B (4:23)

And if we get under the hood, give us a sense for what Furlong looks like today. How do you operate the fund? How do you deploy the risk?

A (4:32)

So I think the great strength of Fair Lawn is our ability to cover multiple strategies in multiple geographies and see it from a step away. And that gives us the ability to do the right allocation. So we're involved in merger arbitrage. So these are announced deals where there's typically a spread we're taking. On the one hand, the risk of the deal does not happen, so process risk. But at the same time, we're also providing this liquidity to target shareholders. There's a natural, typically alpha to be generated from the strategy we invest in, risk arbitrage strategy. So this is also where we long and short, typically the same asset, but where the event that will crystallize the collapse of value is not a merger. We invest in various credit strategies, corporate and non corporate across the globe. And then we do long short investing and then finally we have some real estate strategies as well.

B (5:18)

Let's talk about the multi manager model which has become very popular of late. In a way explain how you're similar but maybe also quite different.

A (5:28)

Yeah, it's a very interesting question. I think when we started off, Wade Farrell was one of the pioneers of the multi strategy model. But it was a single manager multi strategy model. What's evolved over the time is just having these multi managers within the multi strategy. And so the way we're different is that we're one partnership run with a one P and L mentality. All the partners are mostly interested about how well the firm does as a whole. And and that allows us the ability to redeploy capital quickly. In terms of our portfolio it means that we have a substantially more concentrated portfolio. I think we're running at fair lawn, probably less positions and most multi managers have pods investment teams. So it's substantially more concentrated and we take more idiosyncratic risk in that fashion. But we can do it with substantially less leverage than the multi managers. And so we control risk in a statistical and precise fashion as well as but more fundamentally by having lower leverage but tolerating higher Socratic risk on individual positions. And at the same time I hope and expect that we're a much more collaborative atmosphere for the small number of partners that work together. And so the the greatest opportunities tend to fall between the cracks of the credit and the long short and the the real estate teams and the global teams. And so that's a key differentiating strength of ours to deploy capital successfully.

B (6:50)

So if I go back to where we started, the firm was founded in 1986, again only one down year along that path. What is the governing philosophy around balancing risk taking with risk management?

A (7:03)

Well, the DNA of the firm was merger arbitrage and merger arbitrage investing is in a way very simple. You can very easily determine your downside, which tends to be the pre deal price and your upside, which is the deal price. And it forces you to think in probabilistic term what is the implied market probability that I get from just looking at prices and then what do I expect that probability to actually be based on my research. And so that format is what has driven our entire investment construct. It's all about thinking about the world in probabilistic term. An investment thesis is not a Religion, it should be provable wrong. You need to put yourself. If you haven't figured out how you can lose money, then you haven't thought long enough forward. Think about the post mortem after the fact. How could you have lost money? Envisaged that, think back through it. That's a scenario. Put a probability on that. And all of our investments have these different probabilities and we are in the positive expected value game. Ultimately we need to assess this probability well and understand how we can lose money in any given investment.

B (8:07)

Tell us about a moment or two when that philosophy was really most tested.

A (8:12)

I think 2008 was certainly a difficult period for us and for all of our peer group. And there are certainly times when the markets can be crazier than you would have ever expected. And that typically happens in periods of deep, deep stress in liquidity and availability of and systematic risk effectively across the globe. So those definitely test us and test markets typically. Thankfully in the more recent past we've always, we've had negative outcomes, but negative outcomes that were understood before the fact ex ante and then we're prepared for those.

B (8:44)

Let's go back to the markets and the opportunity set that's in front of us. As you think about all the different ways that Farallon can make money, is there one part of the portfolio you find most appealing right now?

