Private equity funds (PE Funds) provide private investors with unique investment alternatives to traditional investment options such as publicly traded stocks and bonds. Before making a private equity transaction and investing in this type of fund, it is important to understand more about these funds, their structure, and their benefits and shortcomings.

saint-kitts-and-nevis-passport-dual-citizenship-family-membersIn this article, we’ll provide you with everything you need to know about the topic in 2024, including the time and money needed to contribute to the PE funds, management and performance fees, responsibilities, and much more.

Below, we’ll explore the following:

  • What is a private equity fund?
  • About the PE funds in Portugal
  • Differences between private equity vs. venture capital in Portugal
  • About the Portugal Golden Visa investment fund route
  • Benefits of Portugal investment funds

Private Equity Portugal: What is a Private Equity Fund?

So, first things first, what is a private equity fund (PE Fund)? They are private closed-end funds, meaning that their capital is not listed on a public exchange. Investors, high net-worth individuals, and various institutions can invest directly into this category of alternative investment funds and get equity ownership in firms through the funds’ shares.

When the PE fund reaches a certain level of commitment (the target), it is normally closed to additional investments.  When you are seeking the best PE fund in Portugal, it’s important to consider the following factors:

  • Private equity funds are closed-end funds that are not traded on stock exchanges.
  • Both management and performance fees are included in the fees of the fund and are deducted from the amount raised.
  • Usually, the two types of participants in these funds are the general partners and the limited partners.
  • Limited partners are responsible for the amount they invest (e.g., Golden Visa investors) and don’t usually participate in the day-to-day management of the funds.
  • General partners are entirely liable to the market (e.g., fund managers) and have an active role in the management of the funds.
  • The limited partnership agreement (LPA) or the Management Regulation (MR) establishes the amount of risk that each party carries; it specifies the lifespan of the fund, how capital distributions are made, and much more.

About Private Equity Funds in Portugal

salaries in portugalThe Portuguese private equity sector is dominated by funds managed by Portuguese-based management firms. In recent years, though, the thriving real estate assets market—particularly in the capital, Lisbon, and the second-largest city, Porto—alongside the tourist boom and various other factors has been catching the attention of yield-seeking international private equity fund managers.

Another incentive that benefited the private equity sector in Portugal was the government’s creation of the funds route for granting Golden Visas through an investment of €350,000. Although the required fund investment increased to €500,000 on 1 January 2022, the popularity of this Golden Visa investment fund route didn’t slow down; on the contrary, new funds continue to prompt innovation and catch the interest of foreign investors.

In the Portuguese market, it is estimated that family businesses may represent between 70 percent and 80 percent of national companies, employ 50 percent of the workforce, and contribute two-thirds of the Gross Domestic Product (GDP); such figures present opportunities for PE funds to help grow these businesses.


The levels of fundraising for PE funds in Portugal are peaking after a couple of slow years. The following factors could have an impact on the increased interest:

  • The Golden Visa program
  • The thriving tourist sector
  • The potential of Portuguese companies
  • The overall growth of the Portuguese economy

Funding sources

The capital raising for private equity in Portugal is often done through private and public institutional investors such as investment banks, pension funds, development banks in Portugal, and some national retail investors. Retail investors from outside of the European Union or the European Economic Area (EEA) who subscribe to private equity funds for the Golden Visa program are another major funding source.

By securing a portion of the funding from private and public institutions in the first place, PE funds can become more attractive to individual investors who will have more confidence in tagging along their investments.

While private equity funds typically invest in equity, they may also employ debt financing strategies — using funding from financial institutions — to enhance their investment portfolios and achieve their investment goals.


These funds are tax-exempt. The tax framework regime for participants in a PE fund will depend on whether they are a tax resident or entity, non-resident individuals, or non-resident entities.

Tax resident individuals who invest in private equity funds

These residents are usually not liable to pay the following:

  • 10 percent final withholding tax rate on income
  • 10 percent tax rate on capital gains

Non-resident individuals who invest in private equity funds

  • Tax exemption on income
  • Tax exemption on capital gains

Fund duration

While it can vary considerably from fund to fund, the typical fund duration is normally eight years. It is also common for PE funds to have the option to extend the initial duration by one to two years ( this could be to maximize returns or to hold a position during less favorable economic cycles, for example; investors who disagree with the extension can usually redeem their shares). Typically, the investment period is around two-thirds of the funds initial duration (roughly five years).

