Farallon Capital Management, LLC is an investment management firm only offering advisory services to institutional clients. The firm's name also has meaning, as it represents the Farallon Islands off the coast of San Francisco. The firm has its headquarters in San Francisco, California, though it has other branches around the world.
There are no individual clients at Farallon Capital Management. If you’re an individual looking for a financial advisor in your area, check out our financial advisor matching tool.
Farallon Capital Management Background
Farallon Capital Management opened in 1986 in San Francisco. Today, the firm is owned by Farallon Capital Management, LP, which is in turn owned by Andrew J.M. Spokes. After joining Farallon in 1997, Spokes now acts as managing partner and principal owner. He has been employed in the financial services industry for more than 30 years.
Farallon Capital Management Client Types and Minimum Account Sizes
Rather than work with individual clients, Farallon Capital Management’s "client" base mainly consists of around 50 private investment funds that it runs. These funds are available for investment to private and institutional investors, as well as managed accounts.
Other clients of Farallon include charitable organizations, state and municipal government entities, businesses, college endowments and other pooled investment vehicles that are managed by unaffiliated managers.
Rather than issue a standard minimum investment requirement, each of Farallon Capital Management’s funds state their own minimums. The firm reserves the right to waive or adjust any minimums at its discretion.
Services Offered by Farallon Capital Management
Farallon Capital Management provides discretionary investment management and administrative services for funds. This involves a number of tasks, including investment strategy development, monitoring, research, rebalancing and more. As an individual client, you can not work directly with Farallon.
Farallon Capital Management Investment Philosophy
Although Farallon Capital Management states it’s open to a wide range of investment strategies, it generally adheres to these five:
- Long/short equity: This involves investments and short sales of equities that the firm believes to be under or overpriced. It determines a base value through fundamental analysis.
- Direct investments: This is a variation of a private equity investment in which the firm invests in a debt, common or preferred equity in a business. Returns are usually contractual, though there is the potential for higher returns depending on performance.
- Real estate: Farallon’s real estate investments are in real estate properties, leaseholds, mortgages or real estate-related assets. It especially looks for investments needing redevelopment, leasing or additional management experience.
- Merger arbitrage: This strategy is focused on identifying investment opportunities in stocks that belong to companies going through mergers or acquisitions.
- Credit investments: This looks to invest in companies who are in financial distress or whose current credit is weak, but improving.
Farallon Capital Management Fees
As far as Farallon’s management of its private investment funds goes, fees range up to 1.00% of the fund’s total AUM, though the fee may be higher in certain cases. In addition to this base fee, Farallon charges some of its funds a performance-based fee. According to the firm's Form ADV, it is "entitled to a 20% carried interest only after investors have received distributions equal to their capital contributions."
Although the firm charges these fees to the funds, prospective fund investors will likely incur at least part of them indirectly. All fees are deducted on a quarterly basis, in advance.
What to Watch Out For
There is one disclosure listed on Farallon Capital Management’s Form ADV. This is in reference to a regulatory violation issued by the Swedish Financial Supervisory Authority (SFSA) in June 2018. The Form ADV states that Farallon “self-reported to the SFSA it was submitting a late notification in connection with its net short position in a Swedish issuer.” As a result of this event, the SFSA fined Farallon Capital Management $40,925. The firm paid this fine in August 2018.
Some of Farallon Capital Management’s funds include performance-based fees in their fee structures. These can, in turn, trickle down to the fees that investors must pay. The firm states in its Form ADV that “clients should be aware that performance-based fees/allocations may be deemed to create a conflict of interest for Farallon, as there can be an incentive for Farallon to make investments that are riskier or more speculative than would be the case in the absence of a performance-based fee/allocation.”
Despite the nature of the above fee arrangement, Farallon Capital Management abides by a fiduciary standard. This is a legal obligation stating the firm must act in clients’ best interests at all times.
Opening an Account With Farallon Capital Management
To get in touch with Farallon Capital Management, call the firm’s main office in San Francisco. Upon becoming a client, you’ll be able to access Farallon’s investor portal.
All information is accurate as of the writing of this article.
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