahead because those deployments will obviously turn into litigation resolutions in the years ahead. That can take, as you all know, some time. Cash proceeds also have jumped up, 23% overall, just showing the fact that while litigation can take a long time, we routinely turn our investments into cash, and we've got a significant track record of being able to do so. A few weeks ago, we put out some other news, including a management restructuring.
The purpose of that was just to continue to address the continued growth and maturity that our business is showing, and also really highlighted what a deep bench of people that we have in this business, that has been largely organically built. We're really thrilled with the team, and Jon will probably say a few more words about that. We're delighted to showcase the fact that we've got a deep bench of management here, and that this has really become a significant global business. Many of you are interested in what's happening with corporate governance, and we've made a number of announcements in that regard over the past months. You should expect to see another announcement fairly soon from us about new director appointments to the board. We've followed an extensive process to engage in finding those appointments, including using Korn Ferry's executive board search function.
As I said, you can look for an announcement from us reasonably soon on that front. As anyone who has followed us for some time knows, we have no control over the timing of our income. In fact, what makes our business uncorrelated is that very fact that we don't control and can't control when cash flows occur, that we rely on judges to decide cases, and we have no idea when they will do so in any individual matter. We actually think that that is an enormous plus for the business, and we would trade that any day for a business that had cyclical returns. What it does have the potential to do is introduce period-to-period volatility, because of the growth or lack of growth in litigation progress.
For us, the second half of 2019 was especially slow, and as a result of that, we'll see lower period income. Just to prove the timing point, January 2020 has been a fantastic month. We had multiple litigation successes in January, that if affirmed and paid, would result in more than $150 million in profit for us in just a single month. Basically, a lot of the things that one would've wished happened in the second half happened in January instead, and we regard that as not problematic at all. Even if we did regard it as problematic, it's not something over which we have any control. It's simply a fact of the business, and it's frankly one of the reasons, not only that we have lack of correlation, but that we're able to generate strong returns.
If this business were predictable as to both outcome and duration, then frankly, you wouldn't need Burford and you wouldn't see the delivery of the kind of returns that we deliver. We're really pleased with 2019, and we're excited about what lies ahead for 2020. With that, let me turn it over to Jon Molot, the Chief Investment Officer, to talk a little bit more about the portfolio.
Thanks, Chris. Thanks to you all for joining on short notice. As I've said many times in the past, it bears repeating, I really like our portfolio. In fact, I like our portfolio today better than I ever have. Part of that is, as Chris said, to the extent that there were not as many resolutions, there was not as much concrete progress in 2019 in litigation events. That just means there's more value left for 2020 and beyond. That's highlighted by our very low loss record, that in 2019, I think we had something like $6 million of losses, which is remarkably small. That compares to $21 million in 2018, which is still a low loss rate, and it's far below 1% of assets.
I can't promise that we'll repeat that low loss level, but that is just a sign that the lower earnings is a result of inactivity rather than bad activity, which means that those resolutions remain to come. In fact, as Chris pointed out, January's been a very active and happy month for us. Some of the things that if the year had ended January 31st instead of December 31st, it would look very different, and we're not really bothered by that. We're in this for the long run, and it's a fabulous portfolio. One of the reasons why I'm particularly enthusiastic about our portfolio today is, as I say every year, it continues to evolve. We are constantly looking for new ways to deploy capital to meet our clients' needs.
Chris mentioned we've developed a business line that provides monetizations for large corporates, and we've been in discussions with a number of Fortune 100 companies and comparable international conglomerates. We've closed a couple of those deals this year, which will lead to a sizable deployment of capital. I think that's a business line that's going to continue to grow and generate returns for us. That's been a very exciting business. I think there'll be, just as in the first half of the year, we talked about a new type of securities portfolio. The second half, we talked about these monetizations. There will be more innovations to come that we're working on in terms of getting capital to law firms as well. I won't go on about the team as I tend to do because I love our team so much.
The one thing I will say is the team, like Chris, Jim, and I, they know what's in the portfolio and they are staying put. They are very happy with Burford, and they're very enthusiastic about its future. I think that's a sign of confidence that this really is a fabulous business. It's a market that has tremendous opportunity, and we're well poised to continue to take advantage of that opportunity. The short of it is that the portfolio is great, the business is running really well, and we're very excited for how things are going at the beginning of 2020. With that, I will turn it over to Jim.
