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California's hedge fund king

By Adam Lashinsky, senior writer
September 22, 2008: 4:01 AM EDT

***

There is an Everyman quality about Tom Steyer. He drinks Coors Light, drives a Honda hybrid, and flies commercial - often on a redeye when headed East on business. That way he can have dinner at home preflight. He wears the same ratty, red plaid tie to work every day. (A successful-trader superstition, say some; a fetish, say others.) His earnestness has its advantages. "Some people feel great leaving a meeting with Tom, and then they realize they didn't learn a thing from him," says Moore, Farallon's early distressed-debt expert. "It's not Machiavellian. But it's deliberate. You don't always know what he's thinking because he's more interested in learning about you."

This intellectual curiosity might be genetic. Steyer is the son of a Wall Street lawyer and a mother who taught for decades in public schools in Harlem. The Steyers were comfortable but not wealthy New Yorkers, says James Steyer, Tom's older brother and the head of a nonprofit in San Francisco. (They have an eldest brother as well, Hume, a trust and estates lawyer in New York.) Tom Steyer did, however, go to the best schools: the Buckley School, Exeter (where he was class president), and Yale. Friends tell stories about the rigorous debates over social and foreign policy at the Steyer family dinner table on the Upper East Side.

Steyer's wife, Kat Taylor, rubbed shoulders with an equally tony crowd on the opposite coast. Her grandfather, Paul Hoover, was chairman and CEO of Crocker Bank, an old San Francisco institution bought by Wells Fargo in the 1990s. Taylor earned a JD/MBA at Stanford, and the two were introduced by Steyer's brother James, a law school classmate of Taylor's. They've been married 22 years, and Steyer is the kind of beaming husband who once told a female colleague after she tried dragging him onto the dance floor that the only woman he dances with is his wife. They have four children, three sons and a daughter. The eldest son, Sam, a sophomore at Harvard, took a year off from school partly to do charity work in Peru.

Steyer always intended to give back after he made his pile. Similarly, his wife considered a career in civil rights before devoting most of her attention to her growing family and various nonprofit boards. "When we were engaged, we thought there'd have to be a significant part of our lives devoted to service," says Steyer. "I don't think we've changed. I would definitely have to think I've been delayed." As Steyer's wealth has grown - he's reportedly worth $1.2 billion; hedge-fund competitors assume that is a conservative estimate - he has become more involved in causes. Last year he wrote a check for $171,000 to help kill a Republican-backed ballot initiative in California that attempted to dilute the Democrats' dominance of the state's Electoral College votes.

One California Bank is a greater undertaking for Steyer and his wife. It is an example of their using finance as a tool to create a better society. Following what they describe as the "devastation" of John Kerry's defeat by George Bush in 2004, the two held a "wake" at a popular San Francisco nightclub. They resolved to do something to help those they saw as injured by the Bush administration's policies and settled on commercial banking as the way to do it, "because of the many ways it intersects with an ordinary working person's life," says Steyer's wife.

Started with just one branch and owned by a new foundation funded solely by the Steyers, the bank behaves exactly like any community bank. It takes deposits and lends between $200,000 and $2 million to local businesses. It aims to make a profit but also to behave as "patient capital." One California Bank also plans to live up to its name. "The ambition is to be statewide in all low-income communities," says Taylor. Adds her husband, who has amassed a fortune as a financier: "This bank is a statement that we believe that capitalism works."

***

Actions may speak louder than words when it comes to Steyer's goals for Farallon's future (or his getting a shot at directing the nation's economy). In August 2007 he installed for the first time a co-managing partner of Farallon, Andrew Spokes, an ex-Goldman banker who had been with Farallon for ten years. Spokes' elevation coincided with the increasing momentum of Hillary Clinton's presidential campaign, prompting observers to assume Steyer was preparing for the day he'd leave Farallon. Promoting Spokes also was an acknowledgement by Steyer that the firm had become too big for one person to manage.

Indeed, one of Steyer's singular accomplishments has been to keep so much bankable talent under one roof, or at least nearby. When Spokes and another early employee, David Cohen, wanted to strike out on their own in 2004, Steyer cut them a deal: Start your own firm, but do it with Farallon's money. The result was Noonday Asset Management (Noonday is a western outcropping of the Farallon Islands). Noonday eventually became the international operation of Farallon. More recently Chun Ding, a longtime Farallon partner in San Francisco, set up ChinaRock Capital, another separate fund staked by Farallon. These arrangements are unique in the fund world. (When buyout shop Hellman & Friedman set up Steyer in his own hedge fund, it was in a business that was different from their own.) The Farallon spin-offs have their own branding and make their own investments, but Farallon supplies all the capital and back-office support. It enables Farallon to grow and its employees to branch out. What's more, even those who leave Farallon don't go far. Steyer is an investor in Katie Hall's firm, Hall Capital Management. Farallon farms out capital to Meridee Moore's Watershed. Both are on lower floors of One Maritime Plaza, where Farallon, Hellman & Friedman, and a host of related firms are located.

If only Steyer were as good at picking presidential candidates as he is at backing fledgling fund managers. He raised money for Bill Bradley in 2000 and John Kerry in 2004. Then he went to bat early for Clinton, remaining loyal to her even after he judged the nomination battle over in February, when Obama won the Iowa caucuses and the hearts of progressive Democrats nationwide. Of the switch from Clinton to Obama, Steyer says only that it has been easy, that he's focused on November, and that he's given no thought to a role in Washington.

So what's a Mr. Smith-type do for fun while he's awaiting the call to serve his country in D.C.? Steyer always has poetry to fall back on. One of his favorite poems is Alfred Lord Tennyson's "Ulysses," which he says his grandmother read to him as she lay dying. The words, he says, contain the lesson "that you never give up, that you're always trying to do the next thing regardless of how much people want you to rest on your laurels." Suffice it to say that Tom Steyer - who allows that his "ambition is to be an ambitious 80-year-old" - has some fight left in him. Or as Tennyson might put it, he will continue "roaming with a hungry heart," looking for the next great investment, the next worthy cause.  To top of page

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