Inquire About the Fund Strategy
This is one of the most key aspects of vetting a fund. Even if you’re not familiar with fund strategies yourself, it’s going to be wise to speak to your independent fund advisor before you make any commitments.
The Focus Area of the Fund
Is your fund focusing on real estate? If so, is it focusing on some particular regions? Or, is it focusing on startup companies? What is the funding stage of those startup companies? Make sure that you receive clear-cut answers to all these questions.
What Are the Target Returns and Target Commitments?
This is another important aspect of vetting a fund. Are you going to get annual dividends? What is the amount the fund is trying to raise? Does the fund clearly state its expected Internal Rate of Return (IRR)? Vague answers or unrealistic figures are red flags.
What Are the Fees You’ll Be Expected To Pay?
We notice that this question is sometimes overlooked. However, it’s very important to know the fees beforehand as there might be some hidden fees you’re not aware of. Don’t hesitate to inquire about all the fees such as subscription fee and annual management fee. Also, get information on the performance fee that the fund manager will charge at the exit.
How About Risk Diversification and Exit Strategy?
These are other questions that your Portugal Golden Visa fund should have clear-cut answers on. Inquire if it has a balanced portfolio and makes a risk diversification. What is its exit strategy? We suggest you ask this to your independent fund advisor for a clear explanation.
What Is the Timeline: Fund Lifecycle
As an investor, it’s important for you to know how long your money will be locked in. There are some critical dates such as the CMVM registration, end of the subscription period, and fund closing. Learn all about these during the vetting process.
Also, ask if the fund manager expects any potential extension period? You can also ask how much capital has been raised so far. This will help you to understand if the target capital and subscription period match.
Who Are the Fund Managers?
Fund investment is very different from real estate investment as you need to rely on someone else: Your fund manager and advisors. It’s crucial to inquire about them before you invest large sums of money.
Check Your Fund Manager’s Market Knowledge
As the first qualifying risk funds only appeared in the market in 2019, it’s not easy to find a long track record with any of them. However, it’s easier to check your manager or advisor’s background. Check their market know-how and learn more about their past experience. Arrange a face-to-face meeting if possible and feel free to ask any questions you might have. Note that while vetting the funds is important, checking your fund manager’s credentials is equally important. This is why we always suggest getting help from an independent fund advisor.
Does Your Fund Manager Share the Same Incentives With You?
It’s fair that the fund manager gets a performance fee at the exit, which is a percentage of the potential profit. This is fine as it’s a good incentive for the manager to maximize the profit.
However, it’s good to ask if the fund manager or advisors also invest in that fund. They don’t have to but it’s definitely a solid vote of confidence when they show that they’re open to risks as well as rewards.
Who Is Behind the Fund?
Sometimes real estate developers are behind the funds, trying to stuff the fund portfolio with their own properties. They do this to liquidate those properties with funds they raise from the investors. This can be ok as long as it fits into the fund strategy. However, it’s something you should be aware of.
The Fund’s Risk-Return Profile
When assessing a fund’s risk-return profile, first assess your own risk appetite: Are you risk-averse and trying to preserve your capital without losing any money? Or are you a risk bearer investing to earn big? Fortunately, Portugal Golden Visa has investment funds that fit both categories. If you’re in the first group, you can opt for the funds backed by real estate. These funds carry low capital risk.
If you’re the latter, go for the funds that focus on startups or other ventures.
More on Portugal Golden Visa Investment Funds
- Not all Portuguese funds qualify you for a Golden Visa. It should be a Capital Risk Fund.
- Funds are regularly audited by third parties as they’re required to comply with the Portuguese Securities Market Commission.
What Else You Need To Know
As of 1st of January 2022, the minimum investment for the fund subscription will increase from €350,000 to €500,000. Now that you’re fully aware of how you can vet the funds, it’s time to start your application to benefit from the current rules.
About Get Golden Visa
Get Golden Visa is a full-service investment immigration agency. We’ve helped hundreds of investors from tens of countries in their path to Portugal Golden Visa through the investment fund.
Our Portuguese office has licensed investment professionals that will help you choose the right investment. Our key account managers will then hold your hand throughout your whole application process, making sure all the moving parts run as smoothly as possible.
Please feel free to drop me an email for any questions you might have. I and my colleagues will be happy to help in your search for qualifying funds in Portugal.