July 18, 2011; Source: Investment News | According to this article from Investment News, small foundations are increasingly opting out of foundation status and into donor advised fund status. This has resulted in big increases in the amounts that have been transferred from foundations into charitable gift funds like those at Fidelity, Vanguard, and Schwab.

Fidelity reports that the amount they took into donor advised funds from foundations last year (ending June 30) almost doubled from $16 million to $30 million. Schwab Charitable saw almost the same rate of increase to $28 million over the same period and the Vanguard Charitable Endowment had transfers from foundations grow from $15 million to $28 million.

Benjamin Pierce, president of Vanguard, suggests that the increase in the use of donor advised funds over private independent foundations, is due to a combination of an urge for investment safety and a reduction of operating costs. “The smaller foundations are beginning to understand it’s uneconomical to run a foundation at that size,” says Pierce.

The median size of gifts from foundations to Vanguard is $100,000 but its highest has been $68 million. Schwab has developed an online tool that makes it easier to measure whether a foundation might be better served through converting to a donor advised fund as part of a specialized “conversion service” for foundations.—Ruth McCambridge