A puzzling 2023 data set for the DAF market provides mixed indications on the direction of the DAF market
This week, the National Philanthropic Trust (NPT) unveiled their highly anticipated annual Donor-Advised Fund Report—the only industry-wide data source for annual DAF market statistics. The report offers some of the best insights available into the latest data and trends shaping the DAF landscape.
However, this year’s data presents a more complex picture, without as much of a clear overarching narrative. This year there are some significant revisions to prior-year data and noticeable fluctuations in several key metrics. In some cases, trends even seem to be moving in opposite directions: asset values swelled with strong public markets, but contributions fell precipitously. Total grant volume and the number of accounts were pretty flat.
This is a good place to remind ourselves that this is an incredibly challenging data set to pull together and is typically best viewed in a longer term context. This report is sourced from over 1,140 annual tax filings by DAF providers who all have a variety of fiscal yearends: March, June, September or December. Regardless of when any particular DAF’s fiscal year ended, that is still counted as 2023 data.
This report is best viewed as a rolling indicator of the DAF market. While it is the most definitive data source, it’s good to assess the market alongside individual reports by DAF providers, research from the DAF Research Collaborative and the DAF Fundraising Report for a more holistic view.
The 2024 DAF Fundraising Report, released in July by Chariot and K2D Strategies, analyzed nonprofit data on their volume of DAF gifts received in 2019 through 2023. The report showed a similar “leveling off” of year-over-year growth in 2023, following rapid growth for the prior 4 years among most participants. The 2025 report should also give one of the first indications of these trends next year (nonprofits can sign up here if they’re interested in learning more about participation).
Top 10 takeaways from the 2024 NPT report:
1. DAF Assets:
DAF assets saw a significant increase in 2023, driven largely by a broadly positive market. Assets rose by 9.9%, from $228.92 billion to $251.52 billion— a massive pool of funds that is already committed to philanthropy. It’s clear that DAFs will continue to play a key role in nonprofit funding in the coming years.
2. DAF Contributions:
Contributions to DAFs saw a sharp decline, marking the biggest year-over-year drop in history. Contributions fell by 21.7%, decreasing from $75.94 billion in 2022 to $59.43 billion in 2023.
This substantial decline may be partly explained by more challenging market conditions in the prior year; donors may have chosen to let their personal investment accounts recover before transferring additional funds to their DAFs. Another possible factor is that, with asset values within DAF accounts growing so much, some donors may have felt less urgency to make new contributions, as their existing investments were already yielding strong returns and expanding their giving capacity.
3. DAF Grants:
The volume of grants disbursed by DAF account holders experienced a slight deceleration, declining by 1.4% from $55.53 billion in 2022 to $54.77 billion in 2023. Despite the drop in new contributions, DAF disbursements remained steady, reflecting the commitment to maintain giving levels even as contributions into DAFs fluctuated. This resilience in disbursements indicates that while DAF contributions may vary with market trends, the funds’ disbursement activities continue to support nonprofits consistently.
4. Account Growth:
The number of accounts grew modestly, 0.6%, to 1,782,281. This might come as a surprise to many given the attention on DAFs and how many more people appear to be using them. It also appears the calculation methodology for number accounts changed this year as meaningful prior year revisions were made that changed recent growth trajectory, but unfortunately there wasn’t any disclosure on this point.
This revision also seems to have impacted the trajectory of average account size - which previously showed a long term trend of steady decreases, indicating a more democratized use of DAFs. However, the latest data shows an average account size of $141,120, growing 9% year-over-year and 49% compared with the 2019 numbers.
While there’s more questions than answers on this point, an important thing to remember is that the majority of DAF accounts are shared by 2 or more people (e.g. a couple or a family), according to the DAF Research Collaborative, so over 3.5 million people are using DAFs.
5. Payout Rate:
The payout rate, or the percentage of total assets that get distributed to nonprofits, remained steady at 23.9%, dropping 0.8% from 2022. The payout rate from DAFs has been one of the most consistent figures over the long history of this report. The 10-year average is 22.7% and in no single year has the overall payout rate been below 20%.
This is one of the most important indicators of the impact DAFs have on the nonprofit industry and on individual’s philanthropy.
6. DAFs vs. Private Foundations:
DAFs are often criticized for not having a minimum required payout rate like the private foundation threshold of 5%, but in practice DAFs are used much more actively in giving. Private foundations hold 6x more assets than DAFs, with $1.48 trillion in assets compared to $251.52 billion in DAFs. And yet, private foundations only distribute 2x the grant volume of DAFs. In 2023, private foundations distributed $114.11 billion in grants, while DAFs distributed $54.77 billion.
7. Single Issue Charities:
The DAF fundraising report also gives us a valuable look into how trends are impacting different types of DAFs. One of the 3 categories they break out are Single-Issue charities that serve as DAF sponsors. These can often be religiously affiliated DAFs or DAF programs hosted by individual university, hospital or large nonprofit.
Single-issue charities defied the broader trends this year, experiencing a significant spike in both grants and payout rates. Grants from these charities rose 26.3%, increasing to $7.19 billion in 2023 from $5.69 billion in 2022.
The total payout rate rose to 34.2% in 2023, up from 26.7% in the previous year.
One example of this is the Jewish Communal Fund of NYC, which reported an increase in annual grantmaking of over 50% in 2023, disbursing over $900 million in one year.
8. Community Foundations:
Community foundations appear to be the hardest hit by declining contributions, with a 31% decrease year-over-year. Despite this drop in contributions, their assets have remained stable, bolstered by strong market performance. In fact, their payout rates have increased meaningfully, indicating that while contributions may be down, these account holders have been able to maintain and even enhance their charitable giving.
9. Post-Pandemic Normalization:
Thinking about these findings in a longer term context, it seems like there is a clear trend of normalization in the market post-pandemic. We saw huge surges in 2021 in many key indicators, with some of the largest single year increases on record in contributions, grants, assets and accounts. These figures are all still extremely elevated from their 2019 numbers, but have either fallen off of those sharp peaks, or slowed their rate of growth.
10. Significant Data Revisions
The report includes some substantial revisions to prior-year data – some of the 2022 numbers vary in this report from how they were presented last year – which is meaningful and intriguing to analyze on their own.
Some of the bigger changes like Number of Accounts and Average Account Sizes weren’t really explained, but we did get additional insight into the DAF Grants calculation.
For the first time, DAF-to-DAF transfers were included in the disbursement data, (the amounts and frequency of funds distributed by DAFs), as noted in a footnote in the report. While the report doesn’t provide explicit details, it appears that these transfers accounted for less than 5% of the total disbursement volume, given the approximate 5% upward revision.