Investment objectives

investment optionsThe objectives of the PE fund are usually the following:

  • Growth transactions in small and medium-sized businesses with the aim to expand it or internationalization.
  • Funding for start-ups at a later stage.
  • Investment in real estate properties through the use of special purpose vehicles (SPVs).
  • Find business opportunities to maximize returns through the performance of companies or through their appreciation.

Private equity funds can have a diverse focus and invest across different sectors. Some PE funds structure themselves as sector-agnostic, while others are more sector-specific or niche-oriented (focused on domains such as technology, industrial, logistics, hospitality, and energy). Naturally, each sector entails different risk levels, which are influenced by the economic circumstances and trends at the time of investment.

For example, a PE fund with a buyout and growth objective usually invests in established companies with proven market products and positive EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This typically involves larger investments compared to venture capital funds that invest in smaller tickets in several startups and early-stage companies, where growth is less certain (but potential can be high).

Similar to how a PE fund conducts its due diligence before investing in companies in its pipeline, investors should also carry out some sort of due diligence on the funds they are considering investing in. It’s important to check who the fund managers are, their experience and track record, as well as the fund’s investment strategy and exit strategy. These are just some considerations to bear in mind.

Exit strategies

Private equity funds in Portugal typically employ three primary exit strategies to realize their investments in companies: trade sales, initial public offerings (IPOs), and spin-offs. The chosen exit strategy plays a significant role in influencing the potential returns, liquidity, diversification opportunities, professional expertise, institutional backing, and broader economic impact for individual investors.

Trade sales, the most common exit strategy, involve selling the investment to another company, either a strategic or financial buyer. This approach offers relative speed and ease of execution, but it may present challenges in securing a buyer willing to pay a premium price.

IPOs, while less prevalent in Portugal, hold the potential for generating substantial returns for investors, particularly if the company’s valuation is high. However, the lengthy and complex IPO process can be resource-intensive and may not always align with the company’s growth trajectory.

Spin-offs, involving the separation of a company division into an independent entity, can unlock value for both the parent company and its shareholders. This strategy offers liquidity to investors while potentially propelling the new company’s growth.

Beyond these primary exit strategies, secondary sales, recapitalizations, and management buyouts (MBOs) may also be considered. Secondary sales involve transferring the investment to another PE fund, typically used for companies not yet ready for a trade sale or IPO. Recapitalizations provide further capital to the company in exchange for an increased equity stake, often aimed at supporting growth or turnaround efforts. MBOs involve selling the company to its management team, a suitable option for businesses that may not be well-suited for alternative exit strategies.

The choice of exit strategy depends on various factors, including the company’s size, stage of development, market conditions, and the fund’s investment objectives. PE fund managers carefully evaluate these aspects, as well as the company’s financial performance, growth prospects, and competitive landscape, to determine the most optimal approach.

For individual investors, comprehending the exit strategies employed by private equity funds in Portugal is crucial for making informed investment decisions. The chosen exit strategy significantly impacts the potential returns, liquidity, diversification benefits, professional expertise, institutional backing, and broader economic implications for individual investors.


Under Portuguese law, private equity managers must obtain permission from the Portuguese market regulator, the CMVM (Portuguese Securities Market Commission), before they are able to operate.

Private equity fund management can be carried out in the following ways:

  • By private equity companies.
  • Through private equity fund management firms that are AIFM Directive compliant.
  • By regional development companies.

Note that investors do not need any special authorization or license to subscribe to participation units in a private equity fund.


All the above-mentioned fund management entities are subject to regulations under Portuguese law. The securities market regulator (Portuguese Securities Market Commission — CMVM) also supervises the funds themselves, as previously mentioned. Private equity vehicles in Portugal are subject to the general limits of the Portuguese Securities Code for the marketing and advertisement of securities.

Recently, the regulatory framework for private equity in Portugal was harmonized with the latest transposed EU directives, and the dispersed national legislation was consolidated into a single regime.

Take a look at our Portugal Golden Visa Ultimate Guide by Experts

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Portugal Private Equity Industry Analysis

The private equity trends in the Portuguese private equity market partly shifted with the most recent changes to the Golden Visa program. Many private equity funds focused on real estate assets, but these are no longer considered Golden Visa-eligible funds.

