Philanthropy Made Easy: the Emergence of Donor-Advised Funds in Asia


Imagine an above-average earner who’s what we may call a “new philanthropist.” Someone who’s been giving to charities regularly for a while, maybe even a few they’ve been supporting for years. Recently, they’ve been thinking about doing more, to have more of an impact through the organizations they already support, and perhaps to look into charities working in other areas — but they’re unsure where to start. 

Enter donor-advised funds (DAFs). As many readers will know, these accounts are similar to asset management funds, but any funds deposited must be designated for charitable donations. They are managed by a third party, with a fund management team that handles the donation process end to end — from the administrative management of the account to conducting due diligence and reporting on what the donation helped achieve. The defining characteristic of a DAF is in its name, “donor advised” — the donor maintains an advisory role on when and how funds are distributed to charities.

The appeal of DAFs is that they alleviate the administrative burden of philanthropy. In Asia, a region where wealth is on the rise, DAFs are growing in popularity as “training grounds” for philanthropy. What they offer to Asian donors is attractive not just to the new philanthropist, but to the established philanthropist, as well.

“In 2010, DAFs were still a relatively novel concept in Asia,” said Dawn Tan in an interview with the Centre for Asian Philanthropy and Society (CAPS). Tan is the deputy chief executive officer of SymAsia, a key provider of DAFs in the region. “We felt that such a platform would meet a need among our clients, many of whom were keen to engage in philanthropy but could not devote the time and energy needed to run their own foundations.”  

DAFs emerged in the United States nearly a century ago with the first DAF established in the 1930s at the New York Community Trust. Since then, DAFs have grown exponentially. In 2021, the U.S. had over 1 million DAF accounts, holding more than $234 billion in assets. The largest U.S. grantmaker, having distributed more than $11.2 billion in 2022, is Fidelity Charitable (a subsidiary of Fidelity Investments), whose primary holdings are DAFs. 

However, because of the rapid growth of DAFs in prominence and asset size, one feature has been receiving increasing scrutiny in the U.S. — tax deductions. Most sponsoring organizations are legally registered as charities, making them eligible to receive tax-deductible donations. As such, U.S. donors can obtain an immediate tax deduction for their contribution to a DAF. While donations to DAFs are irrevocable, there are concerns that they are sitting in the funds for too long. Receiving an immediate tax benefit does not incentivize donors to distribute the funds to charities that need them as soon as possible. 

There is some merit to these concerns. In the U.S., DAFs have often received more attention for their tax advantages than for their philanthropic and charitable functions. A survey conducted by Fidelity Charitable in 2022 found that for almost 90% of donors, tax and financial benefits were the main reason for setting up a DAF.

The story of DAFs in Asia has been quite different, according to a report by CAPS. Based on 25 interviews with sponsoring organizations across Asia, the study sought to understand the landscape of DAFs in the region.

DAFs were introduced in Asia in the early 2000s against a background of increasing wealth and growing interest in philanthropy, and this trend has since continued. In 2022, Asia had over 950 billionaires and counting, according to the Forbes real-time billionaires list. Wealth across the region continues to rise rapidly. A study by Credit Suisse in 2022 found that between 2000 and 2021, the value of assets held by the wealthiest top 1% of people increased 11 times in India and 34 times in China, compared to 3.6 times in the U.S. 

Asia is also home to figures who are well known in business and philanthropy globally. Take Azim Premji, for example, the first Indian to sign the Giving Pledge. To date, he has already donated $20 billion. Or the brothers Ronnie and Gerald Chan of Hang Lung Group in Hong Kong, who donated $350 million to the Harvard School of Public Health in 2014 and $175 million to the University of Massachusetts’ medical school in 2021, both the largest-ever gifts to the universities at the time.

There is, however, another demographic of philanthropists in Asia beyond these ultra-wealthy donors. “There is a growing donor pool who are getting richer but are not yet ultra-rich,” said Dr. Nivedita Narain, chief executive officer of Charities Aid Foundation India, another DAF sponsor interviewed by CAPS. “They are interested in philanthropy and open to international models and practices.” Before DAFs, they had two options: direct donations to charities or, if they wanted to be more systematic, setting up a foundation.

The ultra-rich have many options for giving; the layer just below less so. DAFs offer a middle ground solution where the donation process is simple, but donors can still be strategic with their philanthropy. “DAFs are attractive due to low costs, having a professional team, receiving support and mitigating operating costs risks,” said a DAF sponsor in China, the Lingshan Charity Foundation, in an interview for the CAPS report on DAFs.

DAFs are significantly less costly to establish and manage than foundations. Private foundations are responsible for their day-to-day management, involving a range of operating costs, from legal and accounting fees to staff and facility expenses. For DAFs, the sponsoring organization bears these costs, as well as taking on all the administrative responsibilities, including legal and accounting compliance and recordkeeping.

The key point when it comes to DAFs in Asia is that in contrast to the U.S., tax incentives do not feature heavily, if at all, in conversations with DAF sponsors and donors in Asia. This is in part due to regulatory differences, as tax benefits in Asia for charitable donations are often lower than in the U.S., and therefore less of an incentive — to the extent that some donors are not even aware of them. According to CAPS’s interview with the Social Venture Group, a philanthropy consulting firm in China, “Many Chinese donors will only learn about tax benefits after they have decided to set up or donate to a DAF. So for these donors, tax is not the original driver to establish DAFs.”

Meanwhile, the question of payout, which has provoked much debate in the U.S. given the tax-incentivized nature of DAF giving there — and the lack of any disbursement requirements — is less of an issue in Asia. Indeed, as the CAPS report outlines, Australia and China do impose annual disbursement requirements on DAFs.

The growth of DAFs in Asia is good news for philanthropy across the region. Without the debate surrounding tax incentives, the narrative of DAFs in Asia remains focused on the philanthropic value they offer, especially as they increase in popularity as giving vehicles. By lowering the barriers to entry to philanthropy, both in terms of capital and expertise, DAFs can leverage the rapidly emerging group of wealthy donors in Asia to cultivate structured and strategic giving.

Natalee Hung is a Research Associate at Centre for Asian Philanthropy and Society (CAPS).