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 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.