In 1997, rock star David Bowie entered into the first deal to turn a musician’s future earnings into securities. He issued bonds backed by the expected royalties from his pre-1990 catalog—287 songs on 25 albums—and Prudential Insurance bought them all for $55 million. Moody’s Investors Service assigned the so-called Bowie Bonds a respectable triple-A rating—the first time the company had ever rated bonds backed by music royalties. By Moody’s estimation, Ziggy Stardust had legs.

Prudential has never traded the bonds or made them available to individual investors, opting instead to hold them and collect their 7.9 percent annual yield. As for Bowie, he used part of the $55 million to buy out his former manager’s minority stake in his pre-1990 recordings and now holds the full rights to every one of his songs. (The royalties backed by the bonds will revert to him in 2012.)

Since 1997, a handful of other artists with large back catalogs (and their best years behind them) have also cashed in on their future earnings. The team of Lamont Dozier and Brian and Eddie Holland, who wrote 70 Motown songs that became Top 40 hits, including “You Keep Me Hangin’ On” and “You Can’t Hurry Love,” issued $30 million in bonds in 1998. The next year, James Brown also issued $30 million in bonds. A few others followed, but the trend never really caught on. In 2004, with file sharing eroding album sales, Moody’s downgraded Bowie Bonds to one notch above junk.

The problem is, unlike investments based on the future earnings of oil pipelines or home mortgages, royalty deals are vulnerable to the unpredictable whims of popular culture. Weak sales of a new album, not to mention an arrest or public blunder, can make an artist’s bond lose value. And the sorry state of the music industry doesn’t help.

To David Pullman, the banker who invented Bowie Bonds, that’s just flawed thinking. Pullman, 45, points out that, even after a downgrade, the bonds remain in “investment-grade territory.” And he insists that for every revenue-stream technology that has eroded, another has emerged—ringtones, iTunes, and satellite radio, for example.

Which has inspired a new twist on his idea: a bond backed by the royalties produced by a diverse pool of Billboard Top 40 hits from different genres, eras, and performers. Pullman has spent the past two years buying songs such as “When a Man Loves a Woman,” a hit for Percy Sledge in 1966, and “Celebration,” Kool and the Gang’s 1980 classic. At least in theory, according to a Moody’s analysis of music-royalty deals, a bond backed by a diversified list of hit songs could earn a high rating. Pullman hopes to issue his bonds sometime this year.

Pullman compares the performance of a hit-studded music catalog to one of those skinny balloons that clowns twist into animal shapes. “One song goes down over here, but another song pops up over there,” he says. “So it’s pretty stable income.”