Thanks, Jon. Good morning, everybody. As many of you know, I'm approaching my six-month anniversary as Burford's CFO. I've enjoyed my time here. It's an exciting asset class, a great team, and a terrific business with a lot of growth in front of us. I've also enjoyed meeting with many of our investors and look forward to more of those conversations in the years to come. Chris and Jon have already covered the meat of the trading update. I'm happy to address questions about any of the numbers, either now or offline. I'm also looking forward to providing you with a new approach to our 2019 annual report next month, with substantially more disclosure designed to address some of the key questions that we've heard from all of you.
Consistent with the sort of detail and transparency I hope we provided in today's announcement, my goal is to continue to give our investors as much insight and information about our business as we can. Before turning to questions, I wanted to touch briefly on cash and liquidity. I think as we've indicated in the release today, ours is a cash generative business. We produced $1 billion of cash across the group last year, including $500 million on the balance sheet itself. We closed the year with almost $200 million of cash on the balance sheet, which is sufficient for our foreseeable needs and up from the half year, despite the fact that we did not raise any new balance sheet capital in 2019.
Although it's been two years since our last debt issue, we continue to view a modest level of leverage as a key part of our capital management plans. We've had the view, though, that as the business grows, we need broader access to debt markets. To that end, we've obtained, in the fall, debt ratings from both Moody's and S&P, which I think you can look at as another sign of the maturity of our business, since no one else in our industry is rated. With these ratings, we may look to add some additional debt in 2020 to continue to finance our growth. We're pleased with our continuing performance in collecting receivables. There's often a gap in time, as you know, between when litigation resolves and when we receive cash, which is, of course, why we make pretty good money in our post-settlement business.
We had an unusually large level of these due-from-settlement receivables at June 30, some $173 million worth. We're pleased to report that we collected 97% of those receivables in the second half, demonstrating that we do get paid once litigation resolves, even if it takes some time. A key part of my job is to pay close attention to liquidity. Philosophically, we run a conservative balance sheet and maintain a significant amount of cash, as we did in 2019, to give ourselves plenty of flexibility. Given the different liquidity levers that we have to pull on, I'm quite comfortable with our cash position today and its ability to permit the business to meet its needs and continue to grow in 2020 and beyond. With that, I'll turn it back to Chris.
Thanks very much, Jim. Operator, we are ready for any questions that anyone would like to ask us.
Perfect. Thank you, Chris. Ladies and gentlemen, if you have a question, please press star followed by one on your telephone keypad now. Our first question comes from Julian Roberts from Jefferies. Julian, please go ahead.
Thanks very much. I was just wondering if you could give us any more color on any differences in the market or ways that Burford interacts with its clients and with their law firms since the events of August.
The answer is not really. I think you see that borne out in the amount of new business that we did, because obviously we had put out numbers shortly before what you'd kindly call the events of August. No, I think those events obviously had a profound impact on our equity shareholders, about which we are very unhappy. We have separately, in response to a number of shareholders requesting us to do this, we have separately taken some action that is continuing in the English courts. Leaving aside the impact on shareholders, which I don't mean for a moment to minimize, the rest of the business has carried on. Our clients are sophisticated lawyers and law firms around the world. They have seen meritless short attacks before.
Many of them have advised clients who have been the target of them because they seem to be increasingly frequent. It was pretty apparent that the substance of that attack was, as I said, meritless and misleading. It really didn't dampen, I don't think, the interest in Burford and the willingness of clients to work with us.
Thanks.
As a reminder, that's star one to ask a question. The next question is from Andrew Shepherd-Barron from Peel Hunt. Andrew, please go ahead.
Thank you. Yes. Okay, three quick ones from me, if I may. One is, could you update us on the U.S. listing? Is that still a goer? Secondly, can you tell us whether or not there have been any write-downs in the investment portfolio in 2019? Obviously, we've seen the less unrealized gains, but I'm interested to know whether you've done any fundamental review of the cases and have any comment to make on that. Thirdly from me is, in looking at the information disclosed this morning, it is still not possible to track cash proceeds for 2018, for example. As disclosed, you've given a useful split into the accounts for 2018. Will you be doing that at the finals? Thanks.
