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Trusted Answers: Should You Study Liberal Arts Or Sciences For A Career In Institutional Investing?

by trusted insight posted 5years ago 5202 views

Deciding what to major in is an important decision for anyone considering a career in institutional investing. Studying a science or math-based subject, such as biochemistry or computer science, gives an investor a solid foundation in quantitative analysis and statistics that is often critical to investment decision making. A liberal arts education fosters the ability to think critically and challenge assumptions. History, in particular, was a popular choice among institutional investors, which teaches  comparable methodological approaches. As Tim Dolan says, “Investment analysis is often the study of what took place in the past, understanding that history and then applying quantitative and qualitative analysis to improve decisions about what may happen in the future.” Combining both of these quantitative and qualitative disciplines can prove highly advantageous to an institutional investor.

We have interviewed over 40 institutional investors. In this week's edition of Trusted Answers, we look at some of their insights on the value of a Liberal Arts or Science education:

I think there's a huge value in taking a scientific approach when investing. With my background in biochemistry and biophysics, I was taught and trained in a scientific method to build an understanding of how things work: you start out with a hypothesis, but continue to question, challenge and refine the idea. What's the basis and foundation for how you do things? You're looking for proof and validity. I think it’s a good foundation for an investor. You learn a great deal about markets, fundamental rules and modeling in business school, but the study of science often teaches us to question what we think we know.

James Perry, Chief Investment Officer, Dallas Police & Fire Pension System
(University of Houston and National University Alumnus)
Read the full interview here.

It turns out electrical engineering and computer science are two majors that focus a lot on logic, looking at foundational parts. But where does art history fit in? Clearly, the study of fifth century Buddhist art probably doesn't fit in specifically. I think the benefit of a liberal arts education is that it teaches you how to learn.

"I think the benefit of a liberal arts education is that it teaches you how to learn."

It is the conduit through which you learn how to learn, as opposed to learning something very, very specific. On the electrical engineering and computer science side, clearly, it's about logic. Thinking in systems and thinking in components and thinking in how things fit has worked out very well in a lot of our technology investments that we've made at Capricorn.

Also on the art history side, it lends that macro lens that allows me to look at trends. In very simple words, art history was about connecting the dots. It’s using different works of art at different periods and finding the connection and reading the trends between them. For example, one of the areas I focused on was fifth century Buddhist art. Buddhism was spreading from India over to China. Overall, the Buddhist statues were changing from a very Greco-Roman style to an Indian style and then to a much more Chinese style. It was about noticing how things change over time, mapping those and trying to find a connection and see a trend.

Art history gives that top-down approach, while electrical engineering and computer science allow for the logical thinking. This allows for building systems and very technical due diligence. These skills are still being used today.

Alan Chang, Partner and Managing Director, Capricorn Capital Partners
(Duke University and Harvard Business School Alumnus)
Read the full interview here.

...Being the first person in my family to go to college, I didn’t really have much guidance as an undergraduate; I didn’t know what I didn’t know. History allowed me to pursue a personal passion I knew I’d enjoy. I had no idea I’d ever be in the investment business.

That said, the study of investments includes history. If you think about it, a lot of what we do in the investment industry is historical analysis. As you’ve heard often I am sure, Mark Twain said, “history doesn't repeat itself, but it does rhyme.” Investment analysis is often the study of what took place in the past, understanding that history and then applying quantitative and qualitative analysis to improve decisions about what may happen in the future. So I think for the investment business, having an interest in and a sense of history is invaluable.

...When I started graduate school, I took my first statistics test. I was a history major, and there was not a lot of statistics in my study of history. I did not do very well at all.

The intro to statistics professor at that time was Joe Thomas, and he wrote on my test “See me about this.” I went to see him, and he really called me on the carpet and said, “Look, you know this is important. You should focus in this class, you can do better than this, and I’ll help you. I expect to see you again.”

That was the point where I felt confident that I could apply myself to something, that I could learn and improve as a student and a person, and I had somebody who was going to help me do just that, who cared to make a difference and would hold me accountable. I thought that was empowering and inspiring in its own way. Importantly, I had and have a tremendous amount of respect for Joe Thomas. I didn’t want to disappoint him. It was a very important moment for me, and Professor Thomas was right – statistical analysis is a foundation of what I do today.

Tim Dolan, Chief Investment Officer, GP Brinson Investments, A Single-Family Office
(Cornell University Alumnus)
Read the full interview here.

It’s been enormously helpful, mostly in the ability to synthesize. The way the humanities degree was organized at Yale, we would study different eras of history, mostly European history, and look at them through different prisms or disciplines -- through history, literature, philosophy and art. It required thinking about the common threads that you find across all of those different disciplines.

That is similar to what you do in investing. You look at what’s happening with rates, in equities, in macroeconomic indicators and try to pull together a cohesive view of the markets and where opportunities lie.

...I would go back to what I said earlier about having a very broad view. Particularly at Yale, but even at Columbia, the ability to learn very broadly and think about a variety of disciplines and synthesize things in a pure liberal arts way. So rather than thinking about applied knowledge, just thinking about learning, researching and analyzing in a very broad way has been enormously helpful in being able to assess investments.

Anne-Marie Fink, Chief Investment Officer, Employee Retirement System of Rhode Island
(Yale University and Columbia Business School Alumna)
Read the full interview here.

I was a history major here at Holy Cross. My goal was to be a history professor, but I decided I needed to get some experience outside the academy before making the decision to pursue my PhD. (Incidentally, I now teach a class on campus in portfolio management and financial analysis to non-finance majors. I can relate to how overwhelming it can be for liberal arts students to go into finance, so my teaching style is principally translating the language of finance to the language of liberal arts.) Then when I graduated in 2006, I wanted to experience something outside the role of a history professor, so I worked at BNY Mellon for a couple of years and discovered that I loved financial services. That was a surprise. I returned to Holy Cross in 2008 as an investment analyst.

Daniel Ricciardi, Investment Officer, College of the Holy Cross
(College of the Holy Cross and Boston College, Wallace E. Carroll Graduate School of Business Management Alumnus)
Read the full interview here.

Trusted Answers is a weekly series that delves into some of the most pertinent issues within institutional investing, and shares some of the insightful responses from the 40+ institutional investors we have interviewed in the past year. Take a look at some of our other Trusted Answers.