Commercial Gift Fund or Community Foundation: What’s Right for You?

We’re often asked about the difference between a commercial gift fund and community foundation fund. To answer this question, we find it best to start with a bit of history.

Why Were Community Foundations Created?

The first community foundation was established more than 100 years ago by community-based citizens, intent on improving their communities through pooled philanthropy. At the time, if you were a Carnegie or a Rockefeller, you could start your own private foundation.

There were few other options for people who wanted to improve their local community through organized philanthropy.

Community foundations were created for people who had resources and were philanthropically inclined, to allow them to pool their resources with others from the community. These donors could share the back-office work of a foundation, while learning about local opportunities and making grants to organizations that could make communities better.

Why Were Commercial Gift Funds Created?

Fast forward 80 years.

Large commercial brokerage firms realized they were losing out on the management of assets at community foundations, and decided to start their own charitable funds, primarily to be able to manage assets. So, the Fidelity Gift Fund and many other commercial gift funds were born.

What’s the Difference Now?

Community foundations are local organizations governed by community members who want to improve their community because they work in our cities, live in our neighborhoods, and have children in our schools.

While donors who establish charitable funds at community foundations may recommend grants to organizations outside of their local community (less than 1 percent of San Diego Foundation donors), most community foundations grant local and share the following values:

• They care deeply about their local community and want to learn together though local programming.
• They want to impact the local community, either through grantmaking or the management fee charged to their fund that supports their community foundation.
• They value the personalized service community foundations offer and the local expertise of the foundation’s board, staff and volunteers.
• They are more likely to entrust a community foundation with the long-term stewardship of estate gifts because the foundation is locally based and governed by volunteers from the community

On the other end of the spectrum, commercial gift funds:

• Are nationally-based funds governed by individuals, most of whom do not live or have knowledge of the local community.
• Offer a “point-and-click” platform for grantmaking and little local expertise about opportunities that improve the community in which the donor lives.
• Offer lower fees but do not share any of the fee income generated by the fund with the local community.
• Typically don’t provide an opportunity to connect with other donors and/or to participate in local programming that benefits the community as a whole.

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