Thanks, Andrew. Taking those in order, as to the U.S. listing, we put out a statement a few weeks ago in early January that addressed a number of Burford-related questions, including the U.S. listing. Having issued that statement, we have now been placed in a sort of a quiet period by the U.S. securities lawyers. Everything that we had to say about the U.S. listing was in that statement. Just to recap it, what we basically said is that we had done an extensive amount of work with our legal advisors, and the outcome of that work was a determination that we believed that we should go forward and file for a U.S. listing, and that we intended to do so with the target of having that filing made in April.
We need full-year audited financial statements to be able to make that filing, which is the reason for the timing. We're intending to report full-year results on the 24th of March, and then it'll take a little bit of time to put those in shape for an SEC filing document. That's sort of where we stand. We also said in that release that investors, for U.S. securities law reasons, needed to recognize that we wouldn't be able to say anything else while that process unfolded, as is customary in that way. As to your second question, I'll talk briefly about the valuation process, and Jon can certainly chime in with some color if he'd like.
When we do fair value, one of the reasons that we don't routinely put out trading updates like this and instead go through a process that leads to the preparation of full year results is because the valuation process in which we're engaged is very extensive. We do exactly what you just described. We engage in a fundamental review of all of our investments, and we do that every six months. We don't just do it occasionally. Really what we're doing for every single investment individually that we have is we're looking at whether there has been an objective event in the underlying litigation or arbitration that would cause us to alter our valuation position in either direction, pro or con.
As you saw from the extensive valuation fair value material that we put out last fall, which is still available on our website, you will see that we are quite cautious in our approach to that. In fact, we tend to reverse many more downward write-downs than we do upward write-ups. So we're doing that kind of fundamental review every time. I think in every single period, there are valuations that move in both directions. That's just the nature of litigation. Sometimes valuations will move more than once in the same case. Jon, do you want to add anything to that or do you want-
Yeah, I would just add that as Chris said, we have a very large portfolio. There are activities in all of the cases, and the question is whether in any given case in the prior six months there has been a sufficiently concrete development that increases or decreases the value of the investment based on that objective change. There will always be, in every period, a number of investments that will meet those criteria. Under the formula we have, there will be a change. This was a quiet period, not only with respect to resolutions where the cash came in. For, as we said, it was not that quiet when it came to collecting receivables that we had as of June 30th. All that money came in. With respect to new resolutions generating cash, it was a quieter period.
With respect to litigation events that were concrete enough to warrant a fair value adjustment, it was a quiet period. It sort of reinforces that we don't make fair value adjustments based on sentiment about the cases. Our sentiment about the cases and the portfolio is quite strong, but that is not a reason to adjust fair value in either direction. It was a quiet period with respect to fair value adjustments as well as realization. There were not significant losses in cases or significant setbacks in cases that are not yet fully realized. Some smaller cases had some setbacks, and some smaller cases had some positive developments, and there were fair value adjustments based on those, but not in numbers that are large enough to have moved the needle in the same way as the prior period.
Jim, do you want to take Andrew's third question?
I think the simple answer to your third question is yes. Our intention is to provide more breakouts and transparency into the different pieces of the balance sheet and income statement puzzle. I think the way I think about this is we have historically put out an awful lot of information. The complexity of the business has also grown, and so part of our goal is to keep up with that, but as well is to be able to tie the pieces together in a way that's clear for investors. I think the sort of thing that you're asking about would be one of the places where I think we can provide some additional transparency, and you're seeing a little bit of that in terms of the numbers that we laid out here in the RNS this morning.
Okay. Thank you very much.
Sure.
Another question.
Operator, we can take another question if there is one.
Yeah. The next question is from John [inaudible] from UBS. John, your line is open. You can go ahead.
Hi. Hello. Thanks for taking my question. I wanted to ask you, our assets or our investments on your balance sheet, are any of them monetized by selling them to third-party funds that you control or other related parties? If so, what is the proportion of that, and will you be disclosing that going forward? Thank you.
Sure. We, from time to time, will engage in secondary sales into the market. We've been doing this for some years now, and what we're trying to do over time is actually develop a secondary market for litigation risk. The most obvious example of a secondary transaction that we've done, and we've done it repeatedly now, is Petersen. We also do it from time to time when we're able in other smaller and less visible transactions. For example, we did in fact also do in the second half, a small monetization of one of our other investments. The purpose behind that is to condition a market over time that will become accustomed to buying and will sort of add to our financial capacity. We already source capital from multiple places. We invest directly on our balance sheet from public equity and public debt.