Although the real-estate-related fund is no longer a qualifying investment for the Golden Visa program, it doesnt mean these funds will suddenly end or that no new ones will be launched; the real estate sector in Portugal is still very competitive and attractive to parties such as fund managers, investors, and developers.

The end of all real estate-related investments as eligible Portugal Golden Visa funds (namely property acquisition and subscription of the above-mentioned funds) prompted the launch of new private equity funds. The updated private equity or investment funds route now focuses on the most varied sectors (technology, industrial, energy, logistics, R&D, or even with an agnostic approach) for the Portugal Golden Visa program.

The vibrant startup ecosystem, characterized by a growing number of innovative companies, has attracted the attention of venture capital investors seeking exposure to promising private equity investment opportunities in Portugal. This increased interest stems from the potential for high returns and the belief that Portugal is home to a fertile ground for nurturing successful startups because of factors such as a skilled and educated workforce, lower labor costs in comparison with other European countries, and government support in the form of tax breaks, incubators, and funding programs.

Differences Between Private Equity and Venture Capital

living in portugal bank systemPrivate equity (PE) and venture capital funds (VCs) invest in companies of various sizes, from startups to SMEs. They both commit varying amounts of capital and can differ in the ownership percentages in the companies they invest in.

However, there are a few differences between private equity and venture capital funds.

Private equity (PE)

PE funds usually involve larger investments in more mature companies looking to expand or restructure. PE funds invest for control by acquiring a stake in portfolio companies or through debt instruments.

Venture capital funds

Venture capital funds make modest investments in startups, providing crucial support to startups in their early stages of growth. These investments typically involve acquiring minority stakes through equity and quasi-equity convertible instruments rather than debt. This approach nurtures innovation and long-term success, setting the stage for exciting new ventures to flourish.

Portugal’s venture capital and private equity landscape is key in helping the country’s companies reach their full potential. These investments provide funding and professional expertise to help grow businesses.

Portugal Golden Visa Investment Funds

For a minimum investment of €500,000, investors qualify for a Portugal Golden Visa application. In recent years, both investment funds have quickly gained ground to become one of the most popular ways for individuals seeking a Portugal Golden Visa. This increase in popularity is largely because the costs of applying via this route can offer higher potential yields than other investment routes for the Golden Visa program.

An additional benefit of a private equity fund investment is that fewer and lower additional costs are involved than in the now-defunct real estate investment option.

If you apply for a Golden Visa by investing in a private equity fund, you must maintain your investment for at least six months before applying for the Portugal Golden Visa residence permit.

The process is:

  • Make a qualifying investment in a private equity fund registered with the Portuguese Securities Market Commission (CMVM) and invest in Portuguese companies.
  • Wait for at least six months after making the investment.
  • Apply for the Golden Visa residence permit through the Agency for Integration, Asylum and Migration (AIMA).
  • Provide AIMA with your investment documentation, including a copy of your investment contract and a certificate from the fund manager confirming that your investment is still held.
  • You will receive your Golden Visa residence permit if your application is approved.

Benefits of the investment fund route

Aside from the residence permit, there are several benefits to choosing the investment fund route, such as:

Higher potential yield

Capital gains yield can be significantly greater than other Portugal Golden Visa investment options, depending on your investment profile, the policy, and the targeted/return of the fund that you opt for. Researching the best private equity funds for you will help to secure a high potential yield.

PE funds are strictly regulated

As mentioned previously, private equity funds in Portugal are well-regulated. The CMVM (Portuguese Securities Market Commission) regulates and supervises funds that are eligible for the Portugal Golden Visa program.

Working with experts

Each private equity fund is tailored to the client’s profile and has its own objectives and risk tolerances. Fund managers are professionals whose full-time responsibility is ensuring that the private equity fund performs well.

Any investment, including an investment into one of the Portuguese Golden Visa funds, carries some level of risk. You can analyze this risk independently, but getting advice from a fund manager when making investment decisions is a good idea, particularly if you do not speak Portuguese and are unfamiliar with Portuguese bureaucracy.

