AYC Fund FAQs
How is the AYC Fund Organized?
The AYC Fund was formed on November 22, 2005, as a tax-exempt donor-advised fund under the umbrella of the Austin Community Foundation (ACF), and was reclassified as a “field of interest fund” in 2018. While the Austin Community Foundation (ACF) provides excellent administrative support in the process of gathering donations, it is relatively difficult to make grants from an ACF fund to anything other than another tax-exempt entity. Specifically, this made it difficult for the Fund to make grants to individual recipients. To address this issue, the Roadrunner Amateur Sailing Association (RASA) was formed in February 2009. RASA is related to the AYC Fund in that its board has historically been made up of a subset of the AYC Fund board. RASA received its tax-exempt status from the IRS under code section 501(c)(3) on June 9th, 2009. In practice, donations to the AYC Fund are made in one of two ways: (1) donations directly to the AYC Fund donor-advised fund via the ACF, or (2) donations made to RASA via the Austin Yacht Club. Funds can be granted back and forth between RASA and the ACF fund, and grants to individuals or organizations are made via RASA.
Does the name RASA imply that the fund is intended to benefit the AYC Roadrunner junior sailing program?
The name “Roadrunner” is just taken from the symbol of the Austin Yacht Club. While the AYC fund does make grants to junior sailors and the junior program, it also makes a wide range of other types of grants.
What is the Austin Community Foundation?
The Austin Community Foundation is an organization that supports Austin-based charities by providing services to help the missions of its member charities. This page summarizes the mission and capabilities of the foundation. It was founded in 1977 and has $250 million under management from its member charities.
How does the AYC Fund manage its money?
The bulk of the AYC funds are managed by the ACF in a diversified investment fund. In addition, RASA has a checking account that is used for collecting gifts and making grants. The balance of the RASA checking account is kept small so that the bulk of the funds can be exposed to the growth potential of the financial markets.
How are the funds invested at the Austin Community Foundation?
Until 2018, AYC Fund assets were invested in the Long Term Actively Managed Fund (see this chart for a comparison of the options available via ACF). In 2018, the AYC Fund transitioned to a newly available passively managed fund that differs in two ways from the actively managed fund: (1) as a passively managed fund, the management fees are about one-third of the actively managed fund, and (2) the passively managed fund does not invest in “alternative” investments such as private equity or hedge funds. An overview of the investments and portfolio performance are available in this document.
Isn’t it risky to keep the AYC Fund money in the stock market?
The AYC Fund should be thought of as an endowment that is intended over time to grow and ultimately generate income. This is not so different from a family’s retirement investment portfolio. During the growth phase of the fund (which we are in right now), donations to the fund are exceeding grants from the fund, which means that we are adding money to the investment account each year. Since we do not yet intend to have the fund “live off of its earnings” we want the fund have the opportunity to grow, which means investing in the equities markets. The specific fund has a target of 80% of assets in US and global equities, and 20% in bonds and cash. While the stock market (and hence the fund balance) can fluctuate, the long-term growth of the fund through its investments has been strong. Because the fund is in growth mode, it can weather these types of market fluctuations. Over time, the AYC Fund Board may choose to change its investment strategy to one that focuses more on income generation, at the expense of growth. But to date, that has not been appropriate.
What fees does the AYC Fund pay to the ACF?
The list of fees that we pay to the ACF are as follows:
- Fund administrative fee: 1% of assets
- Management fee (investment counsel): 0.09% of assets
- Investment fees which are rolled into the yield of the investment fund: 0.2-0.25%
- Credit card fees: 2.7% of charged amount plus 30 cents per transaction
Why don’t we just keep the ACF funds in a brokerage account?
When the AYC Fund was established in 2005, the first board members selected to create a donor-advised fund with the ACF because (1) the ACF provided the services necessary to run the fund, including tax-exempt status, the ability to take credit card donations, and investment vehicles to grow the endowment; and (2) employing a third-party such as the ACF to manage the fund provides continuity across the regularly changing membership of the AYC Fund board. While there are other ways that the funds could be invested, it would be wise to employ an organization that provides similar services and continuity.
Have more questions?
We’d love to hear from you! Contact us at: aycfundboard@gmail.com