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Leading experts on financial contagion have agreed to leave their top US universities to head Imperial College Business School’s Brevan Howard Centre for Financial Analysis.
Franklin Allen, who is professor of finance and economics at the Wharton school, University of Pennsylvania, will be the Brevan Howard’s Centre’s executive director and Douglas Gale, professor of economics at New York University will be director of research.
“It is a once-in-a lifetime opportunity to set up a new research centre and focus on financial stability – a subject that I find very exciting,” said Prof Gale.
The two men are famous for their research collaboration, especially on financial contagion, but have both racked up weighty independent academic histories which includes research in many other areas of finance. The list of their current research interests includes asset pricing, financial economics, microstructure of markets, corporate finance and economics of information.
They both also have strong connections with the UK, Prof Allen is from the UK, and grew up in London as the child of an academic. The two men share similar academic backgrounds – Prof Gale, who is Canadian by birth, gained his PhD at the University of Cambridge and Prof Allen gained his DPhil at the University of Oxford.
“We had this brain drain in the UK and this is a chance to reverse that,” said Prof Allen, adding that the opportunity to work in a non-US setting was also important.
“One of the problems in the world today is that US universities have been too dominant,” he said. That dominance, he added, had led to a bias in the world of research which had contributed to financial instability, because there had not been sufficient research on non-US topics.
The two men are contracted to start in July 2014.
“Our first and most important task will be recruiting people for the centre,” Prof Gale said, adding that his role at the centre will also include teaching so will be preparing for that too.
The Brevan Howard Centre is being funded by a £20.1m donation from hedge fund Brevan Howard. Alan Howard, founder of the hedge fund and an alumnus of Imperial College said at the time the donation was announced: “It would be great if Imperial is correctly regarded as strong in finance as it is in other faculties.”
It is unlikely that either of the professors will come cheap. Prof Gale confirmed that it was “an extremely generous offer from Imperial”. Prof Allen also said his offer was very attractive, adding that he hoped it would set a trend that would see other universities prepared to pay enough to attract talent back to the UK. He pointed out that pay for top people in other industries tended to be the same around the world, but that this had not been the case in academia. British academics had been earning less for too many years.
Prof Gale said the centre would focus on issues related to financial stability to start with and would aim to involve practitioners and policy makers as well as academics.
It will initially be involved in the teaching of MBA and masters students, but Prof Allen said he hoped this would extend to undergraduates in the future.