(Bloomberg News) Thomas Steyer, the founder of $20 billion hedge fund Farallon Capital Management LLC, will exit the firm after more than a quarter century to focus on public service, leaving Andrew Spokes as the sole managing partner.

Steyer, 55, who previously worked at Goldman Sachs Group Inc.'s risk-arbitrage team under former U.S. Treasury Secretary Robert Rubin, started Farallon in 1986. Steyer will remain the second-largest investor in the hedge fund after he departs at year-end and his partners will buy his share of the firm, according to an investor letter.

"My role has shrunk over time, his has grown, and rightfully so," Steyer said in the letter. "The transfer to Andrew has proceeded steadily and deliberately for five years. Now it is time for him to take the reins alone."

Steyer, a fundraiser for President Barack Obama, said he will focus on "giving back" to the community. Wearing his signature red plaid tie, Steyer gave a six-minute speech at this year's Democratic National Convention in Charlotte, North Carolina, focusing on Obama's energy policy.

Several prominent hedge-fund managers have stepped away from the industry in the past few years, either by transferring leadership to a new generation of managers or by returning money to clients. Bruce Kovner, 67, the billionaire co-founder of Caxton Associates LP, in January handed control of the hedge fund he started in 1983 to Andrew Law, 46. Billionaire George Soros, 82, last year returned money to investors, ending a career that spanned more than four decades, while Stan Druckenmiller, 59, two years ago closed his 30-year-old fund.

In 2010, Steyer designated Spokes, 47, as his likely successor in the event of his departure, naming him the second so-called key man. Spokes, a U.K. native, joined the San Francisco-based firm in 1997, and became the co-managing partner in May 2007, based in Asia and Europe. Before joining Farallon, he worked in Goldman Sachs's investment-banking group for 10 years. He moved to San Francisco in 2007 from London, where he oversaw strategy and portfolio management at Farallon's Noonday Global Management Ltd. unit.

Spokes wrote in a letter today that investors should not expect any "dramatic changes" in the firm's investment approach. Farallon, a multistrategy firm whose investments include credit and real estate, gained 9.5 percent through September, according to a person familiar with the returns, compared with an average gain for hedge funds of 3.1 percent, according to data compiled by Bloomberg. Farallon, ranked in 2005 as the world's largest hedge fund, returned an annualized 13 percent since its inception, the person said.

Steve Bruce, a spokesman for Farallon, said Steyer and Spokes declined to be interviewed.

"I want my life to revolve around service in one form or another, including continuing participation in our community bank, in encouraging the advanced energy economy and in specific policy initiatives here in California," Steyer wrote.

In his convention speech, he told the audience that Republican challenger Mitt Romney would do nothing to reduce the nation's dependence on fossil fuels and would gut Obama's investments in clean energy.

In 2010, he helped defeat a California ballot measure that would have suspended the state's global warming law. This year, he has donated at least $21.9 million to support a California ballot measure that would eliminate a tax break for out-of-state businesses.

In 2007, Steyer and his wife, Kat Taylor, co-founded One PacificCoast Bank, an Oakland, California community development bank.

Steyer, who was born in New York City, started Farallon after joining San Francisco-based buyout firm Hellman & Friedman LLC, which invested in his hedge fund at its start. A graduate of Yale University who has a master's degree in business administration from Stanford University, Steyer worked as a financial analyst at Morgan Stanley's mergers and acquisitions group and later joined Goldman Sachs as an analyst.

Farallon was the Yale endowment's first investment in hedge funds in 1990, according to "More Money Than God" by Sebastian Mallaby (Penguin Press, 496 pages, $17).

Steyer had a net worth $1.3 billion as of September, according to Forbes magazine. He's among the billionaires who have agreed to devote the majority of their wealth to philanthropy under billionaire Warren Buffett's Giving Pledge program.