Chicago investment fund manager Richard H. Driehaus has donated $3.45 million to his alma mater, the College of Commerce at DePaul University, to endow a chair and establish a center in behavioral finance.

DePaul has named Werner F.M. De Bondt, a pioneer in the behavioral finance discipline and professor of finance at the University of Wisconsin-Madison, as chair of behavioral finance and director the new Richard H. Driehaus Center in Behavioral Finance.

The gift to establish the center is the second largest donation ever made to DePaul’s College of Commerce and the fourth largest gift given to the university.

“This gift allows DePaul’s business school to attract an outstanding scholar, initiate research and expand teaching in behavioral finance, an innovative, interdisciplinary field that examines the psychology of investing and financial markets,” said Arthur Kraft, dean of the College of Commerce. Kraft said expanded study of investor psychology and organizational behavior will help students understand and anticipate market phenomena that cannot be forecast from financial statements alone—such as the unbridled investor enthusiasm for financially unproven Internet firms during the 1990s.

“This will be a transforming gift for us,” said Finance Department Chair Ali Fatemi. “Charged with the goals of incorporating the behavioral aspects of financial decision making into the curriculum, undertaking and disseminating research in the field, and conducting workshops, conferences, and seminars for practicing professionals and academics, the center will be instrumental in securing a leading position for us among our peer schools.”

“The gift will further enhance our reputation as a top-quality program with a major emphasis on relevance and application, ultimately improving our ability to attract and retain a cutting edge faculty, as well as to recruit a most promising student body,” Fatemi said.

The launch of the Driehaus Center in Behavioral Finance is one of a series of moves by Fatemi that have enhanced the prominence of the finance department. Fatemi recently hired Bank One Chief Economist Diane C. Swonk, a nationally recognized financial forecaster, as a clinical professor of finance to teach a course this spring. The department also has partnered with the Federal Reserve Bank of Chicago to sponsor an annual finance research seminar series and formed an advisory board of leading financial professionals to guide its curriculum and mentor students.

Driehaus, who is chief executive officer and founder of Driehaus Capital Management, Inc., has long been a proponent of behavioral finance principles, which his firm uses to manage institutional portfolios and five international mutual funds worth approximately $3.2 billion. Driehaus believes that successfully navigating short-term fluctuations in stock prices often has more to do with understanding investor emotion and crowd psychology than analyzing company financial statements.

“The stock market is not science,” Driehaus said. “I tend to approach the market from a social studies perspective as opposed to a heavily analytical one. That doesn’t mean we don’t look at the facts and the numbers, but we tend to look more at the context of what’s happening now within the marketplace—what is the current psychology toward a specific sector or market group,” he explained.

“This is a breakout way of thinking,” Driehaus said. “It’s a new way of approaching the market. Historically, the market has been taught within a heavy analytical framework, analyzing income statements and balance sheets. But that approach came out of the Depression. When you’re in a Depression, you want to make sure you have a solid balance sheet, so that if you have to liquidate everything you can get your money back. That type of analysis is good in a very negative economy or an economy that is sliding down. But in an economy that’s more venture and technology oriented, like we have now, that type of analysis is no longer as valuable.

“Very few schools are teaching behavioral finance,” Driehaus said. “That’s what makes this so interesting. It’s not a ‘me-too’ approach”

Born on the South Side of Chicago, Driehaus earned his undergraduate business degree in 1965 and his MBA in 1970 from DePaul. In 1982, he founded Driehaus Capital Management, Inc., with headquarters in Chicago’s North Loop neighborhood. The firm is widely known for its expertise in the aggressive growth style of equity investment management. Its success prompted Barron’s to name Driehaus one of the 25 most influential fund managers of the 20th century.

A member of DePaul’s Board of Trustees, Driehaus maintains close ties with his alma mater. The Richard H. Driehaus Foundation donated funds to the College of Commerce in 1993 to create the Driehaus Center for International Business. The center sponsors programs that include short-term foreign seminars for business students and faculty to 15 different international business centers annually; a full-time MBA program in International Marketing and Finance (MBA/IMF); and international MBA programs taught by DePaul faculty in Hong Kong, Bahrain and the Czech Republic. Driehaus also funds scholarships for MBA/IMF students and a virtual stock portfolio contest for DePaul finance students. He also supports DePaul’s annual Theatre School Gala.

A dedicated philanthropist, Driehaus and his charitable foundations have donated funds to support a wide array of interests, including the restoration of Old St. Patrick’s Church and the Garfield Park Conservatory in Chicago, small performing arts groups, organizations that encourage entrepreneurship among economically disadvantaged people, community design competitions and the National Trust for Historic Preservation.

De Bondt, who assumes his role as chair of the Driehaus Behavioral Finance Center in the fall, is a leading academic in the behavioral finance field. His research focuses on the behavioral explanations of financial phenomena and he asserts that the stock market often overreacts to news events.

De Bondt frequently speaks to academics and investment professionals at conferences and meetings in the United States, Europe and Asia. He also lectures on security analysis and money management. His ideas are put into practice by money managers around the world.

De Bondt held the Frank Graner Professor of Investment Management at the University of Wisconsin-Madison. In past years, he has been a professor at universities in Belgium, The Netherlands, and Switzerland, and at his alma mater, Cornell University, where he earned his doctoral degree in 1985.

“We are fortunate to have been able to attract Professor De Bondt to DePaul,” Fatemi said. “One of the pioneers of the behavioral finance field, Professor De Bondt has earned a venerable national reputation and has a long list of scholarly accomplishments to his credit. It would be hard to think of somebody more qualified to fill this position.”

Located in the DePaul Center at 1 E. Jackson Blvd., DePaul’s College of Commerce enrolls approximately 5,925 students. The college’s largest gift was a $10 million pledge in 1990 by The Charles H. Kellstadt Foundation, which established its graduate program as the Charles H. Kellstadt Graduate School of Business. Kellstadt is the eighth largest accredited program of graduate business study in the United States. The school’s part-time MBA program—one of the largest accredited programs of its kind in the country—is ranked fourth in the nation by U.S. News and World Report.