All contributions to a donor-advised fund at Daffy Charitable Fund, a registered 501(c)(3) tax-exempt organization, are considered irrevocable donations by the IRS. When signing up, Daffy members select one of the available investment portfolios for their contributions to their donor-advised fund. All member contributions assigned to a given portfolio are held together in a single pooled investment account registered to Daffy Charitable Fund.
Why does Daffy use pooled investment portfolios?
Pooled accounts are typically used by unit trusts, mutual funds, and other investment vehicles designed to efficiently and effectively manage a large number of small transactions. Daffy uses pooled investment accounts to best support the wide variety of contributions and donation recommendations made by Daffy members.
What are portfolio units?
Daffy portfolios are divided internally into “units” which are assigned to Daffy donor-advised fund accounts. Daffy portfolios are valued based on the actual value of the securities in the account regularly, and that value is equally divided among all the units in that portfolio.
How does Daffy calculate how much money is in each donor-advised fund account?
Every donor-advised fund account is assigned a specific number of portfolio units. Daffy Charitable Fund updates the value of each portfolio regularly, typically multiple times per day, based on the actual value of the assets held in the portfolio. The value of a member’s donor-advised account is calculated based on the number of portfolio units attributed to their account multiplied by the current portfolio unit price.
How are portfolio units assigned to my Daffy account?
When members make a contribution to Daffy, they are assigned a number of units based on the size of the contribution and the current portfolio unit price. For example, if a member contributes $100 and the value per unit when their funds enter the portfolio is $2, they are assigned 50 units in the portfolio.
When Daffy approves a donation recommendation from a member, Daffy reduces the number of units assigned to a donor-advised fund account based on the size of the donation and the current portfolio unit price. For example, if a member donates $100 to charity and the value per unit when their funds enter the portfolio is $2, and 50 units in the portfolio are removed.
What happens when a portfolio receives dividends or interest?
When investment assets in a Daffy portfolio receive dividends or interest payments, the value of that particular Daffy portfolio increases. As a result, the next time the Daffy portfolio is evaluated, the increased value is evenly divided across all of the units in that portfolio. For example, if a Daffy portfolio holds $100 in securities, and is divided into 100 units, then the portfolio unit price is $1. If the portfolio then receives $5 in dividends, the portfolio is now worth $105, which is divided by 100 units, resulting in a portfolio unit price of $1.05.
Why do Daffy investment portfolios sometimes show cash holdings?
Every day, Daffy members make contributions and donations from the portfolios which can affect the cash balance for a short amount of time. Contributions add cash to a portfolio, and donations require the liquidation of assets. As a result, all Daffy members who have selected that portfolio may temporarily see an allocation to cash. Once those funds are invested or transferred out of the portfolio, the portfolio returns to its designated allocation. Depending on the portfolio and the trading windows available for the assets in that portfolio, these cash balances can persist for between 1 to 3 business days.