We have a very attractive arrangement with a major sovereign wealth fund, that effectively is almost structural leverage for the balance sheet. We run a sizable family of investment funds and having access to the secondary market capital, maybe even with a long-term view towards some sort of securitization approach, is attractive to us. That's why we do it. In terms of the buyers of those instruments, they tend to be institutional investors, that have a desire to have some direct exposure to individual underlying litigation assets. We don't comment on what happens individually with investments or with our funds.
I will say broadly that it certainly is not impossible that if we had an attractive investment in the market, that some of our LPs, some of our fund investors, might be of the view that it would be attractive to have an interest in some of those investments as well. If that were to happen, that would be an investment decision made solely by the limited partners. In other words, Burford, as the investment manager, would not be able to be in a position of directing an asset from our balance sheet into our investment funds. That's a self-dealing transaction that would require, under U.S. securities law, which would require the consent of the limited partners. If such a transaction were to occur, that's the basis on which it would be happening. The investment decision wouldn't be being made by us.
If that transaction was required to be disclosed, either to public investors or to private shareholders under whatever the applicable legal regimes are, then obviously we would make the appropriate disclosures.
Sorry, can I just follow up on that?
Sure.
Yeah. That makes sense. You could still disclose what proportion of your balance sheet is potentially being monetized that way. Sure, if your LPs are deciding and you don't have control over the transaction, and if it has to be kept confidential and everything, that makes sense. Disclosing the proportion might be helpful because understanding where the liquidity in that secondary market is coming from obviously matters in terms of the monetization potential of your assets in the long term.
Well, what I assume is underlying your question is speculation that as part of our monetization of the most recent Petersen tranche, that some of that Petersen tranche was put into the hands of our LPs instead of into the hands of pure third-party investors. Again, why don't I do this? Well, again, not only am I not able, but I'm not really at liberty to talk about individual transactions that go into our investment funds. We're subject to a whole variety of confidentiality restrictions. Let me do it this way for you.
There have been public reports around that issue, and those public reports make it clear, and I'm now citing some Debtwire reporting, make it clear from sources other than Burford that even if that did in fact occur, that there was more than enough demand from non-affiliated LPs to more than fill the entire deal that we were trying to do. In other words, while if that happened, it didn't take away from market demand. We weren't using market demand to fill the position. We were instead cutting back market demand in order to accommodate the desire of some of our limited partners.
Okay, thank you very much.
Our next question is from David Green, who is a private investor. David, please go ahead.
Hello there. I wanted to ask a couple of questions, please. First of all, one of the main issues which I think concerns a lot of people is this question of the proportion of profits which are actually attributable to Petersen and the related case. Now, you've mentioned many times that you're not allowed to disclose the fair values of Petersen or any other case before the case concludes. What I would like to know is it possible to find a sort of roundabout way of getting the information to investors without actually disclosing that? For example, you could say the amount of profits for one year, which came from Petersen, and then one wouldn't be able to work out what the fair values were in any year, because we don't know the previous years what it was.
That would be, I think, pretty useful piece of information for investors. That's one question. Well, sorry, if you don't mind to answer that question first, please.
Well, I think when it comes to Petersen, let's start with the most important piece of this, I think, which is the unconditional cash that we've already generated from that. That is something that has been publicly reported. We have already generated more than $20 million, $256 million, if memory serves, in cash from unconditional sales of Petersen interests to third parties. That's on an investment where our total basis is something $20 million plus or minus. I think in terms of getting realized profit out of Petersen, whatever else happens in Petersen has already been a big, complete home run for Burford. As Jon said, we remain optimistic about its future prospects as part of our portfolio. In terms of where Petersen is marked, you're right. It's not something that we're in a position to talk about.
I think that frankly, the reason for that is a very sound legal reason that we elaborate on in some detail in our written materials. I think that we're not much inspired to try to create a backdoor to that which puts the legal issue at risk. The protection of the client legal privilege is really extremely important in this business. If we were to be seen or to be perceived as fiddling around with that, that would, I think, have a significant impact on client confidence.
Okay. If I could ask one other thing, please.
Sure.
