A New Way to Give: Inside the Donor-Advised-Fund Explosion

Until about a quarter-century ago, the donor-advised fund was a little-used vehicle for charitable giving. Yet it soon could account for 10 percent of all individual giving, and it’s challenging conventions of philanthropy.

To better understand this phenomenal growth, The Chronicle analyzed 85 of the largest sponsors of donor-advised funds — the first-ever compilation of such data. (See a searchable database at the bottom of the page.)

All the organizations in the database have appeared in The Chronicle’s Philanthropy 400, a ranking of the nonprofits that raise the most from private sources. They include community foundations, national organizations like Fidelity Charitable Gift Fund, and issue-focused groups like the National Christian Foundation and Donors Trust.

Most data is from tax filings for the fiscal years from 2008 through 2014. Filings for 2014 are not available for about a third of the groups, so charts below focus on 2008 to 2013.

1. Giving to donor-advised funds is far outpacing overall charitable giving.

Contributions to the 85 donor-advised funds studied by The Chronicle nearly tripled from 2008 to 2013, while total charitable giving in the United States grew by only 13 percent. Assets in these funds increased at a slightly less feverish pace.

2. Considerable wealth is accumulating in these funds.

Over all, the average value of accounts held by individual donors has soared in recent years, thanks to the flood of contributions as well as big stock-market gains since the Great Recession. This is particularly true of funds sponsored by community foundations; at the Goldman Sachs Charitable Gift Fund, for instance, the average fund size increased from $260,000 in 2008 to more than $1 million in 2013.

The average value of accounts shrank at issue-focused sponsors. Donors to these funds, who are often passionate about a cause, are typically more active than other fund holders in making gifts. At many of these organizations, the number of account holders also significantly increased; the National Christian Foundation, for example, grew from 2,600 accounts in 2008 to 12,000 accounts in 2013. It has more donors than all other sponsors except Fidelity Charitable and Schwab Charitable.

3. No two sponsors of donor-advised funds look alike.

“It’s like talking about dogs,” says veteran nonprofit consultant Robert Sharpe of the diversity of sponsors. “You’ve got miniature schnauzers and you’ve got Great Danes. They look nothing alike, but they’re both dogs.”

For example: The organizations with the largest average fund value include two Wall Street-driven offshoots of Goldman Sachs but also community foundations in heartland spots such as Indiana and Nebraska.

4. The 10 largest sponsors have enormous potential to change philanthropy.

In 2013, these organizations controlled more than $30 billion in assets and awarded $6.3 billion in grants. Fidelity alone is the second-largest grant maker in America, trailing only the Gates Foundation. But the set of 10 is hardly monolithic; it includes organizations with ties to commercial funds, a charity that promotes Christian philanthropy, and a community foundation that’s a favorite of tech moguls.

Nor are their business models similar. Fidelity’s size is the result of its tens of thousands of donors; Silicon Valley Community Foundation, meanwhile, had only about 1,100 account holders in 2013, but each account had assets worth an average $3.1 million.

To see details about each organization, click on the characteristic on the side and move the cursor across each graph.

5. The rate at which funds are making grants is declining.

Between 2008 and 2013, the rate at which grants are paid out declined at 72 of the 85 sponsors in The Chronicle analysis. This worries critics, who argue that donor-advised funds are attracting contributions that typically go to charities immediately. Charitable giving is being warehoused, they argue, doing nothing but generating management and investment fees.

Donor-advised fund sponsors, however, argue that a booming stock market has sent asset values skyrocketing. Grant making will catch up, they say, and payout rates will increase.

There are four common methods for calculating payout; each measures grants as a share of the aggregate value of a sponsor’s funds.

A. Grants divided by grants plus year-end assets

The Chronicle uses this methodology, which is used by the Internal Revenue Service’s Paul Arnsberger, who studies donor-advised funds. It calculates the share of grants distributed in a year against the total dollars that could have been used for grants that year.

B. Grants divided by previous year’s assets value

The National Philanthropic Trust uses this methodology in its annual survey of donor-advised funds. The trust argues that the methodology is similar to how the Foundation Center calculates payout from foundations. (A 2008 payout figure is not included in the chart because the previous year’s asset value was not available.)

C. Grants divided by year-end assets

Some sponsors use this methodology.

D. Grants divided by average year-end assets over 5 years

Other sponsors calculate payout using a rolling average of year-end fund values over five years. (The chart presents this figure only when five years of data are available.)

Inside 85 Sponsors of Donor-Advised Funds

While others have studied sponsors of donor-advised funds as a whole, this is the first compilation of data about individual sponsors of the funds. The 85 groups in this database managed roughly 90 percent of the assets in all donor-advised funds in 2013.