With the new regulation terminating residential property investments in Lisbon, Porto, and other coastal areas from January 1, 2022, more people are looking to get their Portugal Golden Visa by fund investments.
Fund investments was included in the Golden Visa regime in 2017. It is relatively new when compared to the property investment route, which was launched in 2012. Up till now, property investments is still by far the main investment option taken by most Golden Visa applicants.
However fund investment is gaining traction. The minimum investment amount for venture capital funds is currently 350,000 euros. However, beginning from January 1, 2022, it will increased to 500,000 euros.
Here is some relevant information you should consider before taking your investment decision to go with fund or property investments.
Advantages of Fund Investments vs. Property Investments
- Lower transactional cost – A purchase of real estate asset imply paying around 7% of the transaction amount on taxes.
- Lower maintenance cost – No need to hire a property management company to manage your property for long or short term rental
- Not subject to tax on dividend or capital gain income if you are non-resident tax payer
- Diversification on investment – The fund will diversify their investments into different companies and/ or assets according to the fund policy and targeted risk/return
- Higher potential earnings – Depending on the fund policy and targeted risk/return, capital gains yield can be significantly higher comparing to other investment options related to the Golden Visa program
- Funds are highly regulated – Eligible funds for Golden Visa must be registered in Portugal, which means they are regulated and supervised by the Portuguese Securities Market Commission.
- Expert management of your asset – Fund managers are experts and their full time job is to make sure the fund performs. Also, many funds have a performance fee which gives fund managers an extra motivation to achieve great results, meaning both investors and fund managers share the same objective.
Please find an estimation of cost comparison of property investment vs fund investment for Golden Visa Portugal here.
Drawbacks on Fund Investments
There are also some drawbacks on fund investments, the most notable is the timing of the exit of the fund.
With a property investment, you have the autonomy of selling your asset and cash out at anytime. With fund investment, it is a little different.
The redemption of the fund and thus the liquidation and selling of fund assets is at the end of the fund schedule, and the ultimate object is to sell the portfolio as a profit. Though, this probably would not be in the exact timing of your 5 year Golden Visa period. If you want to cash out at the end of your 5 year Golden Visa period, you can sell it in the secondary market, which can be quite illiquid. This doesn’t mean your investment would be at a loss, as it is anticipated that the investment has already generated income and appreciated in value.
What most fund investors do is to wait until the fund starts to dissolve. It may take time to seal a good deal and thus achieve a better return for the fund owners. The reverse is also true. Unlike property where you can buy and hold as long as you want, buying into venture capital funds mean you won’t be able to hold it beyond liquidation.
For those who are interested in this route, it is important to note that the holding period is not certain and exact. This option isn’t advisable for investors who have a fixed timeline for the investment and need to cash out at a very specific moment.
As like all Investments, investors should invest based on their own objectives, risk profile, total asset allocations, in order to find the most suitable asset to put their money in.
Learn more about the Portuguese Golden Visa and see how you can get your Portugal residency and citizenship!
An Overview of Eligible Investment Funds for Portugal Golden Visa
All fund management companies are well respected companies in this area. Each of the funds have a unique profile that appeals to different clients with different objective and risk profile
A non leveraged real estate fund that provides a 100% capital guaranteed and a 3% guaranteed annual return from day one! Principle can be paid back from year 6-8. Also, an option to get an apartment in lieu of the principle.
Blue Crow Growth Fund
Venture capital fund Invests in leisure, hospitality, industrial and agricultural assets sourcing good and solid tenants and after establishing a bond with the potential tenant investing in the type of assets they’re focused on leasing.
Venture capital fund that Invests equity into companies that focus on the acquisition and development of properties in Lisbon’s premium locations.
This fund invests in small neighbourhood supermarkets, fast food stores, office floors, logistics and warehouses, for income generation, and real estate assets for development which have already been approved by the city hall.
Portuguese Growth Fund
Private Equity fund with a broad perspective and investment scope, sources strong active minority share positions in niche leaders, innovators and growth companies in Portugal with revenues over €10 million
R&D fund Investing in life sciences, new generation of drugs and medical devices to treat diseases without an existing cure. Invest across 4 main areas: drug development, medtech, diagnostics and digital health.
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