Exploring Visa and Immigration Options for Portugal

If you're considering making the move to Portugal, it's essential to be informed about the various visa and residency options available. The Golden Visa Portugal program is an attractive option for many, offering residency to investors and their families. For those eyeing retirement in this beautiful country, the Retirement Visa (D7) is tailored for you. Digital nomads can take advantage of both short and long stay options with the Nomad Visa (D8). Meanwhile, the NHR - Non Habitual Tax regime provides significant tax benefits for new residents. 

For the entrepreneurial spirit, Portugal offers the Entrepreneurship/startup Visa (D2) - Start-up Visa (open company) tailored for those looking to establish their businesses in the country. Those with specialized skills can explore the Work visa for highly qualified employees (D3). Additionally, if you have Portuguese ancestry, you might be eligible for Citizenship by descent

However, moving to a new country isn't just about visas. If you're thinking of buying property, our guide on Buying Property in Portugal can offer invaluable insights. Dive deeper into the immigration process with our comprehensive Portugal immigration guide. For Americans specifically looking to relocate, we have curated information on Americans moving to Portugal. Lastly, one can't forget the importance of the NIF (Tax Registration Number), a crucial step in any relocation process. 

Frequently Asked Questions about Private Equity Funds in Portugal

Are private equity funds traded on the stock market?

No, private equity funds are private, closed-end funds that are not traded on stock exchanges.

This means that they are not accessible to the general public and their investments are only available to a limited number of accredited investors. Private equity funds also do not provide regular liquidity, meaning that investors cannot sell their investments easily.

Private equity funds typically have a long-term investment horizon, and they may hold their portfolio companies for several years before selling them. This makes them a more illiquid investment than stocks or bonds, which can be bought and sold easily on stock exchanges.

Why are private equity funds not perpetual?

Private equity funds typically exit each deal within a set time period to align incentives through an incentive structure, manage risk, facilitate portfolio management, comply with regulations, and attract institutional investors.

This structure helps to ensure that the investments are well-structured, transparent, and aligned with the interests of all stakeholders.

What are the types of private equity funds?

The two types of private equity funds are general partners and limited partners. Limited partnership agreements — which are broadly similar to shareholders agreements but for partners rather than shareholders — establish the amount of risk that each party carries, and they also specify the lifespan of the fund. Limited partners are also responsible for the amount that they invest. General partners are entirely liable to the market. 

What are the benefits of investment funds?

Two of the main benefits of private equity funds in Portugal are higher potential yields than other investment routes, and the funds are strictly regulated by the Portuguese Securities Market Commission. Additionally, the tax exemption on private equity investment funds adds to their appeal.

What is a PFIC (Passive Foreign Investment Company or Qualifying Electing Fund)?

The Passive Foreign Investment Company (PFIC) rules are designed to prevent United States Persons from deferring tax on passive income earned through non-U.S. corporations. Also, PFIC rules are in place to prevent converting this income into capital gains that will then be taxed at preferential rates. 

A foreign corporation is a PFIC if it meets either of these standards:

  1. Passive Income Test — A foreign corporation is a PFIC if greater than or equal to 75 percent of its gross income is passive income, for example, dividends, payment in lieu of dividends, interest, rents, royalties, and annuities. 
  2. Passive Asset Test – a foreign corporation is a PFIC if the average annual percentage of the fair market value of all passive income-producing assets is greater than or equal to 50 percent of the value of the entity’s assets. This is determined on a quarterly basis, and it is considered passive if it generates passive income or is reasonably expected to generate passive income in the foreseeable future.

Almost all foreign mutual funds are PFICs. In other cases, possible examples of PFICs include: 

  • Passive investments in offshore Mutual Funds, Hedge Funds, including Venture Capital Funds, Stocks, Annuities, or Income Producing Property; 
  • Foreign Brokerage Accounts with Mutual Funds, Bond Funds, Equity Funds; 
  • Foreign Retirement Accounts; 
  • Foreign Cash Value Life Insurance Policies. 

What is Form 8621?

Form 8621 is the form that a U.S. person must file if they are a direct or indirect shareholder of a passive foreign investment company (PFIC) under some specific criteria. There are three main factors that determine whether a U.S. person must file Form 8621:

Direct or indirect ownership: The U.S. person must be a direct or indirect shareholder of a PFIC. Direct ownership means that the U.S. person owns stock in the PFIC. Indirect ownership means that the U.S. person owns stock in a foreign corporation that owns stock in the PFIC.

