Schwab Introduces Charitable Gift Fund
November 15, 1999
Charles Schwab Corporation of San Francisco has introduced a mutual fund for people who want to donate to charitable organizations, joining a relatively small number of fund companies offering similar products.
The Schwab Fund for Charitable Giving, which opened on Sept. 29, is a "donor-advised" fund that allows individuals to make an irrevocable, tax-deductible contribution of cash or securities which are invested in three mutual fund pools - growth index, balanced index and gift preservation.
While he declined to disclose sales figures, a spokesperson for Schwab said the company was "happy" with sales so far.
Donors can donate to more than one organization, with a minimum $500 per donation, said Mo Shafroth, the spokesperson.
The other main players in the charitable giving fund market are Fidelity Investments of Boston and Vanguard Group of Malvern, Pa., said Peter Starr, a consultant with Cerulli Associates of Boston.
"It's a niche," Starr said. "Fidelity thinks it's a bigger channel than most. Fidelity was the first firm to aggressively focus on charitable giving. They think it's the next 401(k) market, and they probably have some experience in predicting these kind of things."
The channel has possibilities, Starr said.
"There's a lot more awareness of this kind of fund and a lot more people with the ability to give," he said.
The Fidelity Investments Charitable Gift Fund, which is also donor advised and invests donors' assets in four investment pools, was opened in 1992, said Lori Kelman-Seely, a Fidelity spokesperson. By the end of 1998, it had $1.6 billion in assets, she said.
The Schwab fund has a publication, "Seven Principles of Charitable Giving," for guiding investors in their charitable activities. Schwab reps are also available by phone to answer donor questions. And there is a special web site, www.schwabcharitable.org, with philanthropy information and links to non-profit organizations.
With an initial donation of $10,000 in cash or securities, Schwab establishes a charitable gift account for a client. Contributions to the account are tax-deductible and are placed in three investment pools that grow tax-free to fund charitable giving.
A donor-advised fund means that donors recommend the grants that are made from the charitable gift account.
The investment pools are composed of index funds. The growth index pool invests 45 percent of its assets in Schwab S&P Fund select shares, 30 percent in Schwab International Index Fund select shares and 25 percent in Schwab Small-Cap Index Fund select shares.
The balanced index pool is invested in the Schwab Total Bond Market Index Fund (35 percent); S&P Fund select shares (30 percent); International Index Fund select shares (15 percent); Small-Cap Index Fund select shares (15 percent) and Value Advantage Money Fund (five percent).
The gift preservation pool is 60 percent in the Value Advantage Money Fund and 40 percent in the Short Term Bond Market Index Fund.