A (8:56)

There's probably multiple parts that I still find attractive right now. So I mentioned our core strategies within our long short exposures is certainly two areas in particular that are particularly attractive right now. Japan is a place that we've been investing in for a very long time or 15 years by now. And there's been a dramatic change in how corporations are supposed to behave now. So that transition in corporate governance has really opened a whole avenue for us to deploy capital. It's a place where you need legitimacy, that you need to play by the local code I think to be successful. But there are multiple areas where you can invest in corporations and help them generate value for shareholders. And it's a unique time in Japanese society where the government, the stock exchange, the ministries are all supportive of this constructive engagement. So that's a core area of focus, investing in equities, in constructive engagement with companies to help them generate value for shareholders and ultimately for society at large. We very excited about our, in our long short book, in our event driven investing in biotech stocks in particular. This is an area where there's just an incredible amount of innovation still taking place in this country. And it's an area which really Fits well our mode of thinking in terms of probabilities of outcome and our ability to combine both science and investing together. We're looking for really good investments but with great and depth of scientific research so that debts is working for us. And then thirdly, I think our initial strategies of merger arbitrage that I've mentioned has really seen a new light of day effectively in the recent years with a much easier regulatory path to approval of deals and probably a very short window for corporations to do strategically transformative deal. I think your firm is at the forefront of supporting that effort. We encourage you to go all in, as I know you are. And so it's a very attractive period, period with the very good risk rewards on the large transactions that have been announced. And it's a business which is very good to do selectively. Larger deals tend to have wider spreads and to do it as part of a multi strategy effort where you're not running a diversified book of merger arbitrage deals, but you're really picking the best ones as part of a bigger book where you're diversifying risk elsewhere. Very accretive to returns we expect.

B (11:16)

One of the defining features of the investing environment today, of course, is this rise in geopolitical risk. How does that play a role in how you operate the fund?

A (11:28)

I think we are really trying to add value in our alpha and our DNA is to add value in idiosyncratic risk is will that company decide to sell itself in Japan or not? Will this drug be successful or not? Will this restructuring go our way or not? That's the way we're going to add value irrespective of geopolitical risk. We are geopolitically aware, of course, as we are now macroeconomically aware after 2008. And so this is a key component of our portfolio construction and our portfolio hedges. But what our LPs expect of us is to preserve capital during the periods of volatilities, but really generate returns from idiosyncratic risk, not betting on those investments. And so we're managing the volatility and trying to understand what is going on and how it can impact short term movements. But really our portfolio is fundamentally structured to look through those events.

B (12:17)

You mentioned earlier that credit is a part of the. It's one of the arrows in your quiver. What's your kind of view on this current narrative and hand wringing around the private credit space?

A (12:27)

Well, actually, you know, we're talking about 2008. So private credit came out of that. Yes, it was the solution to the systematic risk that affected all the banks. We're going to put credit risk in areas which are loss absorbing without creating systematic risk. And I think the regulator has been very successful by the view of the growth of private credit, especially around direct lending and structured asset. It's taken the risk off the banks, it's put them in in the hands of investors who have the ability to absorb capital. Unfortunately, it is possible that we're entering a phase where there'll be more need for that loss absorbing portion of the capital. I think the growth will undeniably continue. I also think that, you know, the biggest problem perhaps with the asset class is just that there is always a credit cycle and we have not really had a credit cycle for a long while now. And we've seen a rise in liability management exercises and restructurings, but it would certainly go up significantly in a recession and it's likely to go up much more when there's an incredible transformation that's going to affect all of our industries from the rollout of AI. And I do think that the concerns over the future losses on software related asset light businesses that have been heavily levered and favored by private equity and are perhaps disproportionately represented in private credit versus public high yield credit will create greater losses in the private credit world. But I think it's a question of quantum and I do not expect there to be a systematic risk associated with this. But there will be greater opportunities going forward for investors.

B (13:55)

So what are those opportunities really?

