To combat the misconception of easy access to cash, Goldman Sachs has internally banned the common industry term "semi-liquid" for its alternative funds. This linguistic shift is a deliberate risk management strategy to underscore that while these products have liquidity features, they are fundamentally illiquid and access to capital is never guaranteed.

Offering daily liquidity while pursuing a multi-year investment strategy creates a dangerous duration mismatch. When investors inevitably demand their cash during a downturn, the long-term thesis is shattered, forcing fire sales and destroying value. A fund's liquidity terms must align with its investment horizon.

The continuous monthly inflows of successful evergreen funds create immense pressure to deploy capital quickly. In slow deal markets, this forces a difficult choice: halt inflows and kill momentum, or risk performance dilution from cash drag or investing in lower-quality assets to meet deployment targets.

The term "semi-liquid" for private asset funds is misleading. Retail investor behavior is procyclical; during a downturn, redemption requests will surge simultaneously. This reveals the assets' true illiquidity, turning a perceived feature into a systemic risk.

Goldman Sachs avoids the term "semi-liquid" because it provides false comfort. The liquidity gates on these evergreen funds are a feature, not a bug, designed to prevent fire-selling assets. They are most likely to be activated when investors are clamoring for redemptions.

The primary vehicles for retail access, semi-liquid funds, offer limited quarterly liquidity (capped at ~5%). However, managers can impose "gates" to halt withdrawals entirely, exposing investors to a fundamental duration mismatch between their needs and the fund's illiquid assets.

Many investors in 'evergreen' or 'semi-liquid' funds like BDCs are surprised when they can't withdraw their money. These funds have redemption gates (e.g., only 5% of AUM per quarter) written into their documents, a detail often missed by investors rushing into the asset class without proper diligence.

With fund lifecycles stretching well beyond the traditional 10 years, LPs are increasingly seeking liquidity through secondary sales. This trend isn't just a sign of pressure but a necessary market evolution to manage illiquid, long-duration assets.

Despite narratives about accessing high-growth companies, the bulk of retail capital flows into private credit, not equity. Credit funds' regular coupon payments create natural liquidity streams that are far better suited for the semi-liquid structures offered to retail investors.