Unlike corporate bonds with distant bullet maturities, most structured credit products return principal monthly. This constant amortization shortens the asset's duration over time, making its value progressively less sensitive to interest rate swings and mark-to-market fluctuations during periods of distress.

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.

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.

Contrary to fears, bond ETFs proved their resilience and liquidity during the 2020 pandemic crash and the 2022 rate shock. These events served as critical tests, cementing investor confidence and triggering a new wave of adoption when underlying assets were hard to trade.

For 99% of ETFs, liquidity and bid-ask spreads are not based on the ETF's own trading activity. Instead, they reflect the cost for a market maker to buy or sell the underlying basket of securities. An ETF holding liquid stocks can trade billions with tight spreads, even if the ETF itself is rarely traded.

A major structural disadvantage of ETFs is the inability to close the fund to new capital. Unlike mutual funds or SMAs, an ETF cannot stop inflows. This makes the structure inappropriate for strategies with limited capacity, such as those focused on micro-cap stocks, where large inflows would harm performance.

The presence of a large, actively traded ETF forces the development of automated pricing and trading infrastructure for the underlying assets. This is why CLOs are electronifying faster than other, similarly complex securitized products that lack a major ETF.

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.

A key advantage of using defined-maturity bond ETFs is immense diversification. A single ETF representing one 'rung' of a ladder can hold hundreds of individual bonds, a level of risk mitigation that is practically impossible for most investors to achieve when buying individual bonds, especially with limited capital.