Risks Associated with Investing in Portugal Golden Visa Funds

Key Risks of Portugal Golden Visa Funds

Illiquidity Risk:

• • Issue: Funds typically have 6–10-year lock-up periods, restricting access to capital.
  • Impact: Early exits (e.g., selling shares) are difficult, often requiring discounts (10–20%) and high exit fees (0.5–5%).
  • Example: Investors in the Greentech II Fund may face challenges liquidating before maturity.

Market and Performance Risk:

• • Issue: PEFs (e.g., C2 Legacy Buyout Fund) target 5–10% returns but face economic downturns, while VCFs (e.g., AI Medical Fund) aim for 10–20% but risk startup failures.
  • Impact: Losses or underperformance could reduce returns, though no major fund failures are reported.
  • Note: Portugal’s stable economy mitigates some risk, but sector-specific volatility (e.g., tech, crypto funds) persists.

High Fee Structures:

• • Issue: Fees include management (1–2% annually), performance (10–20% of profits), subscription (2–8% upfront), and entry/exit (0.5–5%), totaling 5–10% of €500,000 over the lock-up.
  • Impact: High costs erode net returns, especially for lower-yielding PEFs.
  • Example: A €500,000 investment may incur €25,000–€50,000 in fees.

Regulatory and Policy Risk:

• • Issue: Changes to Golden Visa rules (e.g., 2023 real estate exclusion) or CMVM regulations could affect fund eligibility or residency requirements.
  • Impact: New rules might increase investment thresholds or alter compliance, though existing investments are typically grandfathered.
  • Note: CMVM’s strict oversight ensures compliance but adds complexity.

Residency Compliance Risk:

• • Issue: Falling below the €500,000 investment (e.g., via partial redemptions or fund losses) could kindize residency status, as the minimum must be maintained for five years.
  • Impact: Investors must monitor fund performance and avoid unauthorized withdrawals.
  • Example: Selling shares in the Kick Off Fund at a loss risks non-compliance.

Manager and Operational Risk:

• • Issue: Poor fund management or operational failures could lead to underperformance or losses.
  • Impact: While CMVM oversight minimizes fraud, manager inexperience in niche sectors (e.g., biotech) poses risks.
  • Note: Funds like the AI Medical Fund require skilled managers to navigate high-risk startups.

Mitigating Risks

• Diversification: Allocate across PEFs (stable) and VCFs (growth) to balance risk, e.g., €300,000 in Greentech II and €200,000 in AI Medical Fund.
• Due Diligence: Verify CMVM regulation, manager track records, and fee structures via Zoark
• Advisor Support: Engage experts from Zoark to assess risks and ensure compliance.
• Fund Selection: Prioritize established funds with strong sectors (e.g., renewable energy) over speculative ones (e.g., crypto).
• Tax Planning: Non-residents may avoid Portuguese taxes, but home-country tax risks require professional advice.