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 Farallon Capital's Andrew Spokes

ON AN EARLY MORNING IN OCTOBER, just as San Francisco was starting to emerge from the fog, Thomas Steyer, founder of Farallon Capital Management, strode across the ballroom stage at the historic Fairmont hotel. Wearing one of his signature plaid ties — a fiery red sartorial flourish — Steyer radiated casual power and confidence. His investors have come to expect no less. Since launching hedge fund firm Farallon more than a quarter century ago, Steyer has gained a reputation for aggressively pursuing investment opportunities across a wide sweep of markets around the world and tenaciously holding on to some positions for years. His ability to deliver steady returns has attracted a roster of blue-chip investors, and on that day about 200 of them were eagerly awaiting the chance to hear him speak.

But that morning was different from previous investor meetings, because Steyer, 55, had just announced his plans to retire.

A few days earlier he had written to his clients to tell them he intended to step away from the business at the end of 2012, and he named his co–managing partner, Andrew Spokes, as his successor. Although the timing was a surprise, the decision was not. For the past five years, Spokes, 47, has been working alongside Steyer at the firm’s San Francisco headquarters, gradually assuming greater control of Farallon’s $18.6 billion portfolio. In recent years most clients have called Spokes when they needed to know what was happening with a particular investment. But few people outside the firm are familiar with the genteel, boyish-looking Brit. Over the past few years, as Steyer has increasingly stepped into the media spotlight as the public face of Farallon, Spokes has remained the inside man.

Now the former Goldman, Sachs & Co. investment banker has taken on a more visible role as the leader of one of the world’s largest hedge fund firms — and the pressure is rising. In Steyer’s absence Spokes will have to deliver profits in line with Farallon’s historical performance, satisfy clients’ expectations and keep the investment team focused. Everyone will be watching the numbers. Although the firm suffered a disastrous year in 2008, when its flagship fund, Farallon Capital Partners, lost 36 percent net of fees during the financial crisis — humbling Steyer and his team — its returns over time have been solid if somewhat unspectacular. Since its 1986 inception Farallon Capital Partners has delivered a net annualized return of 13.41 percent, besting the S&P 500 index, which has returned an annualized 9.55 percent during the same period.