Donor-advised funds date to the 1930s, when foundations such as the New York Community Trust pioneered them. But they didn’t really take off until Edward “Ned” Johnson III, the son of Fidelity’s founder, dreamed up a way to offer them to clients. The idea was to create a public charity that sponsors the accounts and relies on the investment firm to manage the money donors contributed. Those donors, not the money manager, decide which charities get the gifts. Fidelity, based in Boston, applied to the IRS’s Brooklyn, New York, office to establish a new tax-­exempt entity, according to a 1998 Wall Street Journal article. Washington officials realized what had happened only after the request had been approved in 1991, says Paul Streckfus, editor of the EO Tax Journal, who covered early debates over DAFs. The application “should have received a lot of scrutiny,” he adds. “Someone stamped it approved, and Fidelity was off to the races.”

A marketing blitz in the 1990s extolled the benefits to donors, and money started pouring in. Fidelity maintained its lead over the growing ranks of sponsors by leaning on its network of in-house financial advisers to sell the accounts. The company was also ahead of its rivals in accepting assets, such as stakes in hedge funds or crypto, that can be harder to liquidate, allowing people with more complex wealth to free it up for charity.

Money now routinely sloshes back and forth among the major DAF sponsors, tax returns show. Since 2017, donors to the Goldman Sachs Philanthropy Fund have directed more than $800 million to Fidelity Charitable. Meanwhile, Schwab and the National Philanthropic Trust—which partners with banks such as JPMorgan Chase & Co. and Wells Fargo & Co. to offer DAFs to their clients—have been among the 10 biggest recipients of Fidelity’s grants in recent years. Payments from those two outfits and only six others totaled $1.4 billion between July 2016 and June 2021, or more than 4% of all giving from Fidelity Charitable.

Sponsors, which compete on price and service, say the transfers are no different from someone moving a checking account from one financial institution to another. Some donors may be inclined to switch if they get a better deal. Others have multiple DAFs and may be shifting assets among them. Donors also use the accounts as a way to collaborate and pool funds with others on shared initiatives.

But the transfers can make it seem as if more money is flowing to working charities than actually is. The National Philanthropic Trust includes DAF-to-DAF payments in a widely circulated report, which says the industry distributed 27% of assets to charity in 2021. (The trust says there’s no reliable way to quantify transfers to other DAFs.) Fidelity says its own payout rate, which includes DAF-to-DAF transfers, has ranged between 22% and 27% in the past five years. The industry has cited these statistics to bolster the argument that donors are moving money to charity and accounts should, unlike private foundations, be free from mandatory distributions. The average payouts also obscure how many donors empty their accounts each year and how many hardly touch them.

Having the money sit in the accounts can be a boon to the sponsoring organizations. As of June 2021, about half of the almost $50 billion at Fidelity Charitable was parked in Fidelity investment pools, the most recent financial statements show. These pools are predominantly low-cost, but they probably generated more than $90 million a year in fees, based on current expense ratios. The most recent tax return also shows that Fidelity collected $94 million from its DAF operation for administrative and other services.

Fidelity Charitable says that nonprofits always rely on for-profit businesses to provide services such as investment management and accounting. Its link to Fidelity Investments keeps costs low for donors because services are offered “at or below market value,” allowing more money to go to nonprofits, according to the organization. (The biggest donors to Fidelity’s DAFs can have their own investment advisers manage the money in their accounts.)

In its annual Giving Report, Fidelity highlights the most popular charities, which it defines as those getting the largest number of gifts. In 2021, Doctors Without Borders led that list, followed by St. Jude Children’s Research Hospital and the American National Red Cross. Yet none of them cracked the top 25 grant recipients measured by total dollars in Fidelity’s most recent tax return. Over the five years Bloomberg reviewed—which cover July-to-June reporting periods, rather than calendar years—Doctors Without Borders received $107 million. Harvard University and the Mormon church each got almost five times as much ($503 million and $506 million, respectively), and Stanford University almost twice as much ($205 million).

Some of Fidelity Charitable’s other top recipients are more idiosyncratic and likely explained by the preferences of a few billionaires. A handful of historically Black colleges, including Prairie View A&M University and Virginia State University, vaulted up the list in the most recent tax return, after Scott, former wife of Inc. founder Jeff Bezos, made tens of millions of dollars in grants to each.

The filings also show that actor Sean Penn’s nonprofit Community Organized Relief Effort made the list of top 25 recipients the year that Twitter Inc. co-founder Jack Dorsey pledged a total of $30 million. Chicago’s Museum of Science & Industry rose on the list in the years after a $125 million gift from Ken Griffin, chief executive officer of the hedge fund Citadel.

And the biggest recipient of money from Fidelity Charitable over the five years analyzed, getting about $813 million, was Johns Hopkins University. It saw a surge in donations the year Michael Bloomberg pledged $1.8 billion for financial aid to low- and moderate-income students. (Bloomberg is the founder and majority owner of Bloomberg News parent Bloomberg LP.) Representatives of Bloomberg, Dorsey, Griffin and Scott either didn’t respond or declined to comment about their gifts.

Even though Fidelity Charitable, like many tax-exempt organizations, is required to file annual public tax forms with information about where its money goes, the IRS doesn’t compel DAF sponsors to say who’s behind a gift or even how many donors supported a particular nonprofit. Fidelity Charitable says its donors often tell the charities they’re supporting where the gift came from. But they don’t have to make a giver’s identity public.