There's another question. You've said many times that, of course, we understand you can't forecast the profits, and you can't forecast timings of profits because that's totally out of your control as to when the courts make decisions. I think Burford is, well, to many, it's pretty hard to analyze what's likely to happen across the funds and across different types of assets that you hold. Would it be possible to provide a range of forecasts, or not forecasts, like illustrations. You could say, well, historically, generally, cases have taken X number of years on average to settle, and historically, it's been this IRR. If it were to be the same IRR, it would be this level of profits over the next few years. If it would be this, it would be that, and so on and so forth, without making any predictions.
Just to help people get some sort of idea of what might be possible.
What we do is provide a very extensive amount of information about the way that Burford's portfolio has historically performed. Much more information than we're required to by any sort of disclosure standard. It's been interesting going through the U.S. listing process because our disclosure already is entirely adequate for that process, too. Basically, what one needs to do is consider the question of the difference between settlements and adjudications in our business. We provide a bunch of information about the financial characteristics of each. It's actually one of the most difficult parts of the undertaking because it is extremely difficult, if not impossible, to forecast which individual investment is going to settle and which is going to go on to adjudication.
That has fairly profound economic implications, because we tend to make considerably more money on cases that go on to successful adjudication, even net of losses, in fact. Take the word successful out of there. We make more money from adjudications. They take longer, and so that has duration and IRR implications. Whereas settlements are less remunerative in nominal dollar terms, but they have higher IRRs. Fundamentally, what you're ultimately doing is looking at historical returns and taking a view about whether the historical split between settlements and adjudications, which we publish, is going to continue or whether that's going to vary. With that assumption as an investor or as an analyst, you can pretty much take a view about where you think the business is going.
That is the one piece of data that, other than looking at history, we don't have a particularly good way of predicting. I hope that's at least a little bit helpful. Operator?
Our next question is from Laurence Endersen from Capstrive. Laurence, your line is open. Please go ahead.
Good morning. Thanks for taking my question. Just curious, given that Burford deals in what is a structurally high returning assets and is non-correlated, I'm just interested in what kind of inward inquiries you're getting about putting more capital to work on a third-party basis. Also just maybe related, whether that's in any way constrained by sourcing capacity or how long it takes to build out your global sourcing capacity. Thank you.
Sure. Thanks for the question. By third party, I assume you mean third-party investment fund capital.
Yes, non-balance sheet.
Yeah. What you've seen us do, Burford was a balance sheet only investor until 2017. Starting at the beginning of 2017, by acquisition of an existing fund manager and then significant organic growth on the back of that acquisition, we have built the industry's leading funds management platform, so that we have several billion dollars of assets under management today in a variety of different investment fund structures. We have, and you can see it in our materials, we have formulaic allocations between the kinds of investments that we make and the pots of capital that we use for them. We've clearly signaled our intention to continue to draw capital from all of these sources. Jim Kilman, a few minutes ago, talked about likely accessing the public debt markets again in 2020.
We have pretty much every year since 2017, gone to market and raised incremental third-party fund capital. I see us continuing down the road of making use of all of those capital sources going forward. You're right that a high returning non-correlated asset is attractive to that investor base. That investor base, of course, is not as concerned about predictability on a period-by-period basis. This is an asset that fits well into the allocation mix for those kinds of investors. We do have relationships with a significant number of institutional investors in that space.
Okay, thank you. Just related, is there a sort of supply-demand? I'm just curious if there's a balance between the appetite for that asset, because clearly it's an attractive asset, but obviously it takes time to source it at scale and maybe if there's any just color you could provide there would be great.
Well, that's absolutely right. Unlike a hedge fund, for example, that if you're performing well, you can get more capital from investors and you can simply take on larger position sizes in the same investment positions that you were taking on anyway. That really doesn't apply in Burford's business. There's a finite amount of capital that can be put to work in any individual litigation transaction. Indeed, one of the single largest reasons that we decline transactions that come to us from potential clients is because we don't think that the economics of the underlying transaction will support the amount of capital that the client is attempting to raise for it. We're very judicious about that point. As you say, for us to dramatically increase the size of the business as we have been requires several things to happen.
First, it requires that we continue to grow the market into which we're investing this capital, and we have demonstrated now a 10-year runway of being able to do just that. We're doing that increasingly globally, with expansion that we've done recently, for example, in Australia and in Asia, so that we're really now operating on all continents. It also goes to the fact that the market continues to evolve in the kinds of products that it uses. Jon and I both talked earlier about corporate monetizations. That's something that really didn't exist a few years ago, and now it's something that we think can be a not insubstantial part of our business going forward. There's no question that it requires, as you say, sourcing. That's why the team that we have and the approach that we have to originating transactions is very important.
