Charitable Objectives or Donor Benefits? What Sponsor Language Reveals About Donor-Advised Fund Priorities and Resource Flows

Recent years have seen a dramatic rise in donor-advised funds (DAFs). Though housed in public charities, DAFs are often characterized as de facto private foundations due to the deference sponsors typically give to donors’ wishes. The consequence has been frequent calls to institute DAF grant disbursement requirements and other restrictions akin to those on foundations. Despite their growing importance, we know little about what distinguishes different DAF sponsoring organizations beyond a commonly used three-type split between community foundations, national sponsors, and single-issue sponsors. To better understand variation in behavior across DAF sponsoring organizations – which may, in turn, be driven by the donors they attract – we develop a proxy measure of the priorities they display in the language they use on their websites. The measure seeks to identify the extent to which a sponsor emphasizes achieving charitable objectives versus providing extrinsic benefits to donors. In addition to presenting a new method of classifying DAF sponsors, we also show how this measure complements existing sponsor type classifications, with national sponsors emphasizing donor benefits more on average but also exhibiting the most meaningful within-type variation in their emphasis. Most notably, among national sponsors, greater emphasis on donor benefits is highly predictive of greater DAF assets, and this feature is largely attributable not to greater contribution receipts but rather to lower payout rates. Our results suggest that variation in the language used by DAF sponsors can help inform which organizations would be affected by regulatory proposals targeting DAFs, and what effects such proposals would have on charitable activity.