Ex-Goldman MD: "Credit Markets Move in Step Functions"

Geoffrey Williams spent more than a decade at Goldman Sachs, where he traded structured products through the 2008 financial crisis and later co-ran the CMBS trading business. In this episode of Odds on Open, he takes Ethan Kho inside the Goldman mortgage desk as Bear Stearns and Lehman collapsed. He explains how banks sold tens of billions of super senior protection on ABS CDOs for 10 basis points a year, and what it was like to trade TABX and ABS CDOs as AAA paper repriced from basis points to points upfront. He also breaks down how conduit CMBS is structured and tranched, why commercial real estate moves in cycles across malls, office, and life science, and how post-GFC capital rules pushed securitized credit risk off dealer balance sheets and onto hedge funds.Geoffrey now runs 1543 Capital LP, an opportunistic structured finance hedge fund, with a co-CIO who came from Brevan Howard. The fund focuses on end-of-life CMBS, residential solar ABS, and other dislocated credit. He walks through how he underwrites a CMBS bond loan by loan, when desktop tools like Google Earth are enough and when you need to see the property, and how he sizes positions to survive unknown unknowns while targeting mid-teens unlevered returns. The conversation also covers hedging macro tail risk from deficits, rates, and AI disruption, how populist politics and the proposed California wealth tax shape his real estate exposure, luck versus skill in finance careers, thinking in bets as an entrepreneur, and the biggest mistake structured credit PMs make: forgetting that credit markets move in step functions.