As opposed to just being able to have a few people in a room, answering the phone and going and looking for deals and putting trades on. It's a much more client-focused business than that.
Great. Thanks, and good luck.
Thank you.
Our next question is from Rahul Bahl from Hidden Hills Partners. Rahul, please go ahead.
Hey, guys. Thank you for taking my question. Jim, really look forward to the increased disclosures. Couple quick questions, if you don't mind. First question is, you alluded to in the July statement about doing a share buyback. You do the calculation, forward earnings three to five times, it'd be a very high returning use of capital. Curious if there's an update there. Second question, there were some positive press releases around growth in Australia, really entering that market. Would be curious on your thoughts, in addition to corporate additions, if you're seeing some kind of big growth market opportunities. Final question was that quite a bit of kind of mix change here. The post-settlement finance division saw some pretty significant upticks. core litigation finance and complex strategies seem to have a little bit of a take-down in terms of commitments and deployments.
Should we read anything into this more than timing? Would just be curious on your thoughts there. Thank you.
Sure. Thanks. I know my colleagues chime in on some of those too, to take them in no particular order, just on mix change. The mix of our business has certainly been expanding over time. Five years ago, we were 100% core litigation finance. I would note that it was a great year for core litigation finance. In 2019, we posted a 30% growth in new business in core litigation finance. We're excited by that. On the share buyback point, I think the analysis is more than just a financial one, Jim Kilman can certainly speak to this in a second. I think it's more than just a financial analysis. It's also as the discussion I was just having in response to Laurence Endersen's question is, this is a business that is about building client relationships and supplying capital to them and w e have a finite amount of capital.
We have to take into account in that calculus not only financial returns, but also the fact that we're trying to continue to grow and develop this business. It's probably imprudent for us to say, "Well, gee, here's a finite pool of capital, and we're going to instead of-- as to which we're demonstrating real client demand. If we fill that client demand, we're going to build those relationships and keep the business growing. If we don't fill that client demand, it's going to go somewhere else." It feels imprudent for us to take that limited capital and put it to work in a share buyback and say to clients, "Well, no, actually, go to one of our competitors instead for your business." Jim can comment on that Jon Molot, maybe you'll comment briefly on Australia.
Yeah, Chris, this is Jim. Not much else to add to that. Obviously, we do look at the math on share buybacks and essentially think about it, as we should, as stewards of capital. I think Chris' comments around the overlay on top of that math are also important for context. Clearly as well, we tend to have a philosophy of running a pretty conservative balance sheet with a lot of liquidity, and we want to keep being able to do that as well.
On the question about Australia and growth generally, I've said in the past, and it remains the case, even more so, that there are really two sources that are driving our growth. One is geographic. We see tremendous additional opportunity we're exploiting in Australia, Asia and Europe. In Australia, our brand is quite powerful given the size of our growing presence there. We see lots of opportunity in Australia. We also see lots of opportunity in Asia and Europe, and we've seen deal flow in new places that we hadn't tapped before, increasing at a fairly steady clip. The other way in which we've seen growth is by expanding our capital offerings in the markets in which we already have a deep bench and a large presence. Chris mentioned the corporate monetizations.
To some extent, that kind of addresses the question earlier about, is there a match between the capital available to us from fund investors or even debt markets and the opportunities to deploy capital? You can imagine that if we do a large corporate monetization across a portfolio of cases, the risk may be almost identical, and the terms may be almost identical to what would transpire if we were funding simply the legal fees to pursue those lawsuits. We would be looking for a return on capital, but on a much smaller deployment of capital, basically just the legal fees associated with pursuing the suit. Instead, in addition to giving enough money to cover those legal fees, we would be accelerating the receipt of ultimately a settlement or damages award, and monetizing a portion of that.
Which would mean putting out a fair bit more money for proportionally larger returns with the same amount of work on business development underwriting per deal that we would for a smaller deal. That's been quite an attractive source of growth across those corporate portfolios where we could be doing this across a number of cases that a big corporate would have.
Anyway, the short of it is we see growth potential both geographically and in our product offerings.
Very helpful. Thank you, guys.
Sure.
Our next question is from Justin Bates from Canaccord. Justin, please go ahead.
