Goldman Sachs Asset Management Announces Liquidation of Goldman Sachs Defensive Equity ETF

Rhea-AI Summary

Goldman Sachs Asset Management (GSAM) has announced that the Board of Trustees has approved a plan to liquidate the Goldman Sachs Defensive Equity ETF (GDEF). Effective immediately, the fund will begin liquidating its assets. Shareholders can sell their shares on NYSE Arca until market close on July 12, 2024. After this date, shares will be delisted and liquidating distributions will be made on or around July 19, 2024. The liquidation plan does not require shareholder approval, and transaction fees may apply for selling shares. The fund, which focuses on long-term capital growth with lower volatility, has faced various market risks and will stop accepting creation orders on July 12, 2024.

Positive

• Goldman Sachs Defensive Equity ETF (GDEF) will provide liquidating distributions to shareholders based on net asset value.
• The liquidation process will be orderly and shareholders will not require additional action.
• The plan ensures the fund ceases accepting creation orders, preventing further dilution.

Negative

• Shareholders may incur transaction fees when selling shares.
• The ETF will be delisted from NYSE Arca post-July 12, 2024, limiting liquidity.
• Liquidation may result in capital gains or losses for shareholders, affecting their tax liabilities.
• The fund's options-based overlay strategy may cause underperformance and higher portfolio turnover expenses.
• Market risk and other associated risks of the fund may have led to its liquidation.

Insights

Financial Analyst

Goldman Sachs Asset Management's announcement to liquidate the Goldman Sachs Defensive Equity ETF has significant ramifications for investors. Firstly, the Fund's liquidation could be driven by a variety of factors including underperformance, limited investor interest, or strategic reallocations within the firm. Investors need to understand the implications of such moves on their portfolios, particularly in terms of liquidity and tax consequences.

From a financial perspective, liquidation means that the fund will cease to exist, prompting investors to either sell their shares before July 12, 2024, or to hold them till the final liquidation date to receive the liquidating distribution. Selling shares before de-listing may incur broker-dealer transaction fees, but it provides immediate liquidity.

For investors holding shares till the liquidation date, the impact is two-fold: first, they must be aware that the value received will depend on the net asset value (NAV) of their shares, which could fluctuate. Secondly, there are tax implications as they may recognize a capital gain or loss based on the difference between the received amount and their adjusted basis in the shares.

In the short term, the fund winding down its operations could add liquidity pressure and potential sell-offs in the equities market due to the fund's asset liquidation. In the long term, the move may reflect a strategic realignment by GSAM towards more promising or better-performing funds.

An investor should carefully consider the tax implications and assess whether holding until the liquidation date is beneficial compared to selling beforehand. It’s important to maintain a diversified portfolio to mitigate the risks associated with specific fund closures.

Market Research Analyst

The decision to liquidate the Goldman Sachs Defensive Equity ETF can also be viewed through the lens of broader market trends and investor sentiment. Exchange-traded funds (ETFs) like the GS Defensive Equity ETF are typically favored due to their market liquidity, diversification and cost efficiency. However, this particular fund’s niche strategy—which involves a 'Put Spread Collar' for downside protection—may have failed to capture significant investor interest, leading to suboptimal asset growth.

ETFs are designed to cater to varying investment strategies and this liquidation points toward possible shifts in investor preferences. Retail investors might be leaning towards more aggressive or better-performing sectors given the current market dynamics. This fund’s defensive strategy might not align with the prevailing risk appetite seen in today's market.

For individual investors, the liquidation suggests a need to revisit their portfolio allocations. A balanced approach, considering both defensive and growth-oriented assets, is essential. The liquidation emphasizes the importance of regularly monitoring fund performance and market trends to make informed decisions.

Looking forward, this move by GSAM may result in the reallocation of resources to more sought-after asset classes or innovative investment strategies, aiming to better meet investor demands.

NEW YORK--(BUSINESS WIRE)--

Goldman Sachs Asset Management (“GSAM”), the investment adviser for the Goldman Sachs Defensive Equity ETF (the “Fund”), announced today that the Fund’s Board of Trustees, at the recommendation of GSAM, has approved a plan of liquidation (the “Plan”) for the Fund. Under the Plan, which is effective today, the Fund will begin the process of liquidating portfolio assets and unwinding its affairs in an orderly fashion over time. The Plan is not subject to shareholder approval.

Shareholders of the Fund may sell their shares on the Fund’s listing exchange, NYSE Arca, Inc. (“NYSE Arca”), until market close on July 12, 2024 and may incur transaction fees from their broker-dealer. The Fund’s shares will no longer trade on NYSE Arca after market close on July 12, 2024, and the shares will subsequently be de-listed. Shareholders who continue to hold shares of the Fund on the Fund’s liquidation date, which is expected to be on or about July 19, 2024, will receive a liquidating distribution of cash in the cash portion of their brokerage accounts equal to the amount of the net asset value of their shares. For tax purposes, shareholders will generally recognize a capital gain or loss equal to the amount received for their shares over their adjusted basis in such shares. The Fund will stop accepting creation orders from Authorized Participants on July 12, 2024.

