Whatever About 2008: A Controversial Hedge Fund Wants Youth to Understand Money

When money’s your business, doesn’t it make sense to fund financial education? It would seem so, judging from the recent behavior of America’s financial sector. Outfits like PwC, Opus Bank, and Santander have made financial literacy a linchpin of their giving, and that’s on top of the millions going to a range of other financial inclusion efforts, as well as for career readiness, from giants like Bank of America, Citi, and JPMorgan Chase.

After an era of epic irresponsibility on the part of the financial sector, its philanthropy has become more focused on ensuring that young Americans are responsible when it comes to their own money and lives. We'll leave it to others to offer psychoanalysis of what's going on here. Meanwhile, let's get to the usual issues of who's giving money for what. 

Late last month, a controversial hedge fund based in Chicago, Magnetar Capital, channeled $5 million to the University of Chicago to support financial literacy education via the UChicago STEM Education program. UChicago STEM was already working with the Magnetar Youth Investment Academy, which has offered financial literacy programs to 5,500 students at Chicago high schools, mostly in low-income areas. The current grant will sustain and grow the work.

While financial literacy’s value cannot be denied—especially to underprivileged students like those on the South Side of Chicago—the irony is hard to escape. Magnetar Capital, after all, was a major trader in the market for collateralized debt obligations (CDOs), those risky bundled assets that spurred on the subprime mortgage crisis and the 2008 crash.

As we said, though, Magnetar isn’t the only firm playing this game. Most of America’s big banks were implicated in the financial crisis, and many of them sport hefty grantmaking programs today, some of which seem expressly designed to atone for the past. Good PR is surely another consideration. Today’s youth might think of Citi or Chase as the good guys who helped them save for college. Their parents and older siblings, remembering 2008, might have a less sunny opinion.

Setting aside Magnetar’s checkered past, what do its financial literacy programs actually look like? The Magnetar Youth Investment Academy is the vehicle that delivers curriculum to schools, building on research from UChicago STEM Education and the academy’s previous in-classroom work.

As it stands, students complete four units, the first two being pretty straightforward. There’s long-term financial planning, where students think about the fiscal ramifications of life decisions, career choices, and potential risks. Then they dig deeper into budgeting, savings, credit, and debt. It gets interesting in units three and four.

That’s when students learn about investing, how to evaluate stocks, and how to distinguish between investment vehicles. For students who become particularly, well, invested, the hedge fund hosts the Magnetar Academy Team Challenge, a daylong annual competition between teams from 45 Chicago schools tasked with growing $100,000 mock-dollars in a simulated stock trading competition.

So it’s clear that Magnetar wants to go beyond the basics and actually get Chicago youth interested in financial sector careers. This industry focus is somewhat unique among financial literacy programs, which tend to confine themselves to a narrower range of instruction.

Magnetar’s grant benefits high school students, but the nationwide pivot to financial literacy covers all age groups. Opus Bank is one donor in this space, as is the PwC Charitable Foundation and the Mott Foundation. The Walton Family Foundation’s recent grant to local nonprofit Economics Arkansas supports practical economics curricula from K through 12. We've also tracked financial literacy efforts specifically targeting low-income women. 

This focus on financial literacy, a kind of home economics for the modern age, is a chance for nonprofits and educators to raise substantial funds from some of our era’s moneyed behemoths. It’s also puzzling and contradictory, since a case can be made that many of the same behemoths profited from a financially misinformed population. Such is the complex world of fundraising.