A Grand Design for Giving

Investment strategy guides donor in his effort to enhance urban life

Richard H. Driehaus made his first investment when he was 15. Using $2,000 he had

saved from his job delivering newspapers in his South Side Chicago neighborhood, he followed conventional advice and invested in two companies with good track records.

When he lost money, Mr. Driehaus decided to figure out what had gone wrong — a quest that has helped him become one of the nation’s most successful investors, with the means to become one of Chicago’s most generous philanthropists.

At 58, Mr. Driehaus, founder and chief executive of Driehaus Capital Management here, is considered a pioneer of so-called momentum investing, typically shunning blue-chip stocks and focusing instead on small and mid-size companies with strong growth prospects.

It’s a risky strategy that has paid off well for his company, which manages $5-billion in assets for clients that include Lockheed Martin Energy Corporation and U.S. Airways. It has also paid off for the foundation that bears his name.

The Richard H. Driehaus Foundation, to which its founder contributed a total of $3.74-million from 1984 to 1987, now is worth $92-million. It has distributed $20.5-million since its inception and will distribute $4-million this year, mostly in Chicago.

Originally, Mr. Driehaus says, his plan was to give away $100-million during his lifetime. But he now believes that he will end up parting with more than twice that amount, while still leaving plenty for his two daughters.

Supporting Innovation

Just as he eschews blue-chip stocks, Mr. Driehaus steers clear of well-endowed philanthropic institutions. He favors cutting-edge arts groups over museums and opera houses, and organizations that encourage the poor to become financially self-sufficient over those that provide simple charity.

“We don’t want to fund the program that we know is going to work,” he says. “We want to fund the one that is innovative.”

And, as someone whose job is to get his clients’ money to make money, Mr. Driehaus asks the same of his philanthropy: His foundation primarily awards challenge or matching grants designed to stimulate additional donations.

Among the Driehaus Foundation’s grantees are small theater and dance companies. Though the three-year grants awarded to those groups are small, ranging from $3,000 to $7,000 a year, they are aimed at helping the organizations achieve stability and attract support from other grant makers.

The foundation also supports entrepreneurial programs that help people escape poverty.

Not all of the foundation’s grant making supports what is new. Some of it, in fact, focuses on the very old. Mr. Driehaus, a Chicago native and Roman Catholic, is devoted to landmark preservation, particularly when it comes to the city’s many old churches.

“Some of these churches are works of art, and Richard understands that,” says the Rev. John J. Wall, pastor of Old St. Patrick’s Church just outside the downtown Loop, which received a $1-million challenge grant from the Driehaus Foundation to restore its Celtic-influenced interior. “We should never underestimate the power of beauty to transform people’s lives.”

Mr. Driehaus agrees. To that end, his foundation also supports efforts to improve public spaces and inner-city neighborhoods through high-quality architecture and design. “Good design doesn’t cost; it pays over time,” Mr. Driehaus says. “The point is, if you’re building low-income housing and you can tell it’s low-income housing, you’ve failed.”

A Victorian Opulence

Mr. Driehaus’s passion for design and architectural detail can be seen throughout the offices of Driehaus Capital Management, which are located in a limestone Victorian mansion built in 1886 and designed by the architect Henry Ives Cobb, who also created the original buildings for the University of Chicago.

Mr. Driehaus spent several million dollars gutting the mansion, which had last been used as a funeral home, and restoring the interior to a Victorian opulence that belies the company’s Information-Age activities. Rooms are laced with intricate molding and brimming with gilt-trimmed furniture and marble and bronze sculptures of angels and cherubs and nymphs, all from Mr. Driehaus’s vast collection of 19th- and early 20th-century art and architectural artifacts.

The library and hallways are steeped in warm hues from jewel-toned lamps designed by Louis Comfort Tiffany, and in the parlor, a four-paneled Tiffany stained-glass window depicting a gathering of praying angels is ablaze with golden light.

