Farallon Capital

Farallon Capital Management, L.L.C. is an American 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 Capital Management, L.L.C.
Limited partnership
IndustryHedge fund
FoundedJanuary 1986 (1986-01)[1]
FounderTom Steyer
Headquarters
One Maritime Plaza
San Francisco, California[2]
,
U.S.
Area served
Worldwide
Key people
Andrew J.M. Spokes (Managing Partner)
AUMUS$ 27.6 billion
(as of June 30, 2019)[3]
Number of employees
165 (2010)[4]
Websitewww.faralloncapital.com

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

History

Farallon was founded by Tom Steyer in January 1986 with $15 million in seed capital.[1] Before operating out of a cramped H&F office, Steyer had 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 hedge funds to raise money from a university endowment.[6] In 1987, Steyer, who received his bachelor's degree from Yale, approached the university's endowment to allocate funds for Farallon to manage. The Yale endowment declined based on the fees charged by Farallon. David Swensen, Yale's chief investment officer, later came to an arrangement with Tom Steyer in which Farallon would initially manage an allocation of the Yale endowment for no fee.[7] After Yale's investment proved to be lucrative, many other college endowments and pensions began to invest in hedge funds.[6]

Investment strategy

Farallon claims to have 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

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

Investment history

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

Company

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]

Organization

Andrew J.M. Spokes acts as the firm's Managing Partner. Spokes was promoted to the position in 2012 when Steyer separated from the firm.[13][14] Prior to his promotion, Spokes oversaw portfolio management and strategy for Farallon exclusive subadviser Noonday Global Management.[15] 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

Farallon operates offices in:[4]

gollark: Actually, you can be safe if you train in all combat sports ever for several years retroactively.
gollark: Graphene oxide? Why are people being thing about graphene oxide, of all things?
gollark: People can get used to basically arbitrarily bad things.
gollark: Well, what I'd actually want is to have COVID-19 be mostly insignificant, not for it to still be quite bad but for people to be used to it.
gollark: Oh, another issue is that it's not really possible to test that unless you do challenge trials or something, which people are unwilling to.

See also

References
  1. Adamson, Loch (23 February 2005). "Steyer Power". Institutional Investor. Archived from the original on 3 September 2012. 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. "The largest managers of hedge funds (P&I Sep 2019)" (Special Report Hedge Funds). United States: Pensions & Investments. Crain Communications Inc. 16 September 2019. Retrieved 15 October 2019.
  4. "Farallon Website".
  5. Lashinsky, Adam (17 September 2008). "California's hedge fund king". Fortune. Archived from the original on 31 January 2011. Retrieved 23 July 2010.
  6. Mallaby, Sebastian (2010). More Money Than God. Penguin Press.
  7. Fabrikant, Geraldine (2007-02-18). "For Yale's Money Man, a Higher Calling". The 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". The 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" (PDF). Wall Street Letter. 26 June 2006. Retrieved 6 August 2011.
  13. Kishan, Saijel (2012-10-22). "Farallon's Steyer to Step Down as Spokes Named Manager". Bloomberg. Retrieved 2018-11-15.
  14. Lattman, Michael J. de la Merced and Peter. "Farallon Capital's Founder to Step Down This Year". DealBook. The New York Times. Retrieved 2018-11-16.
  15. Strasburg, Jenny. "Farallon Names Spokes Co-Managing Partner with Steyer". Bloomberg. Retrieved 2010-07-26.
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