Principal Investigator Andrew Lo
n this project, we combine structured finance and portfolio theory to design a new family of “megafunds” to support biomedical innovation. Over the last decade, financial markets have channeled trillions of dollars in investments to the real estate and lending markets. Structured finance facilitated this process by re-engineering loans and receivables into securities offering new profiles of risk and return to investors. We apply these principles to the areas of biomedical innovation and drug development, and propose a new type of megafund that will offer investors a set of attractive securities with unique risk/return profiles while multiplying the resources available for scientific research. The main objectives of the project are:
(*) To prove that it is possible to design a structured fund in which investing in science can generate statistically reliable and attractive returns.(*) To detail how a megafund to support biomedical research would need to be structured in order to match researchers’ and investors’ interests.(*) To define the roles that different stakeholders need to play in this market in order to achieve the objectives mentioned above.
The ultimate goals are to offer a practical solution to this challenge, to design new funding vehicles for accessing previously untapped pools of capital for supporting translational medicine, and to demonstrate that structured finance can play a significant role in addressing some of society’s biggest challenges.