This article follows our recent update, “Government Announces Major Changes to Ancillary Funds (Giving Funds)“, which outlined the Government’s decision to rename Private and Public Ancillary Funds as Giving Funds, align minimum distributions to 6%, and allow distributions to be smoothed over a three-year period.
These reforms are not simply administrative. They materially change how Giving Funds must think about investment strategy, portfolio construction, and risk management.
The critical question for trustees and founders now becomes:
Is our investment strategy genuinely designed to support a 6% distribution – consistently, sustainably, and through market cycles – while preserving the Fund’s long-term giving capacity?
For many Giving Funds, the recent announcements should act as a clear trigger to review and, where necessary, reset their approach.
The Shift to 6%: A Higher Bar for Investment Outcomes
Under the new framework, all Giving Funds will be required to distribute at least 6% of net assets per year. While many funds have historically met or exceeded this level, doing so reliably going forward is not guaranteed, particularly in a more volatile investment environment.
Trustees should be asking:
- Is the portfolio targeting returns meaningfully above 6% after fees and inflation?
- What happens to distributions if markets deliver a poor year, or several in a row?
- Will meeting the 6% requirement force the sale of growth assets at unfavourable times?
A portfolio that was ‘good enough’ under a lower distribution regime may now fall short when tested against higher and more consistent cashflow demands.
Distribution Smoothing: Flexibility That Must Be Earned
One of the most important, and most misunderstood, elements of the reforms is the ability to smooth distributions over a three-year period.
This flexibility allows Giving Funds to distribute more in strong years and less in weaker years, supporting more stable and strategic grantmaking. However, smoothing is not automatic.
It only works when the investment strategy is intentionally structured to:
- Build reserves in strong market conditions
- Maintain sufficient liquidity for grant commitments
- Avoid excessive volatility that undermines long-term capital
Funds that rely heavily on a traditional balanced or growth portfolio, often adopted at establishment and left untouched, may struggle to use smoothing effectively when it is most needed.
Giving Fund Portfolios Are Not Personal Portfolios
A Giving Fund has a fundamentally different purpose from a personal or SMSF portfolio.
The objective is not maximising returns in any single year. It is to support ongoing, reliable giving, year after year, generation after generation.
That raises important strategic questions:
- Is the Fund overly dependent on equity market growth to fund annual grants?
- Is there appropriate diversification across asset classes, sectors, and return drivers?
- Would a greater focus on income, capital preservation, or alternative assets improve stability?
Investment risk in a Giving Fund should be aligned to charitable intent, not personal risk tolerance.
Governance Expectations Are Rising Alongside the Reforms
The Government’s changes also raise expectations around trustee oversight and governance.
Trustees should be able to demonstrate that:
- The investment strategy has been reviewed in light of the new rules
- Portfolio construction supports both distribution obligations and capital longevity
- Performance, liquidity, and risk are actively monitored
An outdated investment strategy, particularly one that has not been reviewed since the Fund was established, creates not only financial risk, but also governance risk.
A Clear Call to Action for Giving Fund Trustees
If your Giving Fund:
- Has not reviewed its investment strategy since the reforms were announced
- Is narrowly meeting the 6% distribution requirement
- Experiences significant year-to-year volatility
- Or was established quickly without a purpose-built portfolio
then now is the right time to act.
A structured portfolio review can help determine whether your Fund is positioned to:
- Sustain 6% distributions through market cycles
- Make effective use of distribution smoothing
- Support its charitable mission with confidence and resilience
How Giving Advisory Can Help
At Giving Advisory, we work exclusively with Giving Funds and philanthropic structures. We help trustees ensure their investment strategies are aligned with:
- The new regulatory framework
- Long-term sustainability of the Fund
- The giving objectives of founders and families
Our approach goes beyond performance reporting. We focus on structure, resilience, and outcomes, so your Fund can give with confidence, regardless of market conditions.
Next Steps
If you would like to review your Giving Fund’s investment strategy in light of the recent Government changes, we invite you to contact Giving Advisory for a confidential discussion.
A proactive review today can protect and enhance the impact your Giving Fund delivers for years to come.