Morgan Stanley
  • Access & Opportunity Podcast
  • Dec 31, 2021

William Heard: Diversifying Asset Management


Carla Harris: While decision-makers at large U.S. pension funds, endowments, foundations and insurance companies all agree that building out diverse investment teams is a top priority, a new survey commissioned by Morgan Stanley shows more than half still think doing so will hurt their financial returns, despite data that shows otherwise.

Carla Harris: Welcome to Access & Opportunity. I'm your host, Carla Harris. And we're telling the stories of individuals working to drive change within their communities. We want to provide our listeners with context about social inequities and share tangible examples of how ideas around access and opportunity are being made real everyday.

On this special episode, I'd like to introduce you to William Heard, CEO of Heard Capital, an investment firm managing more than $650 million in assets. William is one of a very small pool of hedge fund managers of color, despite nearly 90% of asset owners saying team diversity is a top priority. William is working to make that a reality so that money managers with less traditional pedigrees, like himself, can enter the space.

Carla Harris: William, thank you so much for being here with me today. It's a pleasure to have you on the show. So are you ready? Can we jump right in?

William Heard: I'm ready and thanks for having me.

Carla Harris: So William, where did you grow up? How did you think about that time and your outlook on life? And did you ever think finance would be a part of it?

William Heard: I grew up in Milwaukee, Wisconsin, oldest of three boys.

I didn't think that finance would be something that I'd be interested in, but once I figured it out, it certainly became something that, quickly, became all I was interested in. So I think because of the lack of opportunity, ultimately it became like a means to provide, protect.

Carla Harris: So, growing up in Milwaukee, one of three boys, that influenced you in a way where you said, “I want to go for more, let me try to get to the top of ‘it’, whatever ‘it’ happens to be.” And how did you stumble upon finance and say that's going to be my ‘it’?

William Heard: It really came down to a bar mitzvah with a friend, his grandfather explaining this stock certificate was a piece of ownership and I was like, “Ownership in what?” – and when he sort of broke it down for me, and then he went through what skills are necessary to do that. And just curiosity led to more questions. And ultimately that led to a collection of experiences and internships that ultimately got me to Wall Street.

Carla Harris: Okay. Okay. So Marquette, you decided to study finance there. Why Marquette?

William Heard: It was close to home.

Carla Harris: Okay.

William Heard: Yeah, I mean, that's, that's the answer. Being the oldest of three boys, like I said, I think ultimately a lot of decisions I've made in life are based in or around providing and making sure like my family and those I care about are okay. It came down to that and trying to figure out if I was going to run track or not. And this is where I ended up.

Carla Harris: Let's talk a little bit about how that led to a bigger plan, because I understand that you helped to build the applied investment management program at Marquette. Now, how does one do that as an undergraduate just having been introduced to finance just a few short years before that?

William Heard: I think what I was struggling with was the cost of Marquette and the fact that all the internships were given away to Madison students. In the context of really trying to figure out how finance made sense, led me to ask questions and come up with a plan. And that plan led to a bigger plan at Marquette.

Carla Harris: William knew that in order to be taken seriously by potential employers in the investment industry, he needed hands-on experienceSo, William decided to create an applied investment management program at Marquette. That program went on to become the first ever undergraduate program officially recognized by the CFA, or the Chartered Financial Analyst association.

William Heard: A big part of it was preparing, quantifying and ultimately getting people to see that this is going to be a problem if we don't do something about it now. So once I put all that together, it really became a business plan and then ultimately led to a series of conversations. And now it's endowed, CFA-blessed, 300 plus students over the last, I think 15 years have gone through it. Proud of that. And it was never about me. It was just like, I can't afford to take these classes over. I need an applied experience and the only way that I have an advantage is to have experience before I come out and hit a trading desk.

Carla Harris: That is phenomenal. That's a playbook point. Let me stop here for a minute, William, because you obviously had an objective, you had a goal you wanted to heighten the probability that you would get a job as you graduated. And so with that singular focus, as you said, preparation, understanding what it might take – that was your preparation, and then quantifying it, because you know, obviously what these jobs were paying and you had the statistics on how many of the University of Wisconsin at Madison students were getting jobs versus how many people at Marquette was getting jobs. And you obviously also knew about the connective tissue, if your graduates graduate with great jobs, making a lot of money, they become very interested and enthusiastic alumni. Was that the connection?

William Heard: Yeah. That's, I mean, yeah, that was the point. You want this to be self-sustaining and create a pipeline.

Carla Harris: Outstanding. So let's talk a little bit about how you set into motion of starting your own hedge fund?