Good afternoon, guys. Thanks for taking the questions. Just a couple questions for Jim, please. Could we go back to the point about cash and commitments for the balance sheet solely? I think you said you've got $193 million of cash at the year-end. At the half year stage, I think you quoted a figure of about $390, $400 million of commitments that were due within the next 12 months. Just trying to understand what the level of commitments you're facing for the balance sheets in the first half this year, and then overlaying that with how much debt you're considering raising or what level of leverage you're comfortable with, please.
Sure. Let me take the cash versus commitments question first. I think it's important to understand a couple of things. One is that, as you say, our commitment level, which we've not, as part of this update, published an updated number to what we did at June 30. Our unfunded commitments level stretches out over some significant period of time. Part of that's because we typically are entering into cases or financings where we are funding legal fees that will stretch out over several years. Part of it is the fact that some of our commitments are essentially discretionary in the sense that we have to go and underwrite a set of cases in a portfolio.
Then there's also the fact that in many cases, the commitments aren't ultimately used because, for instance, we might have agreed to fund legal fees over a period of time, but the case settles well before we need to fund those fees. For all of those reasons, we do not expect to end up funding our full amount of commitments. In fact, the period of time that it takes to fund those commitments can be quite lengthy. You see some of that in our deployment numbers versus commitments in the business in 2019. I think we will obviously, as part of our year-end reporting, we will update our commitments numbers and I think as part of our disclosure, are working on some ways to provide a little bit more granularity on the nature of those commitments.
Certainly take the view that we have plenty of liquidity to meet those commitments. Those liquidity sources are not just the cash that we have on the balance sheet at any given point in time. As you know, our Complex Strategies business is a business that has a very short duration to the assets. We certainly have the ability to draw that business down should we need to in order to fund the Core Litigation Finance business. There are a set of other liquidity levers that we have to pull on beyond just the cash on the balance sheet. I think your other question was about how we view leverage. The simple answer is, our view is to lever the balance sheet only to a very modest degree.
Certainly in my 30 some odd years of working with especially finance companies, I've never seen a company in the space that operates at such a low leverage level as we do. Our intention is to keep it that way. We do have a debt covenant in our existing debt on leverage. We run significantly below that and would intend to continue to run significantly below that. I don't see ourselves putting on additional debt here to a degree that it would get us anywhere close to that leverage level.
I would just add, I think there, Justin, in your question, you exhibited a misconception that I think some other people may have as well around the 50% number that you used. We have in a note to our financial statements, a traditional commitments and contingencies note that requires us basically to give an estimate of the maximum, if you will. The language actually says we expect not more than blah, blah to be drawn within 12 months. That is not by us a forecast. I think it's really important to realize that. As Jim said, a number of our commitments have a high degree of discretion associated with them. We're complying with IFRS by putting that number in there. That should not be taken by us as forecasting a need for liquidity.
Okay, thanks. Just as a follow-up, Chris, of the $1.6 billion of commitments during 2019, what proportion of that was the balance sheets and what proportion made in the second half of the balance sheets?
There's a handy-dandy chart at the back of the RNS that breaks down commitments both by source of capital, the balance sheet, sovereign wealth funds, and so on, and also by area. For example, asset recovery and core litigation and so on. I'd direct you to that instead of me doing a whole lot of numbers on the call.
Okay. Thank you very much.
Our next question comes from Tom Jenkins from Jefferies. Tom, please go ahead.
Yeah. Thank you very much. Just a super quick one from me. You mentioned, Jim, about issuing debt this year. Obviously, you brought up in a few more questions as well. I know it's early days, but is there any chance you could give us a sort of rough idea of expected timing, currency, size, and form? Is this going to be institutionally targeted or a repeat of the retail deals? Any color you can give us would be very welcome.
Yeah. I hesitate to say too much along those lines. I can make a couple of comments that may be helpful. One is that, as you know, we got the ratings, and part of the idea behind those ratings is to broaden the markets that we have debt access to. For instance, those kind of ratings would allow us to potentially access the U.S. 144A debt market, which is, I would argue, probably the deepest and broadest debt market in the world for companies like us. As you can imagine, being able to be a regular way issuer in that kind of market would be certainly attractive to us from a capital planning perspective going forward.
