Farallon seeks investments across asset classes and around the world through a process of bottom-up fundamental research and analysis emphasizing capital preservation. Our investment strategies include Credit Investments, Long/Short Equity, Merger Arbitrage, Risk Arbitrage, Real Estate Investments and Direct Investments. Investment ideas compete for capital based on in-depth, critical assessment of specific risks and rewards. Risk is monitored and managed through rigorous and thorough analysis of each investment and, at the portfolio level, through risk management analytics and overlay and tail-risk hedging.
Our Credit strategy invests in credit instruments we believe are mispriced, or inexpensive relative to their underlying risk. The strategy is largely event-driven, involving complex distressed special situations, corporate restructurings, bankruptcies and liquidations.
Our Direct Investments are typically longer-dated, less liquid private market transactions and may be in various parts of the capital structure. We generally look for inefficiently financed situations where we can facilitate a recapitalization, or situations in which traditional institutional financial capital is not available. We are prepared to move quickly, providing timely, customized financial solutions. This strategy can include transitional financing in the form of senior secured and mezzanine loans, project and acquisition financing, non-performing loan portfolios, convertible debt, and event and growth equity.
Our Long/Short Equity strategy primarily invests in common stock that we believe is underpriced or overpriced relative to its intrinsic or fundamental value, based on an in-depth, differentiated assessment of a company and its market compared to other market participants. Investments also may be made in anticipation of events, changes or catalysts. Market risk and other risks may be hedged through a variety of financial instruments, including options, derivatives and short sales.
Our Merger Arbitrage strategy is focused mainly on corporate takeovers. Each investment seeks to capture the spread between the current and projected values of securities of companies involved in a merger or acquisition. To employ this strategy, we typically establish a long position (usually a purchase of common stock) in an announced takeover candidate and, if the proposed merger or acquisition is structured as a share-for-share deal, take a short position in the acquiring company.
Our Real Estate strategy pursues generally illiquid investments in real estate-related assets, especially in cases where improvement of the asset, leasing and addition of management expertise can add value. We invest opportunistically across a broad range of real estate assets, in various parts of the capital structure, with a focus on office, retail, multifamily and industrial assets.
Our Risk Arbitrage strategy generally consists of investments in publicly traded companies involving theoretical arbitrages often resulting from what Farallon sees as inefficiently priced trading markets. The theoretical arbitrage investments included in this category may include investments in holding companies and their subsidiaries, or securities trading in separate markets or on separate exchanges, hedged with financial instruments in expectation of convergence between market price and theoretical value.