Impact Drives Alpha, and Other Lessons from ‘100% Impact’ Donor Advised Funds

Impact can drive alpha—but market-beating returns are hard to come by in short-term investments. An impact portfolio that’s not under regular review is probably losing its impact. Assessing true impact at the community level grows more challenging as impact investments scale.

RSF Social Finance learned all these things from the impact portfolio created for the Donor Advised Funds we administer. DAFs have acquired a somewhat tarnished reputation recently, and there are good reasons for that. Yet the negative publicity has obscured the ways these philanthropic funds can serve as tools for innovation, not just in grantmaking but in how DAF assets are invested.

Our portfolio demonstrates that. Acting on our belief that philanthropic funds can be most transformational when they support development and testing of new models, RSF was one of the first investors to create a 100% impact portfolio for the DAF assets we hold. When we started on this path in 2006, there were few standardized models to follow. We forged our own way forward, and over the last decade-plus, we’ve experienced a full share of stalls, strategy shifts, and dead ends. We’ve made some good investments and some bad ones. We’ve also grown and learned. Our most recent portfolio review yielded several clear lessons and a new, more rigorous approach to assessing impact.

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