That sort of issuance is most efficient in deal sizes that are at or around or even a little higher than the kinds of deal sizes that we did in our most recent issuance, for instance. We've kind of grown to the point where we could think about that kind of market. I think the other comment I would make is that we probably do have a bias to issue in U.S. dollars to the degree possible, because clearly our greatest currency exposure in the portfolio is in dollars. Having said all of that, we obviously maintain flexibility and are always looking at what the execution possibilities are in different markets. I think the only thing I can tell you for sure is that we will be opportunistic around what's the best execution when we decide to march forward.
Sure. Understood. I don't want to put words in your mouth, clearly, but are you thinking sort of more sooner rather than later in the year? Would you expect that to be the case?
I don't really want to provide that kind of guidance. Although obviously, to access certain markets would require us to have full sets of financials out.
Okay. Understood. Thanks very much for the call.
The next question is from Portia Patel from Canaccord Genuity. Portia, please go ahead.
Hi there. Thanks very much for taking my question. It's just to follow up on the point about debt, actually, and just thinking about gearing from a cash interest cover perspective. I think in 2018 it was somewhere between two and three times, and I expect that's also the case in 2019. Just given your previously expressed nervousness about introducing more gearing into the business, and given that obviously this is a business where cash flows are lumpy, in terms of cash interest cover, what's your level of comfort with regard to gearing there?
Jim, do you have anything to add to your prior debt comments?
No. I think we obviously generate a significant amount of cash flow, and we generate a significant amount of income. That really the sorts of gearing that we look at, both in terms of balance sheet and our interest cover, are not going to vary dramatically from what we've been able to do historically.
I'd just add, I think a sign of our philosophy around this is in the sovereign wealth fund transaction that we did at the very tail end of 2018. It's been online for one year now. In many ways, you can think about that transaction as structural leverage, but leverage that is not on our balance sheet and that doesn't have recourse to our balance sheet. We make the most money when we invest on balance sheet and borrow to finance those investments. If you were going to do a pure corporate finance analysis of this business and say, "What's the best path to the highest profits?" the answer would be probably to add leverage and only be a balance sheet investor.
We regard that as being, from our perspective, unduly risky. That's why you've seen us go and explore a variety of capital sources that aren't recourse to the balance sheet as a way of financing the very considerable growth that we've been seeing. That's clearly our philosophy about capital and capital structure. I'm conscious that we've been going now for more than an hour. I think there's maybe time for one more question.
Yep. Our next question comes from David Brunson from Aztec. David, please go ahead.
Thank you. Good morning, gentlemen, and thank you very much for your unexpected update this morning. There's been some post-year-end events that throw light on your unrealized gains. I wonder if you could say a little bit more about that, particularly as to whether those have an effect on your ultimate profit declaration.
Thanks. Yes, what we talked about really as an illustration of the vagaries and unpredictability of the timing of litigation resolutions, was the fact that after a relatively slow second half, we had a booming January. What we reported there were multiple litigation resolutions. In other words, either a win in a trial or a settlement reached between the parties. We had a combination of those things. What that will produce as time goes forward, we're obviously in the early days of 2020, we'll see how those cases then proceed. We'll see, for example, if the settlements are paid immediately or if they turn into receivables, and we'll see if the trial victory produces a settlement or it produces an appeal. All of those things are still up for grabs.
Whatever happened there, you would expect the successes to flow into income for the first half and, of course, for the full year, either as realized gains if they are concluded and paid or concluded and turned into receivables, or some portion of their value is unrealized gains according to our valuation policy.
Yeah. Just to further clarify, were any of those cases actually commenced in January? Were they carried over from the previous year?
No.
No, those are all legacy cases that were in our portfolio that had concrete events in January. As I mentioned in the second half of 2019, it would only be concrete events, either a realization that's final cash paid, that would be realized income or a concrete event that led to a fair value adjustment. In January, those events occurred in a number of different cases.
Great.
Yeah. We've had once or twice in our history, the experience of putting an investment on and having it settle almost immediately thereafter. It's very rare. Litigation tends not to behave that way.
Thank you.
Thank you. With that, I think that we can bring this to a close. We really appreciate everybody showing up for this call on short notice, and we're grateful for your support. As usual, we're certainly available offline, for anyone who has any further questions or would like to discuss anything further. We will look forward both, as I said earlier, to an announcement about some progress on the board, and then an earnings release at the end of March, and we'll certainly have another call after we put out full year earnings. Thank you again, everybody, and enjoy your week.
Ladies and gentlemen, this does conclude today's call. Thank you for joining, and have a lovely day.