November 08, 2012

Donor-Advised Funds Surge Past Pre-Recession Highs

Donor-advised funds last year grew for the first time since 2007, the best year the funds had before the recession took hold, according to a study released today.

Using data from 652 organizations, the National Philanthropic Trust examined the performance of the funds, which allow people to set up charitable accounts, take an immediate tax deduction, and channel money to whatever charities they want whenever they want.

Among the findings:

• Assets in donor-advised funds grew by $5.5-billion last year, to $37.4-billion, a 17-percent rise and far above the pre-recession increase of $30.6-billion.

• Contributions to the funds totaled $9.6-billion in 2011, a 10-percent increase.

• Grants made from the funds last year grew by more than 13 percent, to $7.7-billion.

• The number of funds also rose to 177,357 accounts, a 4.2-percent increase.

Donor-advised funds now account for more than 3 percent of the total Americans give to charities, the report estimated.

Beating the Stock Market

The robust growth of the funds last year is particularly striking, given the still-struggling American economy, the researchers said.

“If we were a private industry, you’d want to invest with us,” said Eileen Heisman, president of the National Philanthropic Trust, an organization that itself manages donor-advised funds.

In 2011, the report noted, the U.S. economy grew by 1.8 percent after inflation, and the Dow Jones industrial average rose by 3 percent but failed to reach its pre-recession level.

Nevertheless, the stock market’s improvement since the start of the financial crisis in 2008 has sparked the surge in popularity of donor-advised funds, Ms. Heisman said.

What’s more, she says, many sponsors of the funds have attracted more donors by lowering the minimum amount required to open a fund.

Commercial vs. Charity Accounts

The report also compared the performance of the different types of organizations that offer donor-advised funds: 43 commercially sponsored and other national funds such as Fidelity Charitable and the Vanguard Charitable Endowment Program, 373 community foundations, and 236 organizations with a single mission, such as Jewish federations or universities.

National donor-advised funds had more donors, held more assets, and distributed more grant dollars last year than the other two types of funds.

But the average account size was higher at community foundations, which manage some especially large funds, and the single-cause funds distributed more as a percentage of their assets than other funds last year.

Global Giving

Looking ahead, Ms. Heisman predicted that more and more donor-advised funds will be created with real estate, limited partnerships in businesses, art, and other noncash gifts.

She also predicted that donor-advised funds would continue to step up giving to international causes. For instance, she said that at her fund, international grants have doubled in each of the past five years.

“The world has become more global,” she said, “and the next generation definitely sees things more globally.”

Dig deeper: See The Chronicle’s May study of donor-advised funds, including an interactive tool that helps you see details about the biggest funds.