As we continue to research the world's top investors, Tom Steyer, a billionaire hedge fund manager who may need some introduction, comes into focus.
Aside from his activism and charitable work—Steyer is a well-known environmentalist and prominent Democratic philanthropist—his leadership of San Francisco-based Farallon Capital for nearly 25 years has produced an extraordinary run of financial excellence. However, he may be more well-known for his more recent charitable work than for the successful investing that earned him a billionaire.
This essay will instead focus on the investor himself, his investment philosophy, and the talents he employed to become a billionaire, rather than on his generosity.
About Tom Steyer
Tom Steyer, real name Thomas Fahr Steyer, was a well-known environmental activist before he founded Farallon Capital Management in 1986. He was born in New York City, New York, on June 27, 1957.
Steyer, who comes from an affluent family, went to Phillips Exeter Academy before transferring to Yale University, where he majored in economics and political science and captained the soccer team while also studying these subjects. He employed for Morgan Stanley following his 1979 graduation before obtaining an M.B.A. from Stanford University in 1983. Later, Steyer joined Goldman Sachs, where he made a name for himself for making risky trades. In order to start Farallon Capital Management, a hedge fund named after a collection of islands close to San Francisco infamous for their shark-infested waters, he left the company in 1986.
Steyer oversaw Farallon's rise to prominence as one of the top hedge funds, particularly for its management of university endowments. Despite the hedge fund's phenomenal performance, there was some controversy. Students at Yale and other universities protested in 2004 about Farallon's alleged involvement in business enterprises that occasionally lacked social or environmental responsibility. Some accounts claim that Steyer became more actively involved in the fight against climate change as a result of the reaction. He continued to support the Democratic Party and got increasingly involved in politics. He contributed to the defeat of a campaign in 2008 to abolish California's winner-take-all electoral system, and he was a major player in the defeat of Proposition 23 in 2012, which sought to suspend a state law requiring significant cuts in greenhouse gas emissions. He also donated money to support various politicians. Steyer became a very powerful person in California politics as a result of these initiatives.
Steyer left Farallon in 2012 and started to sell his portfolio of companies that did not support his advocacy, particularly those involving fossil fuels. He was elected founding president of NextGen Climate, a company heavily focused on environmental issues, the next year.
Moreover, he founded the NextGen Climate Action Committee, a political action committee (PAC) that aided in his ascent to national prominence. Among Steyer's other projects was the nonprofit Beneficial State Bank, which he and his wife, Kat, established in Oakland, California, in 2007.
When he started a campaign to remove U.S. President Donald Trump from office in 2017, Steyer's profile expanded to a national level. He used online petitions, digital and television commercials, and other strategies. Steyer said in January 2019 that he would not run for president of the United States, despite there being rumours to the contrary. Nevertheless, he entered the race six months later and promised to spend at least $100 million on the run. He resigned from the campaign in February 2020 after giving dismal performances in a number of primaries and caucuses. Later, Steyer supported Joe Biden as the Democratic candidate, and Biden won the election over Trump.
Tom Steyer's Investment Approach:
Inside Tom Steyer's path to a 10-figure net worth was enmeshed in elite universities from day one, unlike that of fellow hedge fund billionaire Stanley Druckenmiller. Steyer began his career in finance at Morgan Stanley (NYSE: MS) after graduating from Yale, where he captained the soccer team. He joined Goldman Sachs (NYSE: GS) after receiving his MBA from Stanford, where he worked in the renowned merger arbitrage group under the direction of future Treasury Secretary Robert Rubin.
Steyer joined Hellman & Friedman, a San Francisco-based private equity company, after leaving Goldman. Steyer later established Farallon Capital, the hedge fund that would make him wealthy, in January 1986.
At Farallon, Steyer and his team use a variety of fundamental investment strategies, such as direct investments in private companies, merger arbitrage, long/short equities, real estate investing, and credit investments. Although Steyer characterises himself as a fundamentals-based investor, not a trader, these methods are more complicated than the conventional buy-and-hold attitude promoted by The Fool.
Whatever the case, the outcomes speak for themselves. From its establishment in 1986 through 2012 — when Steyer stepped aside from day-to-day administration — Farallon nonetheless managed to post a 13.4% yearly rate of return, compared to a 9.5% annualized return for the S&P 500 index during the same time period, despite apparently losing 36% in 2008. Over $21 billion in assets are currently being managed by the organisation across all of its many funds and investment plans. Investors might at least partially get a sense of where the hedge fund company sees opportunities by analysing Farallon's most recent SEC filings.
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