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Why history students make great investors

16 February 2024

Trustnet asks fund managers who read history at university how their degree has helped their career.

By Jean-Baptiste Andrieux,

Reporter, Trustnet

Completing my degree in history came as a great relief, as it meant I finally had something to put in the education section of my CV and the right to hope I would have a job someday.

However, the first question that came to my mind after I left the office where I picked up my certificate was: “but what kind of job exactly?”

Unlike a degree in say, accounting, engineering or hospitality, the potential career paths as a history graduate are not necessarily obvious, because your academic education hasn’t equipped you with a whole lot of hard skills that are immediately applicable in a professional context.

Although I didn’t, an option that I could have considered is fund management.

Below, history graduates who took this route explain how their university major has helped them to become better investors.

Learning from the past (especially past mistakes)

As people who study previous eras, historians are arguably more familiar than others with the numerous errors made in the past.

As a result, history graduates turned investors are well positioned to draw lessons from the past, identify patterns and learn from other investors’ mistakes.

Ben Rogoff, manager of Polar Capital Technology Trust, said: “A lot of what we experience as investors has happened to someone else before, so I try to learn from those previous periods.”

One period of modern history that Rogoff has been reviewing recently is the dot-com bubble, as many have compared the recent enthusiasm for artificial intelligence (AI) with the internet frenzy of the late 1990s.

While he is optimistic about the prospects of this new technology and confident that AI-stocks are not in a bubble, Rogoff still wants to make sure he will not repeat mistakes made by investors at that time.    

He said: “I want to remember more granularly what happened between the IPO of Netscape in 1995 and the dot-com bubble in 2000. I want to learn more about the mistakes that were made in the 1990s, because I’m very keen to try not to repeat them.”


Understanding changes

For Edward Smith, co-chief investment officer at Rathbones, who studied economic history, one of the greatest gifts he inherited from his degree is an empirical understanding of economic change.

He said: “It is important for grappling with questions such as, ‘will generative AI unleash a new wave of productivity and who will benefit if it does?’

“Its emphasis on the role of institutions, such as labour contracts and central banking, was crucial for understanding whether the recent supply shocks were likely to cause a repeat of the 1970s, while understanding institutional change and how developing economies have escaped the ‘middle-income trap’.”


Adopting a multidisciplinary approach

Whatever period or region a historian focuses on, they will need to delve into other disciplines as part of their research.

For example, studying Germany’s Weimar Republic will very likely require looking at both economics and politics, as the period is deeply associated with hyperinflation and political extremism.

Likewise, investors do not merely look at a range of financial ratios, but also have to use skills borrowed from other disciplines.

Charlotte Cuthbertson, fund manager at Asset Value Investors, said: “Something people often get wrong about investment is that it’s just about cash flows, valuations, and economics. But like history, investing is multidisciplinary. Politics, economics, and culture all play a role in what happens on the stock market.”


Distinguishing objectivity from subjectivity

For Edmund Harriss, chief investment officer at Guinness Global Investors, a core skill history teaches is to distinguish between objectivity and subjectivity.

Interpreting facts is historians’ bread and butter, but when they do that, they have to keep in mind that few facts are independent from selection, construction or presentation biases.

Hariss said: “Governments, banks, analysts, companies seek both to inform and to shape our opinions to determine our actions. Markets are about people and people are neither rational nor free from self-interest. Historians must consider the subjective and objective nature of data and information; those that lead and mislead. The historian’s mindset, seeking context and perspective, is of great value to professional investors.”


Ignoring noise

Another lesson Rogoff has retained from studying history is that, although there have been moments of profound change, “not very much happens most of the time”.

He finds this observation particularly relevant for investors, as there is a lot of noise in markets, but it’s best to ignore the cacophony most of the time.

Rogoff added: “There's so much call to action every day: threats to incumbents, regulatory risk, geopolitical risk, etc., but history shows that most of the time, continuity is what happens. More often than not, the best thing to do is actually to do nothing.”

Dealing with large flows of data

Historians deal with a lot of data in their research. Quite often, most of it will be irrelevant and no single data set will fully answer a research issue by itself.

This is a challenge with which investors also contend.

Edward Blain, partner at Orbis Investments, said: “A historian is typically confronted with more data than any human could ever handle, none of it wholly sufficient to answer a given question, but none of it wholly irrelevant either. An investor is in the same position, and training as a historian helps find sense in that noise.”


Making decisions

Once a historian has scanned all the data and gathered the information they needed, they have to decide what they are going to use.

The same applies for investors. Once they have thoroughly researched a company or a country, they then have to decide whether to buy the stock or sovereign bond in question.

Cuthbertson concluded: “As anyone who has written a history essay knows, once you’ve read all the material you have to make a decision. Just like running a fund.”

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Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.