Ivystone Ethos
No. 08 — Committee Memo
DAFs + Ivystone
Donor Advised Fund Investment Committee Memo Capital Replenishment as a Complement to Grantmaking To: DAF Investment Committee From: Ivystone Capital Re: Evaluation of Replenishment-Oriented Impact...
Ivystone Capital
Position Paper
Donor Advised Fund Investment Committee Memo
Capital Replenishment as a Complement to Grantmaking
To: DAF Investment Committee
From: Ivystone Capital
Re: Evaluation of Replenishment-Oriented Impact Investment Strategy
Executive Summary
This memo outlines a proposed approach for incorporating capital replenishment strategies within Donor Advised Funds (DAFs), as a complement to traditional grantmaking.
The framework described herein is grounded in:
existing DAF investment practices,
documented evidence of investment-driven growth inside DAF accounts,
established legal and fiduciary guardrails, and
the principles detailed in Appendix I.
The objective is to extend the long-term charitable capacity of DAF capital while remaining fully aligned with sponsor discretion, compliance requirements, and donor intent.
This memo is intended to be reviewed in conjunction with Appendix I, which provides supporting data, structural comparisons, and source citations underlying the replenishment-oriented approach described herein.
Context and Rationale
DAFs are permanent charitable vehicles owned and controlled by sponsoring organizations. While grantmaking remains central to charitable purpose, DAFs also routinely invest assets to preserve purchasing power and increase future grant capacity.
As documented in Appendix I, investment appreciation inside DAFs is:
tax-exempt, and
demonstrably material to charitable outcomes.
For example, DAFGiving360 reports that investment growth in 2025 alone created $8 billion in additional capital available for grants, confirming that capital replenishment already plays a meaningful role in DAF effectiveness (see Appendix I, Section B).
The question before the committee is not whether DAFs should invest, but how investment strategies can be aligned more intentionally with charitable outcomes while preserving fiduciary discipline.
Proposed Approach
Ivystone proposes a replenishment-oriented strategy that:
Allocates a defined portion of DAF assets to impact-aligned investment opportunities, subject to sponsor approval and policy constraints. This reflects existing DAF investment practices and does not alter sponsor ownership, discretion, or fiduciary responsibility (see Appendix I, Sections B and G).
Applies a dual evaluation framework that requires both:
economic viability (profit), and
demonstrable charitable alignment (purpose).
Preserves sponsor control and discretion over all investment decisions.
Treats replenishment as a long-term stewardship practice rather than a replacement for grants.
This approach is designed to increase lifetime grantmaking capacity without compromising governance or compliance standards, consistent with the structural analysis presented in Appendix I.
Relationship to Grantmaking
This strategy does not propose reducing or delaying grants as a matter of policy.
Instead, replenishment:
seeks to preserve capital that would otherwise be eroded over time,
enables additional grantmaking through investment returns, and
provides flexibility in how charitable capital is deployed across economic cycles.
Grantmaking and replenishment are complementary functions within a permanent charitable structure, as illustrated in the grant-only versus compounding impact comparison in Appendix I (Section E).
Governance and Compliance Considerations
All proposed activities are intended to operate within established legal and fiduciary boundaries, including:
sponsor ownership and control of DAF assets,
adherence to prohibited benefit rules,
monitoring of excess business holdings where applicable,
appropriate diligence, valuation, and reporting procedures.
Ivystone’s role is to support the committee and sponsoring organization with:
structured opportunity evaluation,
documentation and transparency, and
ongoing performance and impact reporting.
No authority or discretion is transferred from the sponsor. Relevant legal and fiduciary considerations are summarized in Appendix I-A (Frequently Asked Questions).
Intergenerational Stewardship Implications
As discussed in Appendix I, replenishment strategies also support intergenerational engagement by:
allowing advisory participation focused on impact domains rather than individual transactions,
providing education around real-world problem areas, and
reinforcing continuity of purpose across generations.
This engagement occurs within the donor-advised framework and does not alter governance or control structures (see Appendix I, Sections F and H).
Committee Considerations
In evaluating this approach, the committee may wish to consider:
appropriate allocation size and pacing,
alignment with existing investment policy statements,
reporting cadence and success metrics,
sponsor-specific constraints or requirements.
These considerations should be evaluated in the context of the data, frameworks, and comparative analysis provided in Appendix I.
