Farallon Capital

Farallon Capital | Hedge Fund Notes

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Resource #1: (11.9.08) Farallon Capital Management, one of the world’s largest hedge funds, has been anything but immune from the market downturn. The San Francisco firm’s flagship hedge fund is facing its first-ever losing year after almost of quarter of its value during the first 10 months of 2008.

Farallon Capital Partners is down 23.8% though last month, according to Bloomberg News. A smaller fund, Farallon Capital Offshore Investors, is down even more, losing 28.3% this year. Source

Additional Resources

The firm’s website includes a section on investment strategies. The core strategy of Farallon is to invest in companies they believe are undergoing a change. Known changes may be mergers, recapitalizations, restructuring, etc. They invest in both private and public companies around the world.

A profile of Farallon’s founder and co-managing partner Thomas Steyer. He founded the firm in 1986. He is also the managing director of a private equity firm in San Francisco, Hellman & Friedman.

Analysis of some of the investments the company has made within the past year. The firm invested in Home Depot and Cemex despite their exposure to the weak housing market.

In December 2007, Farallon disclosed that they own a 5.3% stake in restaurant chain California Pizza Kitchen Inc.

Farallon has made several large investments in the Canadian based company Antares Minerals. Farallon now owns approximately 39.9% of the company.

Farallon Capital agreed to purchase Affordable Residential Communities’ manufactured home unit for $1.8 billion. Farallon already owns 10% of Affordable Residential Communities Inc. It is expected to be a profitable move during the economic downturn.

A group of students at many universities began campaigning Farallon Management to disclose their investments. Many of Farallon’s investors include top university endowments. Students were concerned about the ethical and social implications of investments Farallon has made.

More on the student coalition created in 2004 that targeted Farallon capital to disclose their investment practices. According to this article, up to 40% of Farallon’s investment money comes from University endowments and other similar institutions.

In March 2007 Accredited Home Lenders announced they received a $200 million loan from Farallon Capital. The terms of the loan include a 5 year term and 13% annual interest rate.

In 2006 Farallon made a $25 million dollar investment in Indiabulls Housing Finance. The firm will acquire a 33% stake in the company. Farallon already owns 33% of Indiabulls Credit Services which is a computer finance firm.

In February 2008 Farallon was the 5th largest hedge Fund. It is the largest Fund based in the West Coast (San Francisco)

Farallon Capital’s Offshore Investors Fund is decreasing in size, in part because they have turned away some investors and also because some investors are choosing to move their money into smaller Farallon Funds. “The change fits Farallon's strategy of putting more capital into less-liquid holdings, especially now with credit-market opportunities plentiful”

Article talks about one of the acquisitions Farallon made purchasing a Las Vegas developing company Southwest Diversified. Farallon then restructured the major housing development project Southwest was involved with and under Farallon’s management construction on the development site in California was completed.

Business Week provides a snapshot of the firm. Gives a brief description of the company’s history, key executives, and investing strategies.

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