Aaron Brown, Columnist

Give Pandemic Bonds a Chance

The securities are hardly a gimmick stunt that divert scarce health-care dollars to financial markets.

February 25, 2020 at 11:00 AM UTC

Aaron Brown is a former head of financial market research at AQR Capital Management. He is also an active crypto investor, and has venture capital investments and advisory ties with crypto firms. He is the author of the soon-to-be-released "Wrong Number."

The bond markets may help the battle against pandemics.
Photographer: Miguel Medina/AFP via Getty Images

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Pandemic bonds can’t catch a break. These securities offer relatively high rates of interest to investors unless the risk of global pandemic rises beyond specified trigger points, in which case investors lose some or all of their capital. When the World Bank issued $425 million of these bonds in 2017, there was widespread skepticism among public health professionals. Many called it a publicity stunt that diverted scarce healthcare dollars to financial markets.

Then in 2018, the bonds weren’t triggered during the Ebola outbreak in the Congo, and critics denounced the bonds as giveaways to the rich. Now in 2020 with the coronavirus hitting trigger points, people are complaining that the bonds are not only toxic to investors, but the money they raised is too little, and being released too late, to be effective.