Thomas Steyer's Farallon Capital 13F Filing Q4 2008 ~ market folly

Wednesday, April 1, 2009

Thomas Steyer's Farallon Capital 13F Filing Q4 2008

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up, we have Thomas Steyer's Farallon Capital Management. Steyer founded the firm in 1986 and still manages it today. Steyer graduated from Summa Cum Laude from Yale University and received his MBA from Stanford's Graduate School of Business. Prior to founding Farallon, Steyer worked as an analyst in Morgan Stanley's Mergers & Acquisitions department and then as an associate in the risk arbitrage department of Goldman Sachs. Being so well versed in the area of risk arbitrage, Steyer employs similar strategies at Farallon. Farallon invests in both public and private debt, equities, private investments, and real estate.

For the year of 2008, Farallon was ranked 3rd in Alpha's hedge fund rankings. Farallon is a $30 billion firm and had suspended withdrawals from their largest fund after receiving redemption requests for around 25% of the fund's capital. The fund won't be charging typical management and performance fees, but instead will charge accounting fees. Some of Farallon's portfolio performance is available here and you can also read one of their investor letters from last year. In terms of more recent activity, we had noted in early February that Farallon had sold out of numerous positions (via 13D and 13G filings). And, just yesterday, Farallon updated their positions in Freightcar America (RAIL) and Capitalsource (CSE).

The following were their long equity, note, and options holdings as of December 31st, 2008 as filed with the SEC. We have not detailed the changes to every single position in this update, but we have covered all the major moves. All holdings are common stock unless otherwise denoted.

Some New Positions (Brand new positions that they initiated in the last quarter):

Some Increased Positions (A few positions they already owned but added shares to)
Mastercard (MA): Increased by 64%
Fidelity National (FIS): Increased by 46.3%

Some Reduced Positions (Some positions they sold some shares of - note not all sales listed)
Sherwin Williams (SHW): Reduced by 85.5%
America Movil (AMX): Reduced by 67%
Oracle (ORCL): Reduced by 50.5%
Sandridge Energy (SD): Reduced by 48.8%
Burlington Northern (BNI): Reduced by 48%
Freightcar America (RAIL): Reduced by 24.7%
Cablevision (CVC): Reduced by 23.8%
Wendys Arbys (WEN): Reduced by 19.2%
Geoeye (GEOY): Reduced by 14.8%

Removed Positions (Positions they sold out of completely)
Sciele Pharma (inactive)
Sealy (ZZ)
Abbott Labs (ABT)
National City (NCC)
SBA Communications (SBAC)
Symantec (SYMC)
Barr Pharma (BRL)
Visa (V)
Liberty Media (LMDIA)
Alcon (ACL)
Sealed Air (SEE)
ishares Biotechnology (IBB) Puts
Verisign (VRSN)
Qualcomm (QCOM)
Netapp (NTAP)
Seagate (STX)
Amylin (AMLN)
Applied Biosystems (ABI)
Exco Resources (XCO)
Zimmer Holdings (ZMH)
Gilead Sciences (GILD)
Hospira (HSP)
Marriott International (MAR)
Apple (AAPL)
JB Hunt (JBHT)
Research in Motion (RIMM)
ishares Emerging Markets (EEM) Puts
Schlumberger (SLB)
Williams (WMB)
ishares Russell 2000 (IWM) Puts

Top 15 Holdings (by % of portfolio)

  1. Capitalsource (CSE): 22.42 % of portfolio
  2. Mastercard (MA): 21.33% of portfolio
  3. WendysArbys (WEN): 7.85% of portfolio
  4. Cablevision (CVC): 7.34% of portfolio
  5. Fidelity National (FIS): 5.73% of portfolio
  6. Burlington Northern (BNI): 4.2% of portfolio
  7. Sherwin Williams (SHW): 4.2% of portfolio
  8. Transdigm (TDG): 3.5% of portfolio
  9. Oracle (ORCL): 3.4% of portfolio
  10. America Movil (AMX): 3.2% of portfolio
  11. MI Developments (MIM): 3.17% of portfolio
  12. Knology (KNOL): 2.9% of portfolio
  13. Pinnacle Entertainment (PNK): 2.4% of portfolio
  14. Sandridge Energy (SD): 2.12% of portfolio
  15. Geoeye (GEOY): 1.96% of portfolio

Prevalent selling was the name of the game for Farallon, as assets listed in the 13F filing were way down this quarter. Previously, they held $3.69 billion and now show only $871 million worth of positions this quarter. This is a prevalent theme we've noted amongst hedge funds (and really everyone for that matter). Deleveraging was continuing last quarter and it will be interesting to see in the next round of 13F's if these founds were flocking back to equities, given the recent rally. The were only a few notable changes to their portfolio in terms of specific names. Their addition of more Mastercard (MA) shares, bringing it up to their 2nd largest holding was noticeable. Additionally, their large sales of Sherwin Williams (SHW) and America Movil (AMX) knocked it down on the list of their top holdings. This is just one of many funds in our hedge fund portfolio tracking series in which we're tracking 35+ prominent funds.

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