In some ways you are correct, though not entirely.
The point of comparing cost structures is to highlight that the fund managers roughly are facing the same costs either side of the pond - salaries, research subscriptions, T&E, other overhead - and it does scale with size. A lot of research goes into PE - the average fund has to evaluate 10-30 possible deals and do due diligence for each actual investment and thatās a lot of legwork and time. Index funds are cheaper because they donāt have to pay all that overhead - a couple of people can subscribe to the index component data and set up a prime brokerage account and off you go, with outsourced compliance and accounting and everything else, and the rest is marketing.
If that cost structure seems unfriendly, itās because of the background you are coming from.
Yes the goals of some of the funds are different in that they are meant to provide a vehicle specifically to meet the needs and desires of the GV investor, but thatās just funds attempting to meet the market need. Even one or two of the big players who are primarily PE/VC types are making real estate funds with wealth preservation as a goal, presumably because thatās what they perceive as what the market wants based on their market research.
Several of the available funds are held by both GV and local. Iāve highlighted some of this in the fund comparison thread. Indeed, some merely are just making GV-class shares and saying āthese will meet eligibility requirementsā without making any significant effort to market to GV.
All of this - funds as an asset class for GV - is effectively brand new as of 2019, and is being developed on the fly. Some funds were first to market, and are structured as guesses based on what some fund managers thought the market wants. There are more funds being created now, with different goals. The marketplace is developing. Of course itās going to be imperfect, and lacking products that are a good fit for every taste. As discussed originally, there isnāt even a great way to learn about whatās even available, which is a huge market lack. It does suck. The risks are high. Hell, even the government is still attempting to fine-tune the rules and isnāt necessarily happy with whatās happening, but legislation is a pretty blunt sword.
I would point out that the whole investing in Portugal thing is a risk. Itās an emerging market. If it were less of a risk, thereād be a heck of a lot more capital available, no? Of course youād like some diversified index fund that returns 10% - but there arenāt that many public companies in Portugal to even have several well-diversified baskets, much less any of the other attributes the average investor would want. Indeed, one could argue that the entire point of the GV programme from the .pt.gov perspecitve is not wealth creation for your benefit, itās improving the .pt economy through the injection of capital. If you happen to make money, thatās a side benefit. .pt.gov is providing a carrot, some reason for people to take the higher risk and potential losses. You canāt make that risk just go away. I might agree that the risk is not always clear to many investors and some are taking more of a risk than they realizeā¦ but thatās the nature of investing generally, isnāt it?
Another point along the same line: there arenāt a ton of purely PE/VC funds in Portugal for the simple reason that there arenāt that many opportunities . Thereās maybe what, $1bn in actual PE funds (investing in companies, not real estate), total? @nisbynator9 might have a better number than I do. Thatās really not that much. In a conversation with one of the PE managers, he basically admitted that thereās only about so many PE opportunities to be had in .pt and thereās a risk of there being so much available capital as a result of the true-PE funds (like Explorer and Oxy and C2 and PV) gathering true-PE money from GV that it distorts the market. The average fund size is EUR75mm and theyāre doing deals in the EUR1-10mm range, and the average fund seems to target around 7-15 deals total. There isnāt a ton of diversification to be had here. The list of investors in these funds can generally be printed on a single sheet of paper. And as far as the real estate market goes, consider how few GVs have been issued generally (what, 10,000?) and that little inflow - about EUR5bn total as of Jan 2020 over 7 years - has already distorted the Portuguese real estate market enough that thereās significant complaining across the country.
I might suggest youāre asking an awful lot given the actual situation on the ground. And it really isnāt for everyone. These are not fantastic investments. They canāt be because the market canāt support it.
So maybe yeahā¦ though I am trying to say how this is how things are, youāre right in that there are - and should be!! - a ton more red flags around it all generally. Of course convincing the people in the GV business to do that is another matter entirely. @Tariq_Tamea thatās something to chew on.
To loop that back aroundā¦ maybe the thing youāre missing about the focus on capital preservation in terms of absolute dollar figures for the funds is a reaction to peopleās concerns that they are sinking their money into an emerging market and theyāre not so concerned about the opportunity cost as the genuine, well-founded concern that they might well lose their entire investment. Look how many people are completely scared by Mercan, which is a Canadian company doing nothing more than building a hotel. Those fears are completely justified. Private equity? Good Lord, thereās a reason SEC puts a ton of rules around it in the US.
And no, PE data is not freely available almost by definition because weāre talking about private equity deals. You can find some data published by firms like pitchbook and crunchbase but thatās all payware, and letās face it, a $50mm fund buying out Bobās Fishing And Canning in Porto for $10mm is just not something thatās going to attract a lot of attention outside the local Porto newspaper.
I think before you get too much farther on this journey, it may behoove you to really go answer that question about how much that visa is worth to you, as @msheth did.
Qualified for Golden Visa
And using the publicly traded funds you are not locked in. I am not saying you should or shouldnāt do it, just that there are some ways around SOME of what you are talking about.
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