New York Forum: Goodman warns of ‘paradigm shift’

During an onstage interview at PDI’s New York Forum 2016, GSO Capital Partners co-founder and Blackstone senior managing director Bennett Goodman cited retail as an area of potential market weakness due to the “paradigm shift” brought about by the internet.

“The impact of Amazon has been profound,” he said. “For big box retailers it’s hard to have a differentiated value-add offering.”

He said that department stores such as Macy’s used to be the only place you could go to find certain items, but that this was no longer the case and that industries most touched by the internet were today the most vulnerable.

Goodman referenced disruption in the hotel sector due to Airbnb and in the auto sector from developments such as driverless technology and apps like Uber. “We like things you can’t procure on the internet,” he said.

He added that he has a favourable view of energy, viewing its troubles as cyclical rather than secular. Where the principal is well protected by a company's secure energy resources, he said his firm would be willing to underwrite a recovery five years from now.

However, he added that the company would need to have sufficient liquidity to deliver the upside from a recovery in oil prices and that it is impossible to know exactly when the recovery will happen.

Goodman said the attractiveness of private debt would be maintained on a relative basis in an environment in which returns were coming down across all asset classes. He said the key for investors was to identify the best risk-adjusted returns and that, even dropping a percentage point or two, private debt would still be well compensated for the capital’s patience and for not requiring liquidity.

He pointed to GSO’s scale as a “huge competitive advantage” given “the ability to do what others can’t do” and praised the ability to utilise Blackstone’s private equity expertise, its boots on the ground in Europe and the ability of the firm’s operating partners to provide detailed analysis of business models.

Goodman also urged investors not to “get caught up in fads” and to be highly sceptical. “We see the glass as half empty. We are doubters and that makes us good underwriters,” he noted.

Goodman was speaking to more than 250 attendees, including more than 70 limited partner representatives, at the event.