A (13:57)

It's about being prepared right now. I think this is going to be a long cycle and one of the key factors around private credit is indeed that these structures were designed not to be traded. So there is some trading that's taking place right now. But I think the opportunities that are going to be around actual defaults that are going to be going to be ahead of us and then refinancings of those balance sheets when they mature. And so for me, the private credit opportunity with regards to direct lending and how we can lean into that is really going to be a 27 and beyond opportunity in terms of meaningful capital deployment. But those disruptions that come from AI's involvement in SaaS but in also in asset light businesses will have meaningful impact on those portfolios and there will be many winners and there will be many losers and our interest is going to be in providing solutions to the ones that have done less.

B (14:45)

Well, you alluded to it earlier, but one thing that makes Furlan very unique is you've been through not one but two CIO transitions, which is very rare in the hedge fund space. If you were to explain how the organization has pulled that off, how would you tell the story?

A (15:03)

I think it goes back to the fundamentals of our exclusive mission is generating returns for LPs. Yes. And we, we put our LPs first in everything that we do. And when we talk about our culture of integrity, that's also putting them first. And also our desire to do the right thing by our partners is because we also represent them in what we do. And we're very honored by the cast of LPs that have decided to invest with us. And so when you do that, I think it means that anybody who's, who's running the firm is really a steward on their behalf. And the best way to achieve returns over long periods of time is to move on at the right time to let the new generation take the helm with new ideas to nurture the next generation in order to generate returns for LPs. And so we have this mentality where the partners who run the firms are the one who really earn the economics of the firm firm and we pass it on to the next generation. And that allows us to have these rather seamless transitions of new talent coming in running the firm on behalf of LPs.

B (16:08)

We'll finish with some shorter form questions. Nicholas, what's your greatest strength as an investor?

A (16:14)

Well, I think I'm a self aware paranoid optimist. So maybe that's, that's three strengths which I've got their own weaknesses. I think if you're going to invest well, you've got to know your own biases. I certainly like to lean into market dislocations and I tend to do that too early. And I correct myself. I think you've got to be an optimist. Ultimately it's true optimists win over the long term. That's right. And, but you've got to be paranoid because, because there's more ways to lose money than can be ascertained that first instance. So always putting yourself back, challenging yourself in your hypothesis. And I think that fits in well with when I talk about our three pillars of our culture of humility. You're always constantly reassessing yourself what's the

B (16:54)

best piece of advice you've ever received.

A (16:57)

Life is a marathon, it's not a sprint. And it's a powerful statement because it means also that when things don't work out well, this investment does not define your career as an investor. This particular event in life does not define the rest of your life. But at the same time it's perpetual effort, always pushing yourself. It's a marathon. You gotta train for it, you gotta work on it every day, you gotta persevere. And what's incredible about that statement as well is that you can achieve so much over long periods of time.

B (17:25)

How do you spend your time outside of the office?

A (17:28)

I'm a very boring family man, so. But now that we are actually empty nesters with my wife, there's a little bit more time. But I live in San Francisco. I think Farallon, one of the differentiating characteristics is that it was built in San Francisco to be in a different place than New York. So sad. We could be contrarian in our investment approach and we could make decisions without the wisdom of the crowds around this to some extent. And the great benefit of the San Francisco and the Bay Area is just the outdoors are absolutely fantastic. So I enjoy mountain biking and hiking.

B (17:58)

And then finally, what are you most excited about in the world right now?

A (18:02)

Oh, I think the most exciting thing is this AI revolution that's coming upon us. It's going to change every single industry the way we organize our firms. It's a unique, an incredible time to be an investor. Our whole portfolio is designed so that we are not leaning into the fate of the moment, but we are absolutely recognizing that this will impact our credit business, certainly our long short business and our firm. And staying close to those developments, implementing them internally and how they impact every single one of our investment is probably the single most exciting areas in the world right now.

B (18:35)

We're going to leave it there. Nicholas, thank you for doing this. Thank you for visiting your alma mater and best wishes for the path ahead.

A (18:42)

Thank you very much, Sonny. It was a pleasure to be here.

B (18:45)

Thank you all for listening to this episode of Goldman Sachs Exchanges Great Investors which was recorded on April 9, 2026. I'm Tony Bascarello.

C (18:58)

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