New Impact Investment Model for Medical Research
23 March 2016 at 9:19 am
Australian Not for Profit AUSiMED has launched a venture philanthropy fund, utilising what it has called a new model of impact investing, to support globally significant medical research projects.
The establishment of the fund followed a new tax ruling enabling public and private ancillary funds (PuAFs and PAFs) to lend money for impact investment without the risk of loss if the project is unsuccessful.
AUSiMED CEO Roz Kaldor-Aroni said it differs from traditional impact investing funds, which are based on their likelihood to succeed.
“Medical research is more than likely going to fail, and so no one had really thought about that [impacting investing] in the past,” Kaldor-Aroni said.
“In impact investing you like to think there could be a success… but in our case, the risk is so high that we absolutely cannot begin to predict what the outcome would be, it’s in the hands of the science.
“So for us, it’s always been about what happens if it doesn’t succeed, not about what happens if it does succeed.”
She said that while the new tax ruling didn’t change existing laws, it provided clarity for stakeholders about the security of its corpus.
Kaldor-Aroni said, through the fund, PuAFs and PAFs can turn their loan into a tax-deductible donation if medical research outcomes are unsuccessful.
“They’re allowed to claim not just the principal but all of the lost interest,” she said.
“It’s like getting a free-kick donation, as it’s actually something they’ve earned during the time period.
“And the interest rate the office [ATO] has permitted is up to 14 per cent plus the Reserve Bank of Australia cash rate, which at the moment is 2 per cent, so it would be up to 16 per cent interest.
“So after a three year project they’ve actually increased the value of their principal by 48 per cent.”
Over the three years, she said the aim is for the fund to provide $3 million to $4 million in funding for universities, bringing together medical experts in Israel and Australia who will conduct five research projects.
AUSiMED is a Not for Profit foundation that encourages and financially supports collaborations between medical researchers throughout Israel and Australia.
Patron of AUSiMED, and former Victorian Premier, Steve Bracks AC, said the new funding model highlighted Australia’s focus on innovation to solve social issues.
“The local and global impacts of this type of fund will significantly change and support the medical research field, which is experiencing considerable funding challenges in Australia,” Bracks said.
“I’ve seen the value of bilateral medical collaboration between Israel and Australia, and I am proud to be supporting the continued efforts of AUSiMED to leverage the strengths of two leading research nations in this innovative way.”
Kaldor-Aroni also said she hoped the initiative would attract new sources of funding.
“We’re hoping to attract lenders or donors who either haven’t given to medical research in the past or who are interested in the Israeli connection, because that’s another feature that we have is that we’re partnering up with Israeli scientists.
“We’re hoping those two factors will attract new funding to medical research, which is very underfunded and really needs the boost.”
She said four of the five projects could be eligible for startup funding from the Israeli partnership.
“The startup market in Israel is phenomenal, and those projects will have really great access to capital that isn’t available in Australia to advance those projects significantly,” she said.
“If they do go well they’ll get to market quicker and more successfully than they would here.”