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4 Things To Consider When Investing In Portuguese Golden Visa Funds Under The New Rules

Optimize Investment Partners

The bill is now law, and the Golden Visa lives on, primarily through its investment fund category, which has been rapidly growing in popularity for the past few years. The change may have taken away one of the Portuguese Golden Visa’s most popular investment categories in real estate, but interest in the fund option has been steadily growing.

The number of Golden Visa applications under the fund option grew from just 0.56% of all applications in 2019 to an impressive 30% in 2023 (as of Oct 1), mainly due to the increased awareness of how beneficial investing in funds can be.

Now, investing in a fund is the main way to get a Golden Visa, but there are some critical matters to consider before doing so. This article will highlight those issues and explain how we integrated them into our Portugal Golden Opportunities Fund to create the optimal investment vehicle for Golden Visa applicants. 

Regulation And Golden Visa Eligibility

The first - and most important - matter to consider is a fund's registration and regulation status. 

The Portuguese Securities Market Commission (CMVM) is the government authority responsible for regulating investment funds in the country. A fund must be registered with the CMVM to qualify for the Golden Visa.

But the importance of registration with the CMVM goes beyond just eligibility for the Golden Visa; it is a critical matter for financial security, as unregistered funds are not official, and investing in them could - and probably would - result in financial loss.

The other important aspect to check is whether the fund's investment strategy aligns with the requirements of the Golden Visa.

Under the new rules, a fund cannot invest fully or partially in residential real estate to qualify for the Golden Visa. The last qualification criterion is that the fund invests 60% of its capital in Portuguese companies. This is crucial, as many funds may be registered with the CMVM and do not invest in real estate but invest more than 40% outside of the country, rendering them ineligible.

When creating our Portugal Golden Opportunities Fund, we had all of these issues in mind. Our fund is registered with and supervised by the CMVM, but we went a step further and enhanced our compliance regulations to fit in with the European MiFID II compliance function to ensure the highest level of safety for the fund and our investors. 

The Portugal Golden Opportunities Fund is also highly diversified and invests only in listed assets, stocks, bonds, or mutual funds, steering clear of real estate altogether. 

Our investment portfolio has an exposure rate target of 80-100% to Portuguese-domiciled companies, ensuring we go beyond the Golden Visa's minimum requirement of 60%. This investment strategy makes our fund readily eligible for the Golden Visa. 

The fund also allocates around 20% of the fund's assets to bonds of Portuguese-domiciled companies, ensuring lower volatility for the fund and a higher expected return (risk-level 5), in turn taking advantage of this new interest rate cycle.

The old Porto Stock Exchange building, today a national monument

ROI And Investment Type

The second issue to consider is a fund's investment portfolio, not just to ensure its qualification for the Golden Visa, as explained above.

By exploring what assets the fund will invest in, you can better understand the risk, ease of liquidation, and return on investment (ROI). 

Different funds have different investment portfolios with varying risk levels. In our experience, it is best to find that perfect balance between low risk and the highest possible return through a flexible investment framework. That is why the Portugal Golden Opportunities Fund invests in dynamic assets such as bonds, stocks, listed assets, and mutual funds. 

This investment strategy gives us the flexibility to align our investments with market trends in real-time while providing greater security and better rewards. 

Funds that go for pure real estate investments have low risk but also tend to offer lower ROI. Residential real estate investment funds, which are no longer Golden Visa eligible, usually provide returns ranging between 3-5%, while those that invest in commercial or industrial property may go a bit higher and reach 4-7%, but they won't bring in remarkable ROI unless they operate on a very long term deposit based on arbitrage gains, which isn't a suitable option for people who want to liquidate their investment in five to six years. 

On the other hand, our investment strategy allows us to jump on opportunities that may increase ROI significantly without adding any further risk, as evident by the 10% returns (risk-level 5) we reached as of 2023. 

Having visibility over a fund's performance is also imperative. This visibility will complement the understanding of the investment structure, as it will allow you, as an investor, to make important decisions regarding your investment.

Most funds do not offer real-time performance data; this may be the case because of the fund management company's policy. In other instances, day-to-day data may not be informative, especially within funds that invest heavily in real estate or private equity and non-listed assets and focus on the arbitrage gain endgame. 

However, since our Portugal Golden Opportunities Fund is a flexible fund that invests only in listed securities, we provide live daily updates about the fund's performance. This allows the fund manager to decrease exposure to stocks to as little as 60%, thus taking advantage of market corrections in real-time and helping achieve long-term capital appreciation.

Ease Of Liquidation (Exit Plan)

Another essential element to consider is the ease of liquidation. Every fund has its own criteria regarding investment terms. Some funds may set out long holding periods, while others may be more flexible.

It is important to note that Golden Visa holders will have to maintain their investment for at least five years (until they obtain permanent residence or citizenship), so that should be the ultimate aim. However, they can change investments during that period.

While possible, it is important to note that various immigration lawyers in Portugal claim this is a risk for investors, as changing the investment during the five-year holding period can invalidate certain declarations by the management company. But since this is a legal possibility that needs to be handled with extreme caution, it does bring into focus the liquidation process.

While most funds typically have a five or six-year holding period, that is primarily the case if you've been looking at real estate investment funds, as they need longer periods to make a solid profit.

Funds that invest in other assets can boast better flexibility. Our Portugal Golden Opportunities Fund, for example, allows for liquidation at any given time; all an investor has to do is contact us, and we will give them their investment back with their earned ROI within five business days and with no additional fees.

Unlike other funds that may require you to forfeit your ROI if you withdraw early, the Portugal Golden Opportunities Fund gives you all the returns you are owed up until the day of withdrawal.

Management And Experience

It might come as a surprise to many, but setting up a fund isn't as complicated as it may seem. A person or a company can set up their own fund and assign themselves as fund managers, a matter which may open more opportunities but brings with it an increasingly high level of risk.

Hence, choosing a fund managed by a team with extensive expertise is vital for success. Experienced fund managers understand the nuances of the market and have the know-how to create profitable funds that ensure investors will keep coming back for more.

This matter is especially important in times of economic instability and high inflation when the market becomes more frantic and unpredictable. An inexperienced fund manager may fall prey to simple mistakes that lead to significant financial losses, while an experienced one may take advantage of opportunities that are unseen to many.

Experience is also key to keeping up with any compliance regulations that the government may introduce. It is that in-depth knowledge that allows a fund manager to adapt while maintaining a solid rate of profit.

Optimize Investment Partners have been managing funds for the past 15 years. We boast an impressive track record adorned with success stories. We have the expertise needed to provide you with a Golden Visa investment that actually pays back.

All you need to do to know more about our Golden Visa ready fund is contact us today via our website.