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This is the third quarter 2009 edition of our hedge fund portfolio tracking series. If you're unfamiliar with tracking hedge fund movements or SEC filings, check out our series preface on hedge fund 13F filings.

Next up in our series is Thomas Steyer's hedge fund firm Farallon Capital. Thomas Steyer founded Farallon in 1986 and today it is a multi-billion dollar hedge fund that typically uses risk arbitrage strategies and invests in equities, private investments, debt, and real estate. Previously, Steyer was an analyst for Morgan Stanley in its Mergers & Acquisitions department and also an associate on Goldman Sachs' risk arbitrage desk. Steyer graduated Summa Cum Laude from Yale University and also received his MBA from Stanford's Graduate School of Business. In the past, Farallon was ranked third in Alpha's 2008 hedge fund rankings. In terms of recent portfolio adjustments from Farallon, we saw it was just adding to its Beacon Roofing (NASDAQ:BECN) stake. For more recent activity out of Farallon head to our post on its portfolio and internal firm adjustments.

Keep in mind that the positions listed below were Farallon's long equity, note, and options holdings as of September 30th, 2009 as filed with the SEC. We don't cover every single portfolio maneuver, as we instead focus on all the big moves. All holdings are common stock unless otherwise denoted.

Some New Positions
Brand new positions that
Farallon initiated last quarter:
Aetna (NYSE:AET) Calls
Yingli Energy (NYSE:YGE) Bond
Focus Media (NASDAQ:FMCN)
Jones Lang Lasalle (NYSE:JLL)
Capitalsource (NYSE:CSE) Bonds
Express Scripts (NASDAQ:ESRX)
Monsanto (NYSE:MON)
Crown Castle (NYSE:CCI)
Rockwell Collins (NYSE:COL)
JB Hunt Transport (NASDAQ:JBHT)
Eastman Kodak (EK) Bond
SBA Communications (NASDAQ:SBAC)
Marvel Entertainment (MVL)
Beacon Roofing ~ Farallon has since updated its stake
Charles Schwab (NYSE:SCHW)
Old Dominion Freight (NASDAQ:ODFL)
Linktone (NASDAQ:LTON)
Hurray Holding (HRAY)
China Housing & Land Development (NASDAQ:CHLN)

Some Increased Positions
Positions Farallon already owned but added shares to:
Visa (NYSE:V): Increased position by 144.4%
Sirius Satellite )SIRI) Note: Increased by 85.4%
Carrizo Oil & Gas (NASDAQ:CRZO) Bond: Increased by 63%
Mastercard (NYSE:MA): Increased by 42%
Apollo Group (NASDAQ:APOL): Increased by 38.1%
MSCI (MXB): Increased by 22.3%

Some Reduced Positions
Stakes Farallon sold shares in but still owns:
AmericaMovil (NYSE:AMX): Reduced position by 54.2%
Priceline (NASDAQ:PCLN): Reduced by 52%
Capitalsource (CSE): Reduced by 37.8% ~ we covered these sales as they happened
Kendle International (NASDAQ:KNDL) Bond: Reduced by 19.6%

Removed Positions
Positions Farallon sold out of completely:
Lucent Technologies (LU) (convertibles)
Financial Select Sector ETF (NYSEARCA:XLF) Puts
Qualcomm (NASDAQ:QCOM)
Moody's (NYSE:MCO)
Fidelity National Information (NYSE:FIS)
Metavante Tech (MV)
Arch Capital Group (NASDAQ:ACGL)
Conway (NYSE:CNW)
Solutia (NYSE:SOA)
Sherwin Williams (NYSE:SHW)
Pinnacle Entertainment (NASDAQ:PNK)

Top 15 Holdings by percentage of assets reported on 13F filing

  1. Aetna (AET) Calls: 9.38%
  2. Visa: 9.24%
  3. Capitalsource: 5.41%
  4. MSCI (MXB): 4.37%
  5. Apollo Group (APOL): 3.78%
  6. Burlington Northern Santa Fe (BNI): 3.62%
  7. Discovery Communications (NASDAQ:DISCA): 3.49%
  8. Yingli Energy Bond: 3.36%
  9. iShares Russell 2000 (NYSEARCA:IWM) Puts: 3.11%
  10. Focus Media (FMCN): 3.1%
  11. Oracle (NYSE:ORCL): 2.81%
  12. Knology (NASDAQ:KNOL): 2.58%
  13. Jones Lang Lasalle: 2.51%
  14. Sirius Satellite Note: 2.44%
  15. Transdigm (NYSE:TDG): 2.43%

The main talking point in Farallon's quarter over quarter changes was its brand new stake in Aetna calls. The hedge fund ratcheted this up to over 9% of its reported 13F assets as the position was worth $139 million at the end of the third quarter. Other brand new positions in its top ten holdings include Yingli Green Energy bonds and shares of Focus Media.

While Farallon's stake in Visa is not a new position, it did double down and then some. This is easily one of the most popular hedge fund holdings we've seen in the select funds we track. Meaningful positions Farallon no longer owns includes Lucent Technologies convertibles (previously a 4.8% stake), Qualcomm (QCOM - previously a 3.5% holding), and puts on the financial sector. Farallon also completely sold out of Moody's which is interesting seeing how Warren Buffett has been selling as well. Overall, Steyer's hedge fund firm increased its holdings in the services sector and reduced its holdings in financials and technology.

Assets from the collective holdings reported to the SEC via 13F filing were $1.4 billion this quarter compared to $1 billion last quarter. Farallon was mainly out adding to positions across the portfolio. As a multi-billion dollar hedge fund, Farallon obviously has positions in other markets as well since its long U.S. equities book is only comprised of a little over $1 billion.

Please keep in mind that when we state "percentage of portfolio," we are referring to the percentage of assets reported on the 13F filing. Since these filings only report longs (and not shorts or cash positions), the percentages are skewed. Also, please again note that these positions were as of September 30th so two months have elapsed and Farallon has undoubtedly shifted around its portfolio since then.

This is just one of the 40+ prominent funds that we'll be covering in our Q3 2009 hedge fund portfolio series. We've already covered Seth Klarman's Baupost Group Bill Ackman's Pershing Square, Stephen Mandel's Lone Pine Capital, Dan Loeb's Third Point LLC, David Einhorn's Greenlight Capital, John Paulson's firm Paulson & Co, Lee Ainslie's Maverick Capital, Andreas Halvorsen's Viking Global, Chase Coleman's Tiger Global, Brett Barakett's Tremblant Capital, John Griffin's Blue Ridge Capital and Shumway Capital Partners (Chris Shumway). Check back daily as we'll be covering new hedge fund portfolios.

Original article