MIT economist pitches cancer megafund

Andrew W. Lo, the MIT finance professor and hedge fund manager, wants to bring Wall Street-style financial­ engineering to a crucial social need: curing cancer, the Boston Globe reports.

Named this year as one of Time magazine’s 100 most influential people in the world, Lo runs an investment firm in Cambridge called AlphaSimplex Group, with $3 billion in assets. He is known for his “adaptive markets” financial theory, which maintains that prices and investors are not always rational.

Now he is proposing an idea that would go beyond his own firm, creating a “megafund” that would flood early-stage research in cancer drugs with $30 billion. By supporting as many as 150 experimental compounds at any one time and bringing in large numbers of investors, he argues, the risk would be spread over a much larger base. Even if just a few of the treatments prove effective, Lo estimates the fund would be profitable, earning equity investors annual returns of 7 to 10 percent.

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