(FORTUNE Small Business) – Maybe you're Diabetic, or someone close to you is. Or maybe Alzheimer's disease runs in your family. If so, Sam Katz, CEO of WellSpring BioCapital Partners, considers you his target market--a "passionate investor" with life experience of a chronic disease--for a new type of health-care investment. WellSpring offers a way to invest in companies that are working on cures for five so-far incurable afflictions: Alzheimer's disease, breast cancer, diabetes, prostate cancer, and rheumatoid arthritis. Buy the portfolio for breast cancer--which holds a dozen stocks ranging from well-known names such as Genentech to tiny OSI Pharmaceuticals--and if a cure is found, you'll share in the financial return. Meanwhile, you're participating through your investment in a cause that matters to you.

The idea of organizing a fund portfolio around a disease rather than around technologies, as in a typical health-care or biotech mutual fund, is to make the components more understandable and appealing to the average investor, who may have neither the time nor the inclination to wade through scientific jargon. "Most of us can barely pronounce 'nanotechnology' or 'proteomics,' but we know about the diseases," says Katz, 55. Before striking out on his own to found WellSpring a year ago, Katz was president of Wynnefield Capital Advisors, where he managed two biotech funds. He has also run unsuccessfully for governor of Pennsylvania and mayor of Philadelphia, where WellSpring is based.

The company structures its portfolios as unit investment trusts--concentrated bets of 12 to 23 stocks with no manager, chosen based on their projected ability to get a drug to market--so the portfolio stays fixed for its five-year lifetime. After that it is liquidated (or, more likely, a new portfolio is assembled around the same disease). Investors can get their money out at any time without penalty. There is a fairly steep initial fee of 4.95%, but after that the portfolios charge management fees of just 0.26% a year, making the overall cost cheaper than some actively managed funds but not as cheap as an index fund. The trusts have been offered only since September 2004, a tough period for the pharmaceutical industry, and early returns have been underwhelming. The rheumatoid arthritis and diabetes portfolios were both down about 4% though April 4 (not counting fees), while the American Stock Exchange pharmaceutical index, which tracks 15 big drug companies, has fallen 3%.

Returns on WellSpring's trusts are likely to be quite volatile, and skeptics say that the company appeals to investors' emotions rather than to sound financial reasoning. "You're investing in a pretty risky basket of stocks," says Christopher Davis, a fund analyst at Morningstar. "If you have an interest in breast cancer, you'd be better served to donate to the American Cancer Society." Katz counters that most health-care mutual funds tend to gravitate toward the giant Amgens, Genentechs, and Pfizers and overlook promising smaller biotech firms.

WellSpring's portfolios are not being advertised, though they are marketed through brokerage firms such as Citigroup and Janney Montgomery Scott. WellSpring is betting that investors who think a specific disease needs more research dollars will be passionate about the opportunity to put their money to work. Morningstar's Davis, however, is not convinced. "Having a passion doesn't necessarily translate to a good investment idea. You could care a whole lot about doughnuts, but that wouldn't make Krispy Kreme a good investment."