Ivystone is prepared to assist in developing these parameters in coordination with the sponsoring organization and counsel.
Conclusion
Replenishment-oriented strategies represent a disciplined evolution of DAF stewardship, grounded in existing practice and supported by documented outcomes.
When implemented with appropriate governance, such strategies can:
preserve charitable capital,
expand long-term grantmaking capacity, and
align investment activity more closely with charitable purpose.
The framework detailed in Appendix I provides the foundation for evaluating this approach.
Requested Action
That the committee:
review Appendix I in conjunction with this memo, and
determine whether to explore replenishment-aligned impact investment strategies within existing DAF policy parameters.
Appendix I
Donor Advised Funds and the Compounding Power of Impact Capital
A. Donor Advised Funds as a Core Channel of the Wealth Transfer
Donor Advised Funds are no longer a peripheral philanthropic tool. They are becoming a primary conduit through which charitable capital is structured, governed, and deployed.
As the Great Wealth Transfer unfolds, a meaningful portion of the projected $18 trillion designated for charitable purposes is expected to flow into DAF structures. At the same time, many of the families sophisticated enough to utilize DAFs are also among the primary recipients of the $105 trillion transferring to heirs.
In practice, this means the same families frequently control:
large pools of private, taxable investment capital, and
substantial charitable capital housed within DAFs.
DAFs are therefore not separate from the wealth transfer. They are one of its most important mechanisms.
Sources:
Cerulli Associates, U.S. Wealth Transfer Through 2048 https://www.cerulli.com/press-releases/cerulli-anticipates-124-trillion-in-wealth-will-transfer-through-2048 National Philanthropic Trust, DAF Report 2024 https://www.nptrust.org/reports/daf-report/
B. The Scale and Growth of DAF Capital
Donor Advised Funds represent one of the fastest-growing segments of the philanthropic ecosystem.
Current U.S. DAF landscape:
$230+ billion in total assets held in DAFs
Average annual payout rate of approximately 20%
Asset growth outpacing private foundations and other charitable vehicles
Despite relatively high annual distribution rates, a substantial base of capital remains invested inside DAFs at any given time, often without a direct connection between how assets are invested and the charitable outcomes they are meant to support.
Importantly, investment growth inside DAFs has already demonstrated a measurable replenishment effect. In 2025 alone, investment appreciation within DAF accounts generated an estimated $8 billion in additional capital available for charitable grants, reinforcing the role that disciplined investment plays in expanding long-term charitable capacity.
Sources:
National Philanthropic Trust, DAF Report 2024 https://www.nptrust.org/reports/daf-report/ Fidelity Charitable, Giving Report https://www.fidelitycharitable.org/insights/giving-report.html DAFGiving360, 2025 Results Press Release https://www.dafgiving360.org/press-release/2025-results
C. The Grant-Only Deployment Path (Status Quo)
Most DAF capital today follows a grant-only deployment model.
In this model:
capital is distributed through one-time grants,
funds are consumed rather than preserved,
impact is time-bound to the life of the grant,
and long-term scalability depends on continued external funding.
Grant-only capital flow:
DAF → Grant → Program → Impact Ends
This approach plays an essential role in addressing immediate needs, but it inherently limits the durability and reach of charitable capital. Once deployed, the capital no longer exists to support future outcomes.
Structural consequence:
One dollar is used once.
Sources:
Rockefeller Philanthropy Advisors, Philanthropy Roadmap https://www.rockpa.org/project/philanthropy-roadmap/ Stanford Social Innovation Review, The Limits of Traditional Philanthropy https://ssir.org/articles/entry/the_limits_of_traditional_philanthropy
D. The Compounding Impact Path
Applying Profit + Purpose to DAF Capital
Impact investing introduces a fundamentally different dynamic for DAF-held assets.
Under a Profit + Purpose model, capital is deployed into enterprises designed to:
address real-world problems,
generate sustainable revenue,
and return capital to the DAF over time.
Compounding impact capital flow:
DAF → Impact Investment → Real-World Solution → Financial Return → DAF → Redeploy
This model allows charitable capital to:
preserve principal,
generate returns,
recycle capital into future charitable use,
and support solutions capable of sustaining themselves.
Impact investing does not replace grantmaking.
It extends and multiplies it.