About Goldman Sachs Asset Management

Bringing together traditional and alternative investments, Goldman Sachs Asset Management provides clients around the world with a dedicated partnership and focus on long-term performance. As the primary investing area within Goldman Sachs (NYSE: GS), we deliver investment and advisory services for the world’s leading institutions, financial advisors and individuals, drawing from our deeply connected global network and tailored expert insights, across every region and market – overseeing more than $2.56 trillion in assets under supervision worldwide as of March 31, 2024.¹ Driven by a passion for our clients’ performance, we seek to build long-term relationships based on conviction, sustainable outcomes, and shared success over time. Follow us on LinkedIn.

Goldman Sachs does not provide accounting, tax or legal advice.

© 2024 Goldman Sachs All rights reserved

NOT FDIC INSURED. MAY LOSE VALUE. NO BANK GUARANTEE. NOT INSURED BY ANY GOVERNMENT AGENCY.

GS Defensive Equity ETF (GDEF) began as the GS Defensive Equity Fund, an open-end mutual fund which had operated since September 30, 2020. Effective as of the close of business on January 20, 2023, GDEF acquired its assets and liabilities, and assumed its NAV performance, financial and other historical information. There were no changes to the investment strategy or objective of the Fund.

The Goldman Sachs Defensive Equity ETF (the “Fund”) seeks long-term growth of capital with lower volatility than equity markets. The Fund is an actively managed exchange-traded fund. The Fund typically invests in equity investments in U.S. issuers with public stock market capitalizations within the range of the market capitalization of the S&P 500® Index at the time of investment and other instruments with similar economic exposures. The Fund will also employ a “Put Spread Collar” overlay strategy, which is designed to provide the Fund with some downside protection, whereby the Fund simultaneously purchases a put while selling (writing) a call and put on the same index. The Fund’s investments are subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular sectors or governments and/or general economic conditions. The Fund’s options-based overlay strategy may not fully protect it against declines in the value of the market and may cause the Fund to underperform during a rising market. In addition, the Fund is subject to the risks associated with writing (selling) call options, which limits the opportunity to profit from an increase in the market value of stocks in exchange for up-front cash at the time of selling the call option. The Fund may have a high rate of portfolio turnover, which involves correspondingly greater expenses which must be borne by the Fund, and is also likely to result in short-term capital gains taxable to shareholders. Any guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund’s shares. The Fund may invest in derivative instruments, including futures, options on futures, and swaps. Derivative investments may involve a high degree of financial risk. These risks include the risk that a small movement in the price of the underlying security or benchmark may result in a disproportionately large movement, unfavorable or favorable, in the price of the derivative instrument; risk of default by a counterparty; and liquidity risk. Different investment styles (e.g., “quantitative”) tend to shift in and out of favor, and at times the Fund may underperform other funds that invest in similar asset classes.

Fund shares are not individually redeemable and are issued and redeemed by the Fund at their net asset value (“NAV”) only in large, specified blocks of shares called creation units. Shares otherwise can be bought and sold only through exchange trading at market price (not NAV). Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.

ALPS Distributors, Inc. is the distributor of the Goldman Sachs ETFs. ALPS Distributors, Inc. is unaffiliated with Goldman Sachs Asset Management.

A summary prospectus, if available, or a Prospectus for the Fund containing more information may be obtained from your authorized dealer or from Goldman Sachs & Co. LLC by calling (retail - 1-800-526-7384) (institutional – 1-800-621-2550). Please consider a fund's objectives, risks, and charges and expenses, and read the summary prospectus, if available, and the Prospectus carefully before investing. The summary prospectus, if available, and the Prospectus contains this and other information about the Fund.

The Investment Company Act of 1940 (the “Act”) imposes certain limits on investment companies purchasing or acquiring any security issued by another registered investment company. For these purposes the definition of “investment company” includes funds that are unregistered because they are excepted from the definition of investment company by sections 3(c)(1) and 3(c)(7) of the Act. You should consult your legal counsel for more information.

ALPS Control: GST 2580
Compliance Code: 375379-OTU-2049249
Date of first use: 06/12/2024
31544364

¹ Assets Under Supervision (AUS) includes assets under management and other client assets for which Goldman Sachs does not have full discretion. AUS figure as of March 31, 2024.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240612132023/en/

Victoria Zarella

Tel: 212-902-5400

Source: Goldman Sachs Asset Management

FAQ

What is the liquidation date for Goldman Sachs Defensive Equity ETF (GDEF)?

The liquidation date for GDEF is expected to be on or about July 19, 2024.

When will Goldman Sachs Defensive Equity ETF (GDEF) stop trading on NYSE Arca?

GDEF will stop trading on NYSE Arca after market close on July 12, 2024.

Will shareholders of GDEF incur any fees during liquidation?

Shareholders may incur transaction fees from their broker-dealer when selling shares.

What happens to GDEF shares after July 12, 2024?

GDEF shares will be delisted from NYSE Arca and will not trade after July 12, 2024.

How will the distribution to GDEF shareholders be calculated?

Shareholders will receive a liquidating distribution of cash equal to the net asset value of their shares.

Does the liquidation plan for GDEF require shareholder approval?

No, the liquidation plan for GDEF does not require shareholder approval.