Sitting at a long neoclassical-style table in what was once the mansion’s dining room, Mr. Driehaus, a trim man with a curly mop of salt-and-pepper hair and wire-rim glasses, explains that his giving is rooted in his upbringing in a working-class neighborhood.

His mother was a devout Irish Catholic who saw to it that he received a Catholic education, which he says instilled in him a strong sense of responsibility.

His German-born father worked as a design engineer for a coal-mining company. But despite his dedication to his job and his intellectual capabilities — his ideas led to several patents — the elder Mr. Driehaus never earned enough to fulfill his dream of moving his family out of its modest bungalow and into a Tudor home that he had designed and hoped one day to build.

“My dad was a hard worker, he was a family man, he was bright,” Mr. Driehaus says. “The problem was, he was in the wrong industry.” It was a mistake that Mr. Driehaus was determined not to make.

“I said, ‘No way I’m getting in the wrong business. I want to be able to buy a nice house.’”

After graduating from DePaul University with a degree in business administration, Mr. Driehaus took a job with an investment company, where he began to develop his theories about how to choose stocks. He opened Driehaus Securities Corporation, a brokerage company, in 1980, and Driehaus Capital Management in 1982.

Mr. Driehaus’s “buy high, sell higher” strategy is considered expensive and risky by conventional Wall Street standards. But he has done very well in the bull-market economy, with the returns on his company’s three portfolios doing far better than the benchmark Standard & Poor’s 500 Index.

A Family Affair

As his wealth accumulated, Mr. Driehaus began to take a greater interest in charity. His foundation is very much a family affair, with Mr. Driehaus and his two sisters serving as the only board members. But its direction has also been influenced by Sunny Fischer, a co-founder of the Chicago Foundation for Women, who was hired as executive director in 1992. She has helped Mr. Driehaus to focus his giving on causes that both embrace his passion for architecture and design and work to solve social problems.

From early on, Mr. Driehaus has generously supported the Catholic educational institutions that nurtured him as a student, awarding millions of dollars over the years to St. Margaret of Scotland Elementary School, St. Ignatius College Preparatory, and DePaul University.

His interest in helping poor people become economically stable was sparked after he was introduced to officials from Opportunity International, a charity that provides small loans and basic training in business practices to people — mostly women — in developing countries. The high pay-back rate of those who are assisted by the charity — 96 percent last year — and its practice of pouring the repaid loans right back into the fund were especially compelling, says Mr. Driehaus, whose foundation has given the charity close to $1-million over the last eight years.

“That money keeps on working for them,” he says.

The Power of Design

While Mr. Driehaus believes in the power of such programs to lift people out of chronic poverty, he believes just as strongly in the power of good urban design — whether in a park or a housing project — to lift them spiritually.

“Design helps to create a real sense of place,” he says. Beyond that, adds Ms. Fischer, “Architecture and design can be used to look at social issues and solve social problems.”

Among the foundation’s grantees is Archeworks, a one-year school for architects, interior designers, artists, educators, and others who work on design projects for charities and government agencies.

Archeworks students have created, for example, a new model office for the Illinois Department of Human Services that includes a job-recruitment area for people on government assistance, and a play area for children.

Other grantees, meanwhile, have fought to revitalize forgotten architectural gems in rundown neighborhoods.

One such gem is the Garfield Park Conservatory, a glass Prairie-style structure of seven greenhouses displaying rare species of palms, ferns, and other exotic plants. The conservatory, built in the early 1900’s, had fallen into disrepair, attracting just 10,000 visitors in 1990. Cracked windows and bitter Chicago winters threatened to obliterate its collection of century-old ferns.

A $7,000 Driehaus grant enabled the Garfield Park Conservatory Alliance, a group of civic- and preservation-minded individuals, to put together a proposal for a grant from the Lila Wallace-Reader’s Digest Fund, which awarded it $1.4-million as part of a program to rehabilitate urban parks.

The alliance has since won financial support from the city and other grant makers, enabling the conservatory to add new programs for children and adults. The number of annual visitors has grown tenfold, to 100,000, including 10,000 schoolchildren.

