When clients talk, managers (sometimes) listen. At least that’s how it went down at Heard Capital.
Several years ago, at the urging of one of its largest investors in both vehicles, the hedge fund firm headed by William Heard shut down its long-short fund to focus on the long-only fund. At the time, most of the firm’s capital was already in the long-only vehicle.
It was clearly a good move for investors, who moved all of their money from the long-short fund to the long-only, as well as for Heard. The long-only vehicle surged about 42 percent in 2023 and 16.5 percent in 2024 and was up an additional 14 percent over the first six months of this year.
“Closing the long-short fund was a mutually beneficial decision, as it allows me to concentrate and focus on my strengths,” Heard said in a recent telephone interview.
Today, Heard Capital manages $2 billion-plus, more than 20 times what it was managing in 2019 when William Heard was named an Institutional Investor Hedge Fund Rising Star. The firm plans to launch a credit strategy later this year.
After graduating from Marquette University, Heard spent four and a half years at local credit-oriented hedge fund giant Stark Investments as a special-situations analyst focusing on telecom, media, technology, industrials, financials, and energy. “My years at Stark taught me how to think about equities from a creditor’s perspective, to understand first what can go wrong,” Heard told II when he was named a Rising Star. “It formed the foundation of how I see the investment world.”
At 26, he drew up a business plan for his own hedge fund firm — and at the same time hedged his bets by attending graduate school at the University of Chicago, the birthplace of the Efficient Market Hypothesis. When Madison Dearborn Partners co-founder John Canning Jr., whom Heard had met years earlier at an investment conference, agreed to be a day one investor, Heard quit business school and launched his firm, in 2011.
Heard focuses on five sectors: technology, media, telecom, financials, and industrials. He runs a highly concentrated portfolio. Heard held just 22 different stocks at the end of the first quarter, with the top-three holdings accounting for roughly one-third of assets.
He does not use leverage and boasts that none of his major holdings are Magnificent Seven stocks or are among hedge funds’ most widely held stocks. Heard seeks companies with a strong alignment of interests between management and shareholders and invests with a multiyear horizon.
He often emphasizes he does not run screens to find attractive investments. “We are more likely to find things that are misunderstood or debated outside what’s popular,” he asserts.
His three largest positions at the end of the first quarter were Transdigm Group, Fair Isaac Corp., and American Tower. Heard established each of those positions in the fourth quarter of 2019, according to regulatory filings. In fact, six of his seven largest positions were initiated during that period.
Heard says he likes TransDigm, an aerospace manufacturer, for its capital allocation strategy and alignment with shareholders. The stock has roughly tripled since his initial investment.
The hedge fund manager notes that he stuck with Fair Isaac when questions were raised about the company’s decision to launch a software business to go along with its well-known FICO score business, which determines creditworthiness. “It showed over time it was a good use of capital,” he says. He initially bought the stock for between $70 and $80 per share; it recently closed at $1,528.
And Heard lauds American Tower, a real estate investment trust, for its cell tower leasing and data center businesses.
