Portugal offers spellbinding experiences for avid travelers, foreign investors, and international families alike. Thanks to its golden visa program, it’s possible for expats to acquire residency by investment and even Portuguese citizenship in this charming nation. One of the best ways to get a Portugal Golden Visa is via the Portugal investment fund golden visa option.
In this guide to Portugal’s investment funds for the golden visa, we cover the following:
- Benefits of the Portugal investment fund
- Key considerations to take into account before investing in funds
- Fund eligibility criteria
Rising popularity of the Portugal investment fund option for the golden visa
Property is usually the preferred route for investment in Portugal when it comes to applying for the Golden Visa. However, more and more investors are turning to the Portugal investment fund golden visa option, seeing it as a new way to acquire legal residency.
Having ownership over an asset can be attractive to some, especially when it can result in rental income or even a holiday home. In practice, this method may not suit everyone, as finding and purchasing the right property can be difficult and time-consuming.
As recent as November 2018, the Portuguese Parliament passed a new law making venture capital funds (or FCR – Fundo de Capital de Risco) a qualifying investment for those wishing to apply to Portugal’s Golden Visa. With a minimum investment of €350,000 in an FCR fund or ‘Golden Visa fund’, investors can now successfully apply for the Portugal citizenship by investment program and have immediate access to the program’s benefits.
The name Venture Capital may sound daunting and complicated but it is simply a designation of investment funds that are managed by corporate experts in the field who seek to invest in start-ups or medium-sized projects with strong growth potential. Each fund has a specific well-defined investment mandate and may focus on sectors such as energy, industry, technology, or real estate. Funds are regulated by Portugal’s regulator, the CMVM.
Benefits of Portugal investment fund golden visa
There are a number of benefits of investing in the Portugal Golden Visa investment fund.
- The investment fund golden visa is professionally managed by experts in each specific sector
- You can obtain Portuguese residency from a €350,000 investment
- Venture capital funds are a tax-efficient vehicle — dividends and capital gains returned to investors may be tax-exempt
- Some funds offer a minimum return hurdle-rate (usually of 5%) which means managers will only be compensated if the fund performance is above a certain percentage
- Some funds have the support of the Portuguese Government through subsidies or financed by the IFD (Instituição Financeira de Desenvolvimento)
- The funds are regulated and must comply with the rules stipulated by the Portuguese Securities Market Commission (CMVM), which means that fund managers are regularly audited by third parties
Golden Visa Portugal investment fund profile and diversification
The overall level of security of risk of a Portuguese venture capital fund or ‘Golden Visa Portugal investment fund’ will depend on many factors including investment mandate, managers’ credentials, leverage and liquidity, and legal documents. Some funds may offer limited potential for capital appreciation with a safer investment profile while others may have a more leveraged approach with an aim to provide investors multiples of the capital invested. For example, high-growth companies focused on technology have a different profile to property development projects that tend to have a more predictable cash-flow curve.
Funds may offer the opportunity of an early exit but as a rule of thumb, usually, the investor should expect to realize all gains after five to ten years.
The risk-return profile of these funds will vary according to the sector exposure and portfolio diversification (i.e. how many companies comprise the fund’s portfolio).
Examples of risk-return levels based on sector exposure and portfolio diversification
What should a Golden Visa applicant consider when investing in a Portugal Golden Visa Investment Fund?
If you are interested in applying for the Portugal Golden Visa through a Venture Capital Fund (FCR), you must carefully make your decision based on two important criteria:
- Fund eligibility for the Portuguese Golden Visa
- Fund credentials including fund strategy, management pedigree, and legal obligations
Portugal investment fund golden visa: fund eligibility requirements
Not every private equity fund in Portugal qualifies for the Golden Visa program. You need to make sure the chosen fund fulfills all the necessary technical requirements as listed by the Portuguese border service “Serviço de Estrangeiros e Fronteiras” (SEF) and that the investment fund is regulated by the Portuguese CMVM.
A few questions the investor should consider before investing in Golden Visa funds:
- Is the fund regulated by the Portuguese authorities?
- Is the fund fully eligible for the Portuguese Golden Visa according to SEF?
- Does the fund have the right attributes to safeguard the investor’s Golden Visa status? As a Golden Visa investor, you will need to maintain your investment in the Golden Visa fund for a minimum of five years when you are able to apply for permanent residency and citizenship in Portugal.
Portugal golden visa qualified investment fund credentials
Once we’ve established that the fund is appropriately regulated and is an eligible Golden Visa instrument, the second phase of due diligence is required on the fund credentials.
The three main aspects of analyzing a Portugal golden visa qualified investment fund include:
Fund investment strategy: Does the fund investment strategy make sense? What is the term of the fund? How does the fund plan on paying back investors?
Fund manager credentials: Do the managers have the right experience and credentials?
Fund legal: Are the legal documents appropriately drafted to safeguard the investor’s investment?
The importance of an informed decision
It is important that investors exercise careful consideration when selecting the correct fund investment. Legal documents, as well as the caliber of the managers, must be thoroughly scrutinized. Check out additional information on investing in Portugal for citizenship.
At Global Citizen Solutions, we’ve mapped out all the funds that qualify for the Portugal Golden Visa and developed a data-based system with strict criteria to help you decide which fund is for you.
If you are interested in applying for the Golden Visa in Portugal, be it through buying a property or investing in a fund, we can help.
Get in touch today and schedule a free initial consultation.
