Under the Portuguese Investment Residency Program, launched in 2012, there are currently 8 eligible investment options.
One of the most successful options, especially during the pandemic and the consequent mobility restrictions, has been the possibility of investing in investment units in Portuguese investment or venture capital funds.
This investment option was introduced into law in 2017 and then regulated in 2018, but in fact the first approved processes only took place in 2019.
Since then, there has been growing interest, not only from individual investors in this particular investment option, but also from national and international corporate players who have seen it as an opportunity to diversify the origin and profile of their investors and to develop the Portuguese financial market. .
Following this success, more and more funds appear on the Portuguese market and a dilemma arises. Which one to choose ? What criteria should investors know?
First, it is necessary to verify its regularity, as well as that of the respective management entity, by checking its situation, date of approval and start of activity by the regulatory entity in Portugal – the CMVM (Commission of the securities market).
Thereafter, it is a must to check their eligibility for the purposes of the Golden Visa investor application, as there is no official list of eligible funds. In this regard, it is therefore relevant to verify its maturity (at least 5 years from the date of investment), its purpose (capitalization of companies) and that 60% of the value of the investments are made in commercial companies based on Portuguese territory.
Having checked these two points, there is still a significant list of options available. Naturally, the investor profile – more or less conservative – already makes it possible to make a certain classification, as well as the fields of activity and specialization of the fund, but then, the analysis must go through taking into account the following criteria :
– Duration and minimum subscription amount, also relevant for investors wishing to diversify their investment with more than one fund;
– Exit point subscription, maintenance and performance costs;
– Investment, asset diversification and exit strategy;
– Possibility of extending the duration of the fund and exit policy for investors;
– Expected return, conditions and policy of distribution of income;
– Expected maximum investment objective, number of units already subscribed, current profile of unitholders and investments already made;
– FATCA compliance – essential for North American investors;
– Know-how, history and composition of the governing bodies of the management entity;
– Alignment of interests between investors, fund managers and fund advisers – in particular through their participation in the capital of the fund and a defined method of remuneration;
– National and international exposure;
– Registration with Interbolsa, custodian bank and auditor of the fund;
– KYC and AML policies.
According to data compiled by the Bank of Portugal, at the end of 2021, Portuguese investment funds closed at the maximum reaching 35.5 billion euros, the highest amount since January 2008.
It is recalled that since January 1st2022, the minimum investment amount has been updated to €500,000.00, however retaining the same benefits that this option inherently has – tax efficiency, diversification, potentially higher rate of return and delegation of management.
With the introduction of geographical restrictions on the property investment option, some funds have already positioned themselves as a means of overcoming this obstacle, offering the possibility, on the date of liquidation, of accessing an apartment located in the center of the city. city, which must be part of the fund’s portfolio, as an alternative to recovering the capital initially invested in the equity shares. Considering the valuation rate of the Portuguese real estate market in recent years, this can be a very interesting investment decision.
With the increase in the number of funds and management entities authorized and interested in operating in the Portuguese market, the CMVM should adopt an even stricter position to strengthen their supervision in order to defend the interests of investors, being increasingly important to choose a fund and a management entity that strictly respects the duties and obligations imposed by law.
Sara Sousa Rebolo