Income threshold: The U.S. person must have received certain types of income from the PFIC, such as dividends, interest, or capital gains. The amount of income that triggers the filing requirement varies depending on the type of income.

Value threshold: The U.S. person must own a certain amount of stock in the PFIC. The amount of stock that triggers the filing requirement varies depending on the value of the PFIC.

Who must file Form 8621?

According to the IRS, any U.S. person who is a direct or indirect shareholder of a “PFIC” must file Form 8621 for each tax year if they:

  1. Receive certain direct/ indirect distributions from a Passive Foreign Investment Company or Qualifying Electing Fund (PFIC). 
  2. Recognize a gain on a direct/indirect disposition of PFIC stock. 
  3. Are you reporting information regarding section 1296 mark-to-market election or a QEF? 
  4. In Part II of the form, make an election reportable.
  5. Will need to file an annual report pursuant to section 1298(f). 

Each PFIC must have a separate Form 8621 in which stock is held.  All interests in PFIC’s must be reported annually.

Who is considered a U.S. Person?

According to the Internal Revenue Service or IRS, the term “United States Person” means:

  • A citizen or resident of the United States 
  • A U.S.-based partnership 
  • A U.S.-based corporation 
  • Any U.S. estate other than a foreign estate 
  • Any U.S.-based trust if: 
    • A court in the USA can display primary supervision over the trust’s administration and 
    • One or more US persons have the authority to control the substantial decision-making processes of the trust
  • Any other person that is not a foreign person. 

When must Form 8621 be filed?

The investor must calculate annually their pro rate share of the earnings of their investment, regardless of having received or not any distribution, as it will be considered taxable income for that year. 

By doing this, you will maintain the beneficial capital gain rate, otherwise, you would be subject to a considerable higher capital gain tax rate. 

Nonetheless, one must be aware that you can only make this selection in the first year of holding. It is highly complex to retroactively make a QEF election. 

When should US investors file their taxes for their investments in Portuguese Investment Funds?

Most Portuguese Investment funds have until the end of April to report accounts, whilst U.S. tax filling is due until the 15th of April.  

This means that, due to the schedule difference between the date by which investment funds in Portugal issue their reporting and U.S’ date of submission of tax return, US investors may consider filing for a tax extension deadline for October 15th in order to secure enough time to be able to appropriately file their taxes.

Any information contained in this communication is not intended as, or to be construed as tax advice. We advise our clients and readers to seek professional tax consultancy from a trusted partner in their jurisdiction. 

Should I invest in venture capital funds or a private equity fund to get a Portugal Golden Visa?

Whether to invest in a venture capital fund or a private equity fund to obtain a Portugal Golden Visa depends on individual factors and risk tolerance.

Venture capital funds offer the possibility of higher returns but also involve more risk, as these funds invest in early-stage companies with uncertain outcomes. Private equity funds, on the other hand, invest in more established companies with a proven track record, making them a less risky option with lower potential returns.

Investors should consider their time horizon, risk tolerance, investment goals, and experience when making a decision. If they are willing to wait for potentially higher returns over a longer period, venture capital may be suitable. Conversely, if they prioritize shorter investment timeframes with lower levels of risk, private equity could be a better fit.

What is venture capital private equity?

Venture capital (VC) is a subset of private equity focused specifically on investing in startups and early-stage companies that have high growth potential. In the context of Portuguese immigration and private equity funds, venture capital plays a significant role in shaping both the economic landscape and the migration patterns related to entrepreneurship and innovation.

What are the key considerations for investing in private equity funds in Portugal?

Key considerations for investing in private equity funds in Portugal include:

  • Fund Performance: Historical performance and returns.
  • Management Team: Expertise and track record.
  • Investment Strategy: Alignment with investor goals.
  • Regulatory Environment: Understanding local regulations and compliance.
  • Risk Management: Assessing the risk profile of the investments.

How does private equity investment work in Portugal?

Investing in private equity in Portugal offers the opportunity to support dynamic, fast-growing companies through dedicated investment funds. By participating in these funds, investors can not only contribute to the growth of promising businesses but also become eligible for the Golden Visa program, which grants residency in Portugal. It’s an exciting way to be part of Portugal’s thriving entrepreneurial landscape.

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