Hedgie Steyer hanging it up

Another hedge-fund billionaire is calling it quits.

Tom Steyer, who is also an environmental activist and Democratic fundraiser, is retiring at the end of the year from Farallon Capital Management, the $20 billion San Francisco-based firm he founded some 26 years ago.

“Now it’s time to focus full time on giving back,” he said in a letter to investors yesterday. “I want my life to revolve around service in one form or another.”

Steyer, 55, hit the national stage — literally — when he spoke at the Democratic National Convention this year on the topic of clean energy.

He has long supported higher taxes on the wealthy and has backed a California proposition on the November ballot that would bring more corporate tax revenue to the cash-strapped state.

In 2008, Steyer, who had supported Hillary Clinton in the Democratic primary, was rumored to want to follow his mentor at Goldman Sachs, Robert Rubin, to the Treasury Department.

But Washington wasn’t in the cards. Instead, Steyer helped bring Farallon back after its flagship fund lost 36 percent in 2008. The main fund rebounded 25.5 percent in 2009. Farallon has continued to recover, making all investors whole by the end of 2010, and gaining 9.5 percent through September.

Steyer began prepping for his departure in 2007, when he brought Andrew Spokes to California from London to be co-managing partner of Farallon. Spokes will become the sole managing partner upon his departure. The remaining partners will buy out Steyer’s share.

While Farallon has not recaptured the glory days before the crash when it ran $36 billion, the fund still boasts a 13.4 percent annualized return since its inception — among the best in the business.

Steyer is one of a handful of legendary fund managers who came from Goldman’s famed risk-arb desk.