“This is how we use leverage,” says Mr. Driehaus, whose foundation also gave the conservatory a $50,000 challenge grant to restore a fountain at its entrance, and $25,000 to start a program that trains disabled adults to work in the greenhouse industry.

Inspiring Creativity

Mr. Driehaus also likes to get more mileage out of his foundation’s funds by sponsoring awards and competitions. “Competitions and awards inspire creativity,” he says. “They encourage and recognize excellence.” Some of the world’s most beautiful structures, including the U.S. Capitol, the National Library in Paris, and the Museum of Modern Art and Architecture in Stockholm, he adds, were built through competitions. Even today, notes Ms. Fischer, Paris holds design competitions for all of its new public buildings.

The foundation collaborates with several groups to spur better community design through annual awards, including the Landmark Preservation Council of Illinois, the Local Initiatives Support Corporation, and Inspired Partnerships, a charity that helps congregations find ways to finance the rehabilitation of old churches.

Winners of annual awards have included the designer of a low-income neighborhood health clinic and the architect of an elementary school, who used plenty of colors and details such as a skylight sundial to distinguish her structure from the typical city school.

“The returns of good design may be smaller over the near term, but they’re greater over the long term,” says Mr. Driehaus. The foundation recently sponsored a competition, with a $31,000 matching grant, to design a new building for the campus of the Illinois Institute of Technology — the first building to be created by someone other than the famous architect Mies Van Der Rohe, who designed the original campus. It also has given $100,000 to sponsor a competition to build a public school that will integrate features for disabled students into the design.

The Driehaus Foundation has also been a key supporter of the National Trust for Historic Preservation, providing a total of $270,000 for numerous projects, including one to beef up state and local preservation organizations by providing management assistance and mentors to newly established groups.

The success of the program — the number of professionally staffed statewide preservation organizations has grown from 17 to 39 in five years — has prompted Mr. Driehaus to contribute an additional $1-million in matching funds to allow the trust to continue it for five more years.

Small Grants, Big Impact

Such large grants are not typical, however, and Mr. Driehaus says those that excite him the most are small ones that have a big influence. That is the goal of the foundation’s program supporting small performing-arts organizations, which was started three years ago after two theater companies that the foundation had supported with small grants went on to win awards for their work.

Peter Handler, who was hired to manage the $150,000 program, says the grants are small but significant.

“Many of these groups’ budgets are anywhere from $30,000 to $60,000,” he says. “So if the foundation makes a $5,000 grant, it could be 10 percent of their cash budget.”

What’s more, because the grants are usually unrestricted, they can be used for such basic necessities as paying artists and staff members.

They also can lead to support from other grant makers: Earlier this year, the John D. and Catherine T. MacArthur Foundation nearly doubled the program’s budget with a $100,000 matching grant.

In January, the Driehaus Foundation will begin a new program, awarding three $10,000 grants to individual artists.

“Again,” Mr. Driehaus says, “we’re hoping it will challenge others to take up support as well.”

Mr. Driehaus says he is pleased with the foundation’s direction and plans no major changes, adding that he will continue to search for gaps to fill in the areas of arts, economic development, historic preservation, and design. His face lights up as he considers one possibility.

“We should do more fountains, great fountains,” he says. “Maybe we’ll sponsor a competition.”

THE RICHARD H. DRIEHAUS FOUNDATION

History and purpose: Established in 1984 by Richard H. Driehaus, founder and chief executive of Driehaus Capital Management, in Chicago, to support “organizations working to enhance the urban environment.”

Areas of support: Architectural and design projects; community and economic development; historic preservation; small dance and theater companies; and individual artists.

Finances: The foundation expects to give away $4-million in 2001.

Assets: $92-million as of June 30, 2000.

Key officials: Richard H. Driehaus, president and chairman of the Board of Trustees; Sunny Fischer, executive director.

Application procedures: The foundation awards grants primarily in the Chicago area and does not accept unsolicited requests.

Address: 203 North Wabash, Suite 1800, Chicago 60601; (312) 641-5772.