You may have noticed that there seem to be fewer open grant rounds this time of year. You’re not missing things; it’s true. Fifteen years of grants data, now readily searchable in GEMS Funding Insights, confirms that numbers of open grant rounds (those with application forms and hard due dates) typically take a dip in spring.
If you’re not already, now is a great time to look beyond open grant rounds to Donor Advised Funds (DAFs), Sub-funds, Gift Accounts and other philanthropic Trusts and Foundations, and consider how you might reach out to the families and individuals behind them to begin a conversation.
DAFs are emerging as a fast-growing new giving structure in Aotearoa New Zealand. Most in the for-purpose sector are already familiar with Trusts and Foundations, but, at Strategic Grants, we’re now regularly being asked what exactly DAFs are, how they are different, and where they fit in.
It’s important to get this straight, and it needs some unpacking. So, let’s get into it…
What is a DAF?
DAFs, also known as Sub-Funds, Gift Accounts, have been popular in the US and UK for some time and are now gaining popularity in New Zealand. They have been called the fastest growing form of philanthropy globally. This is due to the ease with which they can be established and the minimal administration involved.
DAFs are a charitable fund, where an immediate tax deduction is applied on establishment, and the founding donors choose the direction of giving. They are often referred to as ‘named funds’ or endowments, because they are named by or after the donors involved, and are set up to give in perpetuity. DAFs can give to New Zealand or international charities. They do not have a minimum annual distribution, which means founders decide when and how much they give.
Rather than being a stand-alone entity, DAFs are set-up as a sub-fund within a larger structure which is a charitable trust or community foundation. The duties of Trustees and Directors are fulfilled by the Charitable Trust under which the DAF is established, which means the people behind the DAF are free to focus on the difference they want to make, and identifying the organisations they want to partner with to achieve that.
DAFs set up within community foundations allow funders to commit their giving to a community they want to support long-term, by leveraging the umbrella foundation’s close connections with local charities and causes while retaining flexibility about the specific activities to which giving is directed.
Charitable Trusts
Charitable Trusts, often referred to as Trusts and Foundations in the fundraising sector, are a legal structure that acts as a vehicle for philanthropic giving and can be set up as an endowment or have a limited life.
As this is a legal structure, there are administrative requirements around registration and reporting and are commonly administered by Trust Companies. They are set up with a charitable purpose and as such are different from the legal structure of family trusts.
They can have set beneficiaries, sectors or regions they are required to give to, or they may have discretionary distributions.
Increasingly, to support those with an interest in philanthropy investment and wealth management advisory companies are establishing charitable trusts, offering a vehicle within which multiple clients can establish DAFs. The advisory firm takes care of all compliance requirements and manages investments, and supports each endowment’s founders to achieve their giving objectives.
How much do DAFs and Charitable Trusts give?
In dollar terms, based on the latest available reported statistics (2018), giving from DAFs and Charitable Trusts is estimated at almost $300M, around 8% of total philanthropy and grantmaking.
In 2022, it was reported that the growing network of community foundations across New Zealand saw a rapid 33% growth in endowment funds (i.e. DAFs), growing from $150 million to $200m in the one year alone. It’s safe to assume that growth has only continued.
DAFs, and the charitable trusts and community foundations they are nested within, clearly represent significant opportunity for New Zealand for-purpose organisations, now and into the future. Additionally, the intergenerational wealth transfer currently underway is also expected to bolster DAF giving; over the next 20 years a total of $1.1 trillion will be handed on.
How do charities engage with DAFs and Charitable Trusts?
Some Charitable Trusts operate open grant rounds, however the majority do not have a standard application process or publicly available guidelines.
Building relationships of trust with trustees, and the intermediaries and wealth managers who support the administration of these funds, is critical to your success. Here’s how to get started:
- Get ready internally. Your first step should be ensuring that your organisation has a current list of funding priorities that align with its purpose and mission. Funders will often have an expectation that the programs or needs you are seeking funding for are well designed and developed, so investing time in developing strong project plans before you commence engagement will help to ensure you do this effectively.
- Do your research. Next is prospect research to identify the funds that align with your organisation’s mission, values and priorities. Not all will have websites with clearly articulated goals, so you may need to explore their funding history to find out which are strong prospects for your organisation.
- Leverage existing networks. Through prospect research you can also identify who is involved with each fund. Circulate these names with your board and senior leaders, check to see if they are in your customer relationship management system (CRM), and utilise LinkedIn for any connections – a warm introduction or existing relationship is ideal.
- Connect with fund managers. If a wealth manager or other intermediary is the key contact (possibly the only known contact), look at their website to see if they communicate preferences for engagement. Some trustee companies have a form you can fill out or are happy to receive concise summaries (1-2 pagers) detailing your organisation’s goals and key priorities for funding. If not clear publicly, contact the intermediary to find out how you can best engage with them and the fund/s they manage.
- Clearly communicate shared alignment. Whether contacting the founder, another trustee or an intermediary, be sure you can outline how your organisation’s priorities align with that of the fund. When an opportunity to present a proposal arises, write to inspire and evoke confidence in your organisation.
- Be patient. Relationships can take time to build, and they can make decisions at different times throughout the year.
- Steward well. DAFS and Charitable Trusts present significant long-term, high-value opportunities in the for-purpose sector. Stewardship is crucial for growing relationships and ongoing success. Engage in meaningful ways, where appropriate.
Where can I find out more about DAFs and Charitable Trusts?
Not all information is publicly available, but if you’re looking for one grants database that gives you this information PLUS all other available funding opportunities from trusts and foundations, health and medical research funders, corporate foundations, local council and government grants and tenders, and international funders that give to New Zealand charities, GEMS is it.
Every customised GEMS calendar includes all funding opportunities matched to your organisation.
For a guided tour of GEMS, reach out to book a demo.