William Heard: I got the opportunity to start at a large hedge fund, like straight out of college, and thinking about life at that point in time. Great Financial Crisis had occurred and I knew I didn't want to switch careers. And to be honest, I didn't want to wonder, what if, if I didn't take the shot, I didn't want to be sorta like, mid fifties saying ‘shoulda, woulda, coulda’. And thinking about that, again, it went back to preparation and a plan, and really trying to figure out what's the business case for me doing this today and then how do I scale it? Once I wrote it down and quantified, it was really about execution.

I was 27, 28 years old, markets are what I loved and it was a complicated time for everyone. So I felt if I failed, ultimately I could go back to business school or something, but again, like just that risk reward. And for that margin of safety, I felt like my downside was so limited that if I could just get the 10 million bucks together, that was my milestone and my catalyst for ultimately pivoting to doing it full-time.

Carla Harris: Already for established fund managers coming out of the Great Recession, this was an incredibly difficult time to secure capital as the bottom fell out of the industry. But add to this that William was a young black man with no proven track record, trying to start his own hedge fund in the aftermath of a global crisis. It could not have been a more challenging time for him to enter.

Carla Harris: What barriers to entry do you still see out there that exist for diverse managers like you?

William Heard: You know, it's coming from Milwaukee, didn't have the wealthy friends or the trust fund. I love my parents to death, I just wasn't born into that and that's okay. I think the pedigree was something that also I didn't possess. Pedigrees the thing that sometimes will drive an allocator's decision, not all allocators, but you know, it's always perplexing because they don't think about the series of things the individual had to solve for to get to that point. I would argue certainly having to prove yourself constantly and start from scratch, might be a little harder.

Carla Harris: [laughs] You think?

William Heard: And you might approach it differently. But, you know, numbers don't lie. And at the end of the day, that's always what we led with. And what I encourage people to do is surround themselves with mentors, people that can provide very short feedback loops, care about you, but also will be direct.

Carla Harris: Straight, no chaser.

William Heard: Yes, exactly. And I've been very fortunate to have folks be that for me. I have a board of advisors, which people are like, “why do you have that?” And it's because I know that I don't know everything and I can not make up for that time lost and I don't have the pedigree. So why not surround myself with people that have seen more, done more and done at a level that can't be questioned? I think some of those barriers still exist. And the other big one that I think that's becoming more common is the GP commit, it's not so much that we don't want to eat our own cooking. It's that for so long we have.

Carla Harris: Yes. And let me just break that down for our listeners. What William is talking about when he talks about the GP commit is that many asset allocators, large institutional investors that might invest in your fund, is now they're looking to see how much money you have committed to the business. You know, how much money you've invested to build, as he said, to build the business and then maybe to even see the portfolio? And then, you know, they want to see some minimal level. And so that obviously becomes a huge barrier to entry, especially for portfolio managers of color. Because as William just said, if you didn't come from pretty wealthy family and friends, it was tough to get that first million or $2 just to invest, let alone. To get another million or $2 to build a business.

Let me ask you this question, because you said a few times in the past that diversity in investment management is beneficial to investors. Tell our listeners how.

William Heard: The data's out there that just shows like this is math, diverse investment management firms produce more alpha. Earlier this year academic study found that hedge funds with diverse management teams outperform and a range from 3.6% to 6.2% per year with less risk, on a risk adjusted basis they found their outperformance to be between five and 8% per year. So that's just the math.

Carla Harris: The numbers don't lie.

William Heard: I feel we don't have to study it anymore. We have to do something about it.

Carla Harris: Okay, so let's put you in the seat of advisor and counselor. So, let's say you're trying to advise some of the larger asset management firms in the world on how they can become more diverse. We've done a couple of white papers on that, William, but what would you tell them about, what are some easy steps they could take to welcome more diverse portfolio managers within their organizations?

William Heard: I think at the end of the day a lot of our partners realize this: any emerging asset management firm is a small business and it's about the return on time and working capital, that is not infinite. And I think understanding how decisions are made is important.

And just that realization that we are a small business, we can handle “no”. We've heard “no”, but just tell us, “no” so that we can move on. Come back once we've done A, B, C, D, E, F, G's but I think having some sense of visibility or what we call a checklist to close is important.

Just having a better sense for how decisions have been made in the past, what other managers they might have invested in that sort of, were at a similar size and then the flexibility around GP commit we talked about as well, thinking through – where the gaps exist? How do I align the interest?  – has been something that we thought about way back then when we launched.

Carla Harris: Right now, public pensions have seen the biggest shift in their positive outlook towards diversity with 63% agreeing that multicultural investment teams significantly improve investment performance. That's an outlier considering only 6% of university endowments, 20% of insurance companies and 14% of other asset owners feel the same.

