One of the most successful options, especially during the Pandemic and the consequent restrictions on mobility, was the option of investing in investment units in Portuguese investment or venture capital funds.
This investment option was introduced into the Law in 2017 and later regulated in 2018, but in fact, the first approved processes only took place in 2019.
Since then, there has been a growing interest, not only from individual investors in this particular investment option, but also from national and international corporate players who saw here an opportunity to diversify the origin and profile of their investors and to develop the Portuguese financial market.
As a result of this success, more and more funds are appearing on the Portuguese market and a dilemma arises. Which one to choose? What criteria should investors be aware of?
Firstly, it is necessary to verify its regularity, as well as of the respective management entity, verifying its situation, date of approval and activity beginning by the regulatory entity in Portugal - the CMVM (Securities Market Commission).
Subsequently, it is essential to verify their eligibility for the purposes of the investor's application for the Golden Visa, 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 investment date), purpose (capitalization of companies) and that 60% of the value of investments is made in commercial companies based in Portuguese territory.
Verified these two points, there is still available a significative list of options. Naturally, the investor profile – more or less conservative – already allows us to do some ranking, as well as the areas of activity and specialization of the fund, but then, the analysis must go through a consideration of the following criteria:
- Term and minimum subscription amount, also relevant for investors wishing to diversify their investment with more than one fund;
- Subscription, maintenance and performance costs at the exit point;
- Investment, asset diversification and exit strategy;
- Possibility of extending the duration of the fund and investor exit policy;
- Expected return, conditions and income distribution policy;
- Maximum expected investment target, number of units already subscribed, current unit owners profile and investments already made;
- FATCA compliance – essential for North American investors;
- Know-how, track record and composition of the management entity governing bodies;
- Alignment of interests between investors, fund managers and fund advisers – namely, through their participation in the fund's capital and defined method of remuneration;
- National and international exposure;
- Registration within Interbolsa, the custodian bank and the fund's auditor;
- KYC and AML policies.
According to data compiled by the Bank of Portugal, at the end of 2021 Portuguese investment funds closed at maximums reaching 35.5 billion euros, which was the highest amount since January 2008.
It is recalled that since January 1st, 2022, the minimum investment amount has been updated to €500,000.00, maintaining, however, the same benefits that this option has by nature - tax efficiency, diversification, potentially higher rate of return and management delegation.
With the introduction of geographic restrictions on the option of real estate investment, some funds have already positioned themselves as a way to overcoming this obstacle, offering the possibility, on the date of liquidation, to access an apartment located in the city center, which must be part of the portfolio of the fund, as an alternative to recovering the capital initially invested in the participation units. Given the rate of valorization of the Portuguese real estate market in recent years, this may be a very interesting investment decision.
With the increase in the number of funds and management entities licensed and interested in operating in the Portuguese market, CMVM is expected to adopt an even stricter stance to reinforce supervision over them in order to defend the interests of investors, being increasingly important to choose a fund and a management entity that strictly comply with the duties and obligations imposed by law.
Sara Sousa Rebolo
Lawyer & Partner