Ivystone applies this Profit + Purpose framework to identify and diligence impact opportunities capable of operating within this compounding model, supporting disciplined capital recycling alongside charitable intent.
Sources:
Global Impact Investing Network (GIIN), Sizing the Impact Investing Market 2024 https://thegiin.org/publication/research/sizing-the-impact-investing-market-2024/ Cambridge Associates, Impact Investing Performance https://www.cambridgeassociates.com/insight/impact-investing/
E. Grant-Only vs. Compounding Impact
A Structural Comparison
Dimension
Grant-Only Model
Profit + Purpose Model
Capital Preservation
No
Yes
Financial Return
None
Potentially recyclable
Reuse of Capital
No
Yes
Duration of Impact
Time-limited
Ongoing
Scalability
Dependent on new funding
Self-reinforcing
Alignment with Permanence
Weak
Strong
Key insight:
DAFs were structurally designed for permanence. Compounding impact strategies are aligned with that design in a way grant-only deployment is not.
F. Alignment Across Family Capital Structures
For families stewarding both taxable wealth and charitable capital, DAFs offer an opportunity to align values rather than fragment them.
A unified Profit + Purpose framework allows families to:
apply consistent standards across investment and philanthropic decisions,
reinforce shared intent across generations,
reduce tension between heirs and asset owners,
and create continuity during generational transitions.
Family governance research increasingly identifies misalignment of purpose as a central risk during wealth transfers. Integrated capital strategies help mitigate that risk.
Sources:
Cerulli Associates, Next-Generation Investor Research https://www.cerulli.com/insights Boston Consulting Group, Global Wealth Reports https://www.bcg.com/industries/financial-institutions/wealth-management
G. Risk, Discipline, and Fiduciary Considerations
Impact investing within DAFs requires the same rigor as any other capital deployment.
Ivystone applies:
problem-first diligence,
financial sustainability analysis,
staged capital deployment,
measurable outcome tracking,
and ongoing accountability.
This approach aligns with fiduciary guidance emphasizing prudence, documentation, and clarity of intent in charitable investment strategies.
Sources:
IRS, Donor Advised Fund Guidance https://www.irs.gov/charities-non-profits/donor-advised-funds Council on Foundations, DAF Best Practices https://cof.org
H. Experiential Stewardship and Family Engagement
Impact investing also enables forms of engagement that traditional grantmaking rarely provides.
These may include:
firsthand exposure to deployed solutions,
observation of outcomes in real-world settings,
shared learning experiences for rising generations.
Research on next-generation engagement consistently shows that experiential involvement strengthens long-term commitment to stewardship and shared values.
Sources:
UBS, Global Family Office Report https://www.ubs.com/global/en/wealth-management/insights/global-family-office-report.html Rockefeller Philanthropy Advisors, Engaging the Next Generation https://www.rockpa.org
I. Strategic Conclusion
DAFs sit at the intersection of permanence, flexibility, and intent.
Grant-only deployment treats DAFs as spending accounts.
Compounding impact strategies treat them as legacy engines.
As the wealth transfer accelerates, families who adopt a Profit + Purpose approach inside their DAFs will dramatically increase the durability, reach, and coherence of their charitable impact.
The question is no longer whether DAFs can evolve.
The question is whether they will be structured to do so deliberately.
Ivystone exists to support families and institutions ready to make that transition.
Frequently Asked Questions:
Legal and Fiduciary Considerations
**Q: **Can DAF assets be invested for growth?
**A: **Yes. DAF sponsors routinely invest contributed assets, and investment appreciation is tax-exempt. Industry reporting confirms that investment growth materially increases capital available for grants.
**Q: **Does investment growth remain available for charitable use?
**A: **Yes. Investment appreciation remains within the DAF and directly increases future grantmaking capacity.
**Q: **Is impact investing compatible with DAF structures?
**A: **Impact investing may be compatible when implemented under sponsor control, with appropriate diligence, and in compliance with prohibited benefit and excess business holdings rules.
**Q: **Does this approach replace traditional grantmaking?
**A: **No. Compounding impact strategies complement grantmaking by preserving and expanding the capital base from which grants are made.
**Q: **Who retains decision-making authority?
**A: **All assets remain owned and controlled by the DAF sponsoring organization. Donors and advisors provide recommendations; sponsors retain discretion.
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