Liquidity Management in Alternative Investments for Donor Advised Funds

Why is liquidity important in a donor-advised fund (DAF) with alternative investments?
- Liquidity ensures that you can meet obligations such as:
  - Administrative and investment management fees.
  - Capital calls for your investment strategy.
  - Charitable grants to the charities of your choice.
- It is critical to manage liquidity effectively, especially for investments with long lockup periods (e.g., 3-5 years or longer).
What are the common liquidity challenges in private equity or venture capital investments?
- These investments often require funds to be locked up for extended periods.
- Redemption rules and timing can limit access to capital when needed.
How can investors manage liquidity effectively in a DAF?
- Review subscription and fund documents to understand the liquidity terms and obligations.
- Maintain at least 20% liquidity within the donor-advised fund to ensure financial flexibility.
What are fund-specific redemption rules, and why do they matter?
- Redemption rules define when and how investors can access their capital.
- Understanding these rules helps align liquidity planning with investment and charitable goals.