One of the hedge fund industry's veteran managers, Farallon Capital Management LLC, received a rash of redemption requests from institutional investors for its flagship multistrategy approach this fall even as it raised $750 million for a new Asia-focused special situations fund.
At least $223 million is poised to flow out of the multistrategy funds after the most recent redemption period, which ended in November, because institutional investors are nervous about staff turnover and the yearlong lockup period.
The bad news-good news scenario is not particularly unusual for a number of large, long-established multistrategy hedge funds, said investment consulting sources who spoke on condition of anonymity about San Francisco-based Farallon.
”Some firms don't age well,” said one consultant, whose clients are not invested in Farallon funds. “We wouldn't recommend them because the lockup is too long and a lot can happen in a year,” the consultant said.
Both Thomas F. Steyer, Farallon's co-managing partner and co-senior managing member, and Mary Beth Grover, the firm's official spokeswoman, declined to comment.
Because executives declined to comment, no information was available on the new Asia special situations fund. External sources contacted did not have knowledge of the fund. Farallon has not added details about the fund to its ADV filing with the U.S. Securities and Exchange Commission, which was last updated Sept. 9.
Farallon imposes a one-year lockup on assets invested in its main multistrategy hedge funds — Farallon Capital Partners and Farallon Capital Institutional Partners — and allows its largely institutional client base to redeem only once per year.
The assets of the two flagship strategies account for $12.7 billion, or 60%, of the firm's $21 billion of assets under management, according to Farallon's ADV filing.
Because assets aren't returned to investors until the end of January, that 13-month delay is just too long for some investors, including the $650 million Nevada System of Higher Education, Reno.