Donor-advised funds, or DAFs, are the duck-billed platypus of the philanthropic world: a very weird creature that shouldn’t, by rights, exist. When described, they make very little sense, and it’s easy to get angry about them as a result. But you shouldn’t. Because, weirdly, for all that they are bad things in theory, they turn out to be good things in practice.

If you want to know why DAFs are considered evil, look no further than an article which appeared in the New York Review in 2016, by Lewis Cullman and Ray Madoff, entitled “The Undermining of American Charity”. As Cullman and Madoff explained, quite correctly, DAFs “give donors all of the tax benefits of charitable giving while imposing no obligation that the money be put to active charitable use.”

A plutocrat can take a million dollars today, or even a billion or more, put it into a DAF, invest it in the stock market, watch it grow, control how it’s invested, and never give a penny to charity – all while taking a massive up-front tax deduction. If the charitable tax deduction is supposed to encourage and reward the donation of money to charitable causes, it’s perverse to see it used in a context like this, where the primary beneficiary would seem to be the big asset management companies (Vanguard, Schwab, Fidelity, and the like) who get to manage the funds.

Read the full article by Felix Salmon about donor-advised funds by Felix Salmon at Cause & Effect.