Philanthropy

Cazenove Capital Eyes Strong Donor Advised Fund Demand

Tom Burroughes, Group Editor, London, 13 January 2022

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Donor-advised funds are a turn-key solution for rapidly building a philanthropic toolkit and getting past some of the snags involved in creating charities, the UK wealth management firm has said after launching a DAF recently.

Professional advisors in the UK are enthusiastic about donor advised funds (DAFs) as a convenient way to execute clients’ charitable goals, Cazenove Capital said after launching a DAF in December.

Cazenove Capital has rolled out Cazenove Capital Donor Advised Fund, administered by National Philanthropic Trust UK. Cazenove Capital manages £200 million ($274 million) in third-party DAFs for UK clients including family offices, business owners and entrepreneurs and private individuals. 

The devastating impact on many lives from the pandemic and associated lockdowns have helped sharpen focus on philanthropy.

DAFs – which are already a large market in the US – can be opened relatively quickly, contrasting with the chore involved in creating other structures, such as foundations. That is an important source of its appeal, Lyn Tomlinson, head of impact and philanthropy at Cazenove Capital, told this publication.

“One of the key things with philanthropy is to `get going’,” she said. 

According to NPT UK's 2021 report, contributions to donor-advised funds were £610 million in 2020, rising 0.4 per cent on a year before. Charitable assets in DAFs total £1.9 billion, up 8 per cent over the prior year. The aggregate grant pay-out rate from donor-advised funds was 28 per cent in 2020 versus 31 per cent in 2019. A research report from Cazenove Capital of 70 family office members or their representatives also reveals that only a third (35 per cent) have created a charitable trust or foundation.

DAFs carry tax advantages. UK taxpayers who make a cash gift DAF can apply for Gift Aid, depending on their personal tax circumstances. Donors who pay tax above the basic UK income tax rate can reclaim the difference between the rate they pay and basic rate of tax via their personal tax returns.  

The Charities Aid Foundation gives the following example on a gift of £100,000 where the donor pays tax at higher rate of 45 per cent: The DAF can claim Gift Aid on the donation at 25 per cent so the charity ultimately receives £125,000. A person can reclaim £31,250 via a personal tax return (the difference in tax rates (45 per cent – 20 per cent) x gross donation of £125,000).

Lyn Tomlinson, head of Impact and Philanthropy at Cazenove Capital said: “In the past two decades we have seen philanthropic advice move from ‘a nice to have’ to a ‘must have’ for the majority of clients. Charitable giving is an effective way to engage the next generation in the responsibility of wealth, and in many cases to align families to shared causes and interests. There are multiple approaches to philanthropy and impact investing, with each client requiring a bespoke assessment of their priorities before deciding which route is best for them.

Creating a charter for a new charity from the ground up can be hard work and “a bit demoralising at times because of the time it takes.”

“We do see that DAFs will grow. I see a lot of advisors being interested from the professional advisor community,” Tomlinson continued. 

The new Cazenove DAF requires people to donate at least £100,000. Clients can recommend grants from the fund at any time, in support of international and UK charities. Donations can be made using cash, shares, business interests or other assets including property and art. Clients can also choose to invest into Cazenove Capital’s market leading sustainability fund range, or create a bespoke impact investment portfolio, the firm said. 

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