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Charitable Gift Funds Grow in Popularity

Charitable gift funds, introduced for the first time nearly a decade ago, have gradually gained a following, spurring additional firms to add new funds. Just last week, OppenheimerFunds of New York, introduced its first charitable gift-fund, the OppenheimerFunds Legacy Program.

"Public interest in, and donations to, charitable causes continue to grow," said Bridget Macaskill, chairman and CEO of OppenheimerFunds. "This is especially true of the tens of millions of baby boomers, many of whom, thanks to substantial and sustained appreciation in stock prices, have seen significant increases in their net worth."

Total net assets in charitable gift funds were $38.2 billion in 1999, according to a study by The Chronicle of Philanthropy of Washington D.C., a newspaper covering nonprofit institutions, charities and philanthropies. Assets in the largest donor-advised fund pools rose 131 percent between 1995 and 1999, from $2.4 billion to $5.5 billion, according to the study. During that period, grants given to charities rose from $500 million to $1.2 billion, according to the study. The biggest donor-advised fund pools included Fidelity Charitable Gift Fund, Schwab Fund for Charitable Giving, Scudder Charitable Foundations, Vanguard Gift Fund, American Guaranty & Trust Company American Gift Fund, Bessemer National Gift Fund, and Pitcairn Trust Company National Philanthropic Trust.

The major tracking firms do not follow charitable gift funds so information as to their total number is not available.

Charitable gift funds are donor-advised funds. In a donor-advised fund, an irrevocable donation is pooled with other donors' contributions and invested by the fund. Donors have the privilege of making recommendations as to what organizations funds will be donated. These recommendations are subject to approval by the trustees of the donor-advised funds. Policies on charitable grant distributions can vary from organization to organization. Contributions to donor-advised funds are considered outright gifts to public charities so they are tax deductible.

"The benefit to a program like this is that if somebody has appreciated securities and they donate these securities into the portfolio - into the Legacy program - they are going to get a tax deduction on the capital gains that might have been incurred had they just sold those securities on a regular basis and then donated that money," said Gregory Stitt, a spokesperson for the OppenheimerFunds.

In 1992, Fidelity Investments of Boston became the first fund company to offer a donor-advised charitable fund. Since its launch, Fidelity Charitable Gift Fund's net assets have risen from $11.8 million after the first year to almost $2.5 billion, as of Sept. 30, according to Fidelity. Since its inception, the fund has donated more than $1 billion to U.S. charities, said Rudman J. Hum, chairman of the fund's board of trustees.

Vanguard's Charitable Endowment Program was introduced in December 1997. In its first year, the fund gathered net assets of $72.2 million in more than 550 accounts. Last year, net assets reached $202 million in 1,268 accounts. The fund has made 3,653 grants totaling $19.5 million in fiscal year 2000. Since the fund's inception, it has made 4,697 grants totaling $26.2 million.

Schwab Fund for Charitable Giving was introduced in September 1999. As of June 30, it had total assets of $61.8 million. In the first half of this year, the fund donated $13.3 million to charitable organizations.

Other companies with charitable gift-funds include Merrill Lynch of New York and American Century of Kansas City, Mo., according to Cynthia Egan, president of Fidelity's Charitable Gift Fund.

"What accounts for the popularity of the fund is the old American tradition of giving to our fellow citizens," said Cynthia Egan, president of Fidelity's Charitable Gift Fund.