This TED Talk by MIT Professor Andrew Lo describes how financial engineering can be used to help cure cancer.
In the video he describes what sounds like an ABS with several tranches that would be open to public investors. This way you could get around the inherent risk of investing in startup biotech companies that are reliant on an upcoming drug test.
He notes that the final drug tests tend to have 2 outcomes:
- Fail the drug test, 19/20 chance, investment lost
- Pass the drug test, 1/20 chance, multiples of ROI
The product he is describing is reminiscent of the MBS that were all the rage in the mid 2000's. Different tranches etc.
What do you guys think about using this structure to securitize investing in cancer startups?
Private Equity Interview Course
- 2,447 questions across 203 private equity funds. Crowdsourced from over 500,000 mem.
- 9 Detailed LBO Modeling Tests and 15+ hours of video solutions.
- Trusted by over 1,000 aspiring private equity professionals just like you.