Carla Harris: So let's talk a little bit about giving back because William Heard is a generous philanthropic giver. And why is it important to you to give back and get involved with supporting your community and the underrepresented in Chicago?

William Heard: So I think Chicago and Milwaukee at the end of the day, I know that there are, I'm a hundred percent sure that there are kids that grew up in tough neighborhoods that'll be very, very good at this job. And I think like all the skills that, the daily survival, the thousands of decisions they have to make from point A to point B, would make them good at this job. And I think it's about showing them that it's possible.

Then also just providing a safe space, sometimes the library is just as hot as the block. I'm here Saturday and Sunday, most of the time, so it's nothing for me to let young folks come print stuff, hang out, just knowing that they can be, they can get, just get out of it for four or five hours on the weekend. I think that's also important to me. And all the other stuff is just really about making sure young people have the confidence and the capital to take the ACT or SAT multiple times and things that I just didn't think about.

Carla Harris: Again, you bring up another good playbook point, because of your lived experience, you have an opportunity to see different qualities in human capital than somebody who might've been interviewing people for 10 years. And I just want to break it down a little bit. I'll say it so you won't have to. But when you said there are a lot of kids in the neighborhood that I know could do this job, because they've just had to, they just had to to survive. So let me get three or four bullet points. When I think about the things that you need to be a good banker or to be a good investor, you do need to have that sensibility to be able to read people, to read beyond the numbers, to understand the situation, you know, to think logically and consequentially, and be able to sell your thoughts and your ideas. And when you're in a tough environment, when somebody steps to you, you better have a story, a narrative, something true or false, but it needs to be a narrative.

William Heard: Yep. Yeah.

Carla Harris: So, so is that an amen brother? Can I, can I leave it there?

William Heard: That is amen. That is amen. Yes.

Carla Harris: Okay. So what's next for Heard Capital?

William Heard: You know, I can say for sure I believe the best is ahead. I think it's about performing, thinking strategically about partnerships. It's about giving back as well. So that's what I'm thinking about that sort of the future.

Carla Harris: Alrighty. Well, we have a tradition on Access and Opportunity and it's called a lightning round and it's a fun way for our listeners to get to know you as an individual. So I'll just ask you a series of rapid fire questions and you answer the first thing that comes to your mind. Are you ready?

Carla Harris: City or countryside?

William Heard: City.

Carla Harris: Winter or summer?

William Heard: Summer.

Carla Harris: What is a book you've read recently that you would recommend?

William Heard: I recommend this book for everyone. It's called Mastery by Robert Green and Counterintuition by Michael Mauboussin are the two that I think every person should read.

Carla Harris: Okay. Thank you very much for that suggestion. I'll be doing that. Do you have a hidden talent?

William Heard: I think it's a talent, but, I write down everything. It goes back to preparation. I don't have electronic filing system. I have boxes of paper that I just throw notes in.

Carla Harris: Uh oh, my environmental friends are coming for you! In office or working from home?

William Heard: Probably office.

Carla Harris: Okay. Binge watch a TV show or watch a movie?

William Heard: Read a book.

Carla Harris: What's your personal mantra?

William Heard: Know thy self.

Carla Harris: Yeah, you've given me a few of them, I was going to say. And one word to describe your legacy?

William Heard: Deliberate.

Carla Harris: Deliberate. I would agree. William Heard. Thank you so much for taking the time to speak with us today and to share with our listeners. Thank you.

William Heard: Thank you.

Carla Harris: William Heard is truly paving the way for future investors and head fund managers of color and a big congratulations to him and his team at Heard Capital for being named Hedge Fund of the Year by Chief Investment Officer Magazine, their success goes a long way in paving the road for more diverse faces to enter this arena. They're showing through action and results. The value that multicultural teams bring to the table and the impact of this goes well beyond investment teams, as more multicultural and women money managers are welcome into funds. We're going to see more capital deployed to founders that have long been overlooked.

What did you learn today from William Heard? Send us your thoughts at, we would love to hear from you.

Subscribe to Access & Opportunity on Apple Podcasts or wherever you listen. Thanks for coming along.

On this episode, Carla speaks to William Heard, founder, CEO and CIO of the hedge fund Heard Capital. They discuss William’s unique journey into finance and the barriers that fund managers of color like himself still face in the industry.

More than half of asset managers still believe that hiring diverse teams comes at the cost of higher returns, despite data showing otherwise. On this episode, host Carla Harris speaks to Heard Capital founder and CEO William Heard as he shares his journey to become a successful Black hedge fund manager and how he’s paving the way for money managers like himself, with less traditional pedigrees, to achieve their goals in the financial industry.


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