Donor Advised Funds: Changing the Philanthropic Landscape for Higher Education

April 24, 2019 |
3 minute read

Donor Advised Funds (DAFs) are the fastest growing giving vehicle in philanthropy. The Council on Foundations defines DAFs as:

“A type of charitable giving fund that is established by a donor with an eligible charitable sponsoring organization (i.e. a community foundation) to support a cause (or causes) that the donor cares about. A donor advised fund allows the donor to remain involved and active in charitable giving by retaining ‘advisory privileges’ to recommend how the sponsoring organization should make grants from that fund.”

A DAF is like an investment account dedicated to the purpose of supporting charitable organizations. Cash, securities, and/or other assets can be contributed to a public charity, otherwise known as the sponsoring organization. This allows the donor to be eligible for an immediate tax deduction. Those funds can then be invested for tax-free growth while the donor retains the right to recommend how the public charity that is sponsoring the DAF should make grants from that fund. Any IRS qualified public charity is eligible to receive a grant from a DAF.

Generally, contributions to a DAF are treated as contributions to a public charity, providing some advantages over the more traditional private foundation structure. Primarily, donors can claim a higher charitable deduction to a public charity than a private foundation (50 percent vs. 30 percent of adjusted gross income). Additionally, DAFs, unlike Private Foundation endowments, are not subject to a 5 percent IRS minimum annual payout or the annual 2 percent excise tax on investment income that private foundations pay. These advantages make DAFs an attractive option to manage and grow philanthropic resources and explain much of their growing popularity.

According to the Chronicle of Philanthropy, giving to colleges and universities grew 4.6 percent in the academic year that ended in June, with DAFs showing significant growth as a source of gifts. Data from the 2018 Council for Advancement and Support of Education (CASE) Voluntary Support of Education survey reported that for college and universities, the number of grants grew by 19 percent and the dollar value of DAF grants received grew nearly 66 percent in the 2018 fiscal year.

Many colleges and universities, including Stanford, Yale and Dartmouth, have set up DAFs to allow alumni and others connected to the institution to put their philanthropic dollars to work. The college or university, as the sponsoring organization, can set a minimum investment of cash or stock with annual fees typically ranging from 1 to 5 percent. Although alumni and their families can recommend other charities to receive distributions, the school will typically request and encourage a certain percentage of giving from the DAF go to the school. Also, for many institutions that have a religious affiliation, they will build in gift guidelines to ensure that those using the school’s DAF support charitable causes aligned with the school’s mission and religious views. As DAF’s continue to grow, especially for colleges and universities looking to use it as a key resource development tool, here are three things to consider:

  1. Expertise and Expense.  Any college or university considering establishing a DAF program should understand the expertise and expense to run a program of this nature.  If the fundraising benefit does not exceed the cost, institutions can still take advantage of DAFs by targeting fundraising efforts to individuals who already have DAF accounts.

  2. Investment Policy & Performance. Colleges and universities that utilize DAF’s typically invest those pools alongside the endowment and in accordance with the investment policy set forth by the college or university’s investment committee.  Having a thoughtful, strategic, mission-focused investment policy statement coupled with return-based performance metrics will be that much more important to alumni and the broader community of prospective donors.

  3. Evolving Regulations. Broadly, as DAF’s continue to grow, the advantages they provide—the lack of a standard minimum payout percentage as well as the tax advantages for wealthy individuals— will receive intensified scrutiny from a regulatory standpoint.  It will be important for nonprofits that have DAF platforms to continuously monitor the discourse and policies addressing how DAF’s are regulated.

DAFs are an important and evolving aspect of philanthropic giving and the Commonfund Institute will continue to research and monitor the usage and impact that DAFs have on nonprofit institutions.


  1. Giving to Colleges Rises 5 %, With Harvard and Stanford Raising the Most
  2. 2018 CASE Voluntary Support of Education Research Brief
  3. Dartmouth Gift Planning: Donor Advised Fund
  4. Stanford University: Giving to Stanford
  5. Giving to Yale-Donor Advised Fund: Investing in Yale’s Endowment, Meeting your Philanthropic Goals
  6. How Fidelity and its donor-advised fund are shaking up charitable giving for the better
  7. What everyone on Campus needs to know about Donor-Advised Funds
  8. Council on Foundations



Stay connected with the Insights Blog

Popular Blog Posts

Market Commentary | Insights Blog

Chart of the Month | The Surprising Relationship Between Money Supply and Inflation

The potential for rising inflation is becoming a top concern for many investors and consumers. Many believe that inflation is already here as evidenced by price increases in commodities, homes,...
Perspectives | Insights Blog

In Remembrance: Verne O. Sedlacek

A Gentle Giant The Commonfund community was shocked and saddened this week by the news of the sudden passing of our former President and CEO, Verne Sedlacek at the age of 67.
Investment Strategy | Insights Blog

What is an OCIO?

Outsourced investment management, once primarily a solution for small institutions with limited resources, is now used by a broad range of long-term investors. When properly implemented, outsourcing...


Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. Forecasts of experts inevitably differ. Views attributed to third parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information. Past performance is not indicative of future results. For more information please refer to Important Disclosures.