PEF operates two funds:

Group Fund: donations less than $180,000, which are grouped together for collective impact.

Personal Fund: donations more than $180,000, which provides a custom experience with a dedicated Donation Specialist.

For either fund, clients make a 100% tax deductible contribution to PEF (501c3 public charity) and provide an allocation preference for one or more of the 8 PEF sectors. The PEF fund managers then audit 501c3s (mainly in the US and occasionally across the world) to decide where to deploy PEF’s capacity building and fundraising services supported by your client’s donation. Generally, PEF works with a benefiting 501c3 for one 3-year term to maximize the Return on Contribution (ROC) value of the donation.

Capacity building is an overarching term that represents the short- and long-term activity performed to promote a nonprofit’s sustainability and fulfillment of its mission.

Simply put, PEF wholeheartedly believes that capacity building is the most effective way to invest in a nonprofit’s ability to generate positive impact on the lives and communities it serves.

Return on Contribution (ROC) is a ratio that represents the total incremental amount raised by a benefiting 501c3 over the cost of the PEF capacity building services. Historically, the PEF has been able to achieve an 18x ROC ratio with its benefiting 501c3s, effectively making the donation 18x more valuable to the benefiting 501c3 than just a 1:1 gift.*

PEF operates two funding options: the Group Fund and the Personal Fund.

Group Fund: There is no minimum donation required to participate in the Group Fund. Donations to this fund are combined and all results of the fund are reported in aggregate to your client.

Personal fund: The minimum donation for the Personal Fund is $180,000. This covers one 3-year term with a benefiting PEF 501c3 in a chosen sector. Donors may choose to donate more, which creates efficiencies of scale and allows PEF to serve even more 501c3s in the chosen sector(s).

Group Fund: No, contributions to this fund are 100% allocated by the PEF fund managers.

Personal Fund: Yes. However, keep in mind that like your investment strategy for your clients’ portfolios, diversification is key to reducing risk and promoting positive outcomes. If a client really wants a particular benefiting charity and/or location, PEF can focus its search and evaluation on 501c3s in a particular location or perform an audit of the specific charity’s potential to produce a return on contribution (ROC). PEF then provides a yes or no to the donor. Candidly, PEF’s audit heavily weights the leadership team’s characteristics and the organization’s ability to scale, very similar to the for-profit investment world!

Based on historical data, PEF considers a 3-year term as one full cycle. We are confident we can maximize the time/value ratio and balance out the value of the non-linear nature of capacity building with a 3-year engagement with a 501c3. This is why we set the donation term to 3 years for donations.

When vetting 501c3s to be a part of PEF’s portfolio of recipients, the fund managers first perform a rigorous audit that evaluates the leadership’s ability to deliver impact. Beyond that, we tend to heavily weight organizations that create meaningful impact, with a particular focus on organizations that are early stage and have the potential to rapidly replicate and scale.

No is the short answer. Think of PEF as a 501c3 charity that operates programs and benefits from client donations. Because in reality, that is exactly what PEF is. The way the organization thinks, operates with partners (such as you), and views adding value to donor relationships is unique.

Some see PEF as a better alternative to a DAF because it deploys impact capital much faster and has a much better donor experience built in. Also, advisors have creatively built endowments with DAFs and established quarterly distributions to PEF so the DAF acts as an endowment supporting PEF (advisors have used taxable accounts for the endowment, too).

Group Fund: All communication will be distributed to your client electronically from a Donation Specialist that operates the Group Fund. The donation specialist will provide updates to your client for a period of 3 years after your client’s latest contribution to the Group Fund.

Personal Fund: 3 years from the date of the latest donation made. This allows PEF to complete the latest 3-year cycle with your client.

Absolutely. In fact, we prefer it. PEF’s relationship with you is equally as important as with your client. In many cases, the Donation Specialist becomes a trusted partner in the ecosystem, just like an estate attorney and CPA. Additionally, PEF Donation Specialists can join annual client meetings or take on more of a background role- whichever scenario is preferable.

Absolutely, yes. If it is your client’s intention to be 100% anonymous, we take that request very seriously. The donation process can be administered through a financial professional (such as you, an estate attorney, or CPA). Then, it is up to the donor what amount of contact they would like from PEF and how (if at all) performance and impact information is distributed to them.

For both the Group Fund and the Personal Fund, PEF readily accepts cash, check, securities, and cryptocurrency donations. See our donation page to better understand how to transact with PEF. In some cases, PEF will accept illiquid assets. If your client desires to contribute an illiquid investment, please be in touch with PEF so we can discuss the opportunity with you.

Group Fund: Performance and allocation information are communicated to your client twice per year through email.

Personal Fund: Our Donation Specialists are always available to donors if they have a question. Performance and allocation information are communicated to your client twice per year. Also, once per year a more formal time to meet with your client is scheduled to review financial performance and the qualifiable impact of the donation. In some cases, PEF can broker direct conversations with the Executive Director of a benefiting 501c3 for a more meaningful experience. The PEF performance report (example displayed below) is provided semi-annually to the donor.

This table illustrates the historical 1 and 3 year returns of two popular ESG/sustainability funds (equity investments) vs the ROC achieved by the Philanthropic Expansion Fund. PEF is not an equity investment; however, the three funds are comparable in terms of their ability to generate ESG/social impact dollars.

In the outlined scenario, a $10,000 investment in either equity investment achieves less than a 10% return; however, a risk-free donation of $10,000 to PEF results in a $10,000 tax deduction and historically generates $180,000 of real, quantifiable impact over the same time period.

Yes.

As a non-equity, 100% tax-deductible transaction, a donation to PEF still generates social impact. In fact, PEF believes that the impact created by PEF 501c3s via supporting PEF is arguably one of the most efficient and effective ways an advisor can generate social impact metrics for a client’s portfolio.

Connect with us directly if you are interested in learning more about how PEF integrates into client portfolios and how PEF is redefining how advisors can capture and deliver impact within client households.