For investors exploring their options for gaining a visa through investment in Portugal, choosing the right type of fund is, essentially, down to your personal risk level and the amount you would like to invest. The bottom line is, any investment of more than €350,000 in a fund will grant you access to the Golden Visa program, however, the various options available today all present different levels of risk, alongside varying investment terms and lengths.
Your initial €350,000 investment can be placed in:
- Private Equity Funds
- Venture Capital Fund
It is important to note, however, that not all investment routes are available to everyone. For example, U.S. citizens may be prevented from accessing traditional private equity or VC funds due to FACTA regulations. Additionally, unless you wish to invest more than the required €350,000 to apply for the Golden Visa, certain funds may be prohibitively expensive.
Here, we look at each of the fund types and provide some insight into what you can expect when you apply.
What is a Private Equity Fund?
Private equity funds are among the most “traditional” investment vehicles, typically placing your investment in conventional markets and financial instruments that are not listed on the public exchange. Fund lengths are generally 10-plus years and offer medium to high risk levels with rewards delivered in relation to the amount of risk. Sometimes, private equity funds will pay yearly dividends although this is not always the case.
Private equity funds are generally considered to be less risky than venture capital funds, placing investments across all industries rather than focussing on new, high growth industries. Additionally, investments are usually placed in larger, more mature companies that have well-established reputations.
What is a Venture Capital Fund?
Venture capital funds typically look towards early-stage companies, generally being among the highest risk investments. In many cases, VC funds will be invested in companies with global potential, offering a fixed fund length of 10-plus years. Additionally, VC funds will deliver maximum capital gains at the end of the investment rather than dividends over the term.
Venture capital funds usually focus on high growth companies within the technology, biotech, and cleantech sectors. In many cases, investors will expect a degree of failure within these companies, banking on the idea that one company may grow exponentially to make up any losses. Having said this, placing investments in a fund, rather than with individual companies, helps to mitigate this risk a little.
Which Investment Fund for the Portuguese Golden Visa is Right for Me?
Choosing between a venture capital fund and private equity fund will depend on a few factors. These include:
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- Desired investment amount – The minimum investment to be eligible for the Golden Visa program is €350,000, however, some funds may require a larger initial investment. This is particularly true of PE funds.
- Potential risk level – All investments come with some level of risk. Choosing between different types of funds will depend on the amount of risk you are willing to take over the investment period
- Desired return – In general, the higher the risk the higher your potential return. Balancing your risk/return is a personal choice and should align with your wider investment strategies.
- Your current residency and passport status – In some cases, your current residency and passport status may limit the kinds of funds you are eligible to invest in. Before applying for an investment fund for the Portuguese Golden Visa, it is important to be aware of how your existing status may affect your ability to invest.
For investors from countries that do not face restrictions, then how you invest will depend on how you wish to build your investment portfolio. However, there are multiple avenues to explore, so ensuring you have the up-to-date information on your eligibility in all cases will open the doors to the best value investments available.
Today, many investors are choosing Golden Visa funds in Portugal over the formerly popular real estate route. This is because of the low entry costs and the fact that your investment is more diversified and secure than with real estate alone. Additionally, you are not required to be in the country to make your investment, allowing you to start the Golden Visa process before you arrive.
This, combined with the other benefits of funds; such as support from the Portuguese government, professionally managed funds, and investor protection of these tax efficient vehicles, make this route highly attractive to investors who wish to gain entry to Portugal and Europe—providing a viable alternative to the latest restrictions on purchasing property in Portugal.
For more information on how to apply or to invest in a Portuguese fund for a Golden Visa, contact Planeur today. We are your one-stop-shop for the Portuguese Golden Visa process and we will be happy to discuss your options further.