Farallon Capital

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Farallon Capital Management, L.L.C.
Type Limited Partnership
Industry Global Investment Management
Founded January 1986[1]
Headquarters One Maritime Plaza
San Francisco, California[2]
, U.S.
Area served Worldwide
Key people Tom Steyer (Co-Managing Partner)
Andrew J.M. Spokes (Co-Managing Partner)
AUM US$21,500,000,000 (2011)[3]
Employees 165 (2010)[4]
Website www.faralloncapital.com

Farallon Capital Management, L.L.C. is an American global investment firm that manages capital on behalf of institutions and individuals. The firm was founded by Tom Steyer in 1986.[5] Headquartered in San Francisco, California, the firm employs approximately 165 professionals in eight countries around the world.[4]

Farallon primarily manages capital for university endowments, foundations, and high net worth individuals.[1]

As of 2011, Farallon Capital Management is the 12th largest hedge fund in the world managing US $21.5 billion in assets.[3]

History[edit]

Tom Steyer founded Farallon in January 1986 with $15 million in seed capital.[1] Previously, Steyer worked for San Francisco-based private equity firm Hellman & Friedman, as a risk arbitrage trader, under Robert Rubin, at Goldman Sachs and in Morgan Stanley's corporate mergers and acquisitions department.[5]

Farallon made a name for itself by being one of the first firms to raise money from a university endowment.[6]

In 1987 Tom Steyer a Yale undergraduate approached the university's endowerment to allocate funds to Farallon to manage. The Yale endowment declined based on the fees charged by Farallon. David Swensen, the head of the Yale endowment later came to an arrangement with Tom Steyer where he would initially not be charged by Farallon to manage an allocation of the Yale endowerment.[7] After Yale's investment proved to be lucrative, many other college endowments and pensions began to invest in hedge funds.[6]

Investment Strategy[edit]

Farallon pioneered absolute return investing, a model focusing on potential returns as well as risk adjusted returns.[6] Absolute return investing "treats every investment—whether a residential mortgage, a common stock, or a parcel of land—as a bond, with an implied rate of return." [5] Farallon invests in various asset classes including value investments, credit investments, merger arbitrage, real estate related investments, and direct investments in both developed and emerging markets.[8] Farallon typically holds positions anywhere from two to five years.[1]

Farallon also practices "event driven" international investing, finding distressed international companies and helping the businesses restructure. In 1999, Farallon bought a direct stake in an Argentine shoe company, which it helped stabilize to profitability as Argentina recovered from an economic crisis. And in 2002, Farallon bought control of Bank Central Asia (BCA), an Indonesian financial institution, for $531 million. At the time, many of Indonesia's banks were on the verge of collapse because of bad loans made during President Suharto's leadership and the country was seen as dangerous for foreign investment. Over the next four years, Farallon installed a new chairman and made necessary reforms. After Farallon sold its stake for a profit in 2006, many other institutional investors began to look to Indonesia for returns. In the year before Farallon's investment in Indonesia, $286 million flowed into the country as foreign direct investment. After Farallon exited, that number grew to $1 billion in 2007 and $4 billion in 2008. According to Council on Foreign Relations economics fellow Sebastian Mallaby, "Farallon's investment was a blessing for Indonesia."[1][6]

According to Institutional Investor's Alpha, Steyer considers "himself as a research-oriented fundamental investor, not a trader."[1]

In March 2010, Farallon announced plans to refocus its investing on risk arbitrage and credit wagers and lessen its equity exposure. In addition, the firm said it would disclose more information to clients to "foster a more open culture at the hedge fund."[9]

Investment Vehicles[edit]

Farallon Capital Institutional Partners - for Farallon's institutional investors to invest in.[10]

Investment History[edit]

In 2007, Farallon in partnership with Simon Property Group and other hedge funds purchased Mills Corp, a real estate investment trust.[11]

Company[edit]

In 2006 it was reported that Farallon Capital was the largest hedge fund in the world in 2005.[12] Steyer named the firm after the Farallon Islands off the coast of the San Francisco Bay Area.[5]

Culture[edit]

Farallon's corporate culture has been reported both as setting it apart from similar firms and also as traditional.[5][13] During the firm's infancy, Steyer "insisted that Farallon employees keep their liquid savings in the fund so that they would feel the pain if they lost money."[1][6] The firm rewards independent thinking and rigorous research, which has earned it the reputation as the "McKinsey of hedge funds."[13]

Organization[edit]

Tom Steyer and Andrew J.M. Spokes act as the firm's Co-Managing Partners. Spokes was promoted to the position in 2007. Prior to his promotion, Spokes oversaw portfolio management and strategy for Farallon exclusive subadviser Noonday Global Management.[14] Spokes opened Farallon's first international office in London in 1998.[1]

Farallon retains talent by giving enterprising professionals the opportunity to spin off and run new funds with Farallon capital. For example, Former Farallon traders started Noonday Global Management and ChinaRock Capital using Farallon money and back office support.[5]

Today, Farallon has 21 principals, 13 managing directors and 35 investment professionals who oversee the firm's day-to-day operations and management.[4]

Offices[edit]

Farallon, along with Noonday Global Management, operates offices in:[4]

See also[edit]

References[edit]

  1. ^ a b c d e f g h Adamson, Loch (23 February 2005). "Steyer Power". Institutional Investor. Retrieved 19 August 2010. 
  2. ^ Adam Zoia; Aaron Finkel (28 January 2008). Getting a job in hedge funds: an inside look at how funds hire. John Wiley and Sons. pp. 2–. ISBN 978-0-470-22648-3. Retrieved 31 July 2011. 
  3. ^ a b "The 2011 Hedge Fund 100 Ranking". Institutional Investor, Inc. May 12, 2011. 
  4. ^ a b c d "Farallon Website". 
  5. ^ a b c d e f Lashinsky, Adam (17 September 2008). "California's hedge fund king". Fortune. Retrieved 23 July 2010. 
  6. ^ a b c d e Mallaby, Sebastian (2010). More Money Than God. Penguin Press. 
  7. ^ Fabrikant, Geraldine (2007-02-18). "For Yale's Money Man, a Higher Calling". New York Times. Retrieved 2010-07-26. 
  8. ^ Keoun, Bradley (March 21, 2007). "Farallon Discloses Takeover Talks With Accredited". Bloomberg. Retrieved 31 July 2011. 
  9. ^ Sorkin, Andrew (2010-03-12). "Farallon Plans Shake-Up, Report Says". New York Times. Retrieved 2010-07-26. 
  10. ^ Williamson, Christine (December 27, 2010). "Farallon receives mixed messages". Pensions & Investments. Retrieved 31 July 2011. 
  11. ^ Stephen Todd Walker (7 January 2011). Wave Theory For Alternative Investments: Riding The Wave with Hedge Funds, Commodities, and Venture Capital. McGraw-Hill Professional. pp. 365–. ISBN 978-0-07-174286-3. Retrieved 2 August 2011. 
  12. ^ "Goldman Sachs Leads Hedge Fund Management Rankings". Wall Street Letter. 26 June 2006. Retrieved 6 August 2011. 
  13. ^ a b "Farallon Capital Management". FINS. 
  14. ^ Strasburg, Jenny. "Farallon Names Spokes Co-Managing Partner with Steyer". Bloomberg. Retrieved 2010-07-26. 

External links[edit]