Rock Capital sent out the annual QEF paperwork this morning, for US Person investors who choose to file form 8621 and treat Rock Capital as a PFIC. That said, the management does not believe that Rock Capital is a PFIC; it does not meet the criteria for passive income.
I believe NEXT is not a STAG fund but Optylon Krea. But regardless yes to what Jeff saidā¦ The PFIC is designed to report income to US tax authorities. The bank passively holds the fund units. I dont know how the bank could know of fund gains or losses therefore the bank does not even possess the necessary information for the PFIC annual statement. I believe the fund(s) initially confused the PFIC issue with FATCA requirements (of which the bank is responsible), but at this point the fund(s) cannot continue to feign confusion when they have been alerted to this issue repeatedly.
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I am equally incensed here because had I not known of this forum and asked the right questions this could have exposed me to potentially significant future tax liabilities.
Optylon is the Fund Advisor-makes the choices of investments. STAG is fund Manager-beholden to protect the assets in the investorsā names.
Hi all - having looked through some of the funds over the past few days, I see that most of them are focused on Real Estate (with only a couple coming anywhere remotely to being VC funds).
Does anyone here have any concerns regarding this? I ask since, per my understanding, the intent behind creating a āfund routeā to GVs was to divert GV investor money away from the rapidly overheating Portuguese RE market. If all these funds are funneling money into RE anyway, doesnāt that defeat the purpose of the fund route?
Any danger that the Portuguese authorities could one day āwake upā and realise that these are actually RE funds, and not VC funds, and retract their GV eligibility?
Not really.
I think youāre equating āventure capitalā with āwhat happens in SiliValleyā, but VC is a pretty vague term really. If you look at the CMVM page where the registered funds are listed, it say āprivate equity and venture capitalā. These are all āSociedade de Capital de Riscoā, so I think itās simply thought of differently.
Having the money being allocated by Portuguese citizens into projects they think are worthy is probably an improvement for the country versus having foreigners come in and buy whatever it is they want.
Further, Iād say the concern is that the money is primarily going into residential real estate. Itās going to do that because the average GV holder simply isnāt going to stump up the EUR1-3mm required to buy the average non-residential property, or have enough knowledge or interest to do so. People understand houses, and many buy second houses anyway, so theyāre going to do what they know and buy a second house. The fund route allows the incoming GV money to go into commercial property, which helps relieve pressure on residential. (Obviously Rock is a bit of an exception to this, but itās kind of the anomaly, and even then itās still better-directed since Rock is building/renovating residential for the Portuguese market not for the GV market - itās actually helping by adding supply, and not even at the top end.)
I donāt think thereās any concern about the authorities āwaking up and realizingā - the funds are all registered already, the fundās management regulations are going to have been registered with the gov Iām quite sure (presumably theyād have to be, otherwise how would the gov know whether the fund should be eligible for GV in the first place?), so the gov is already quite aware of what the funds are doing.
As for broader government intent/plans and wanting funds to move away from real estate - perhaps. And that might be an issue for investors in the future, in that funds based on real estate wouldnāt be available any more. I wouldnāt be concerned about it in terms of āI made this investment in this fund, now theyāre going to yank my visa because the investment underneath it isnāt valid anymoreā - if they did anything that caused current visa holders to lose their visas, thatād call into question the viability of the entire program - if a government changed the rules underneath someone who already had their visa, would you trust them to not do it again? GV issuance would probably grind to a complete halt. So I could see where they would say āall new GV funds need to be not-real-estate / all GVs as of date X need to be in this new set of non-RE fundsā but thereās no way they screw the existing holders.
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Thank you for sharing your perspective, Jeff. Makes a lot of sense.
While I can see this becoming an issue in the future, I guess itās reasonable to assume that funds already approved by CMVM are safe.
I think itās unlikely that the government would revoke the golden visa after already issuing it and I know many Rock capital investors have already received their visa. However, my understanding is that real estate funds are taxed differently (10% i think) than VC funds and so there may be a risk that the Rock capital and other real estate GV funds will be taxed like a real estate fund if the tax authorities decide so. FWIW, this risk was highlighted to me by the fund manager of Portugal Gateway, a non-real estate GV fund.
@loheiman There are a few things I would say in response.
and I know many Rock capital investors have already received their visa.
I do not think this is accurate. I would guess that the number of such investors that have a visa already is 0.
a risk that the Rock capital and other real estate GV funds will be taxed like a real estate fund if the tax authorities decide so
My understanding is that the funds are not taxed at all on their income by law, so not sure where you are getting this info. Even if they were taxed, that would not be relevant to a GV investor AFAIK.
Sorry i mis-spoke. I meant to say that many Rock capital investors have been pre-approved which is not the same as receiving their visa but from what I understand is actually when documents/requirements are checked.
Thanks for your perspective, very insightful
Does anyone has any idea about the EQTY Capital fund (fund Manager FundBox)? They seem to be a new fund investing in residential real estate. They have a group of advisors (like Stone Capita) who are on the board for advising on property selection. The strategy is to buy off market at a discount, rent it out and then sell towards the end of the tenure. I donāt think the returns would be high but can be a decent second fund. They aim to have a yearly distribution of 3%. Any thoughts on them would be really helpful.
Regarding New Edge fund. New Edge will not produce a PFIC statement. So, even though this fund is open to US citizens, it is not very attractive taxwise.
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Hello Everyone,
After reading this topic and doing some search, I am leaning towards Greytech II from Iberis. It seemed to me only real āventure capital fundā. It may be riskier in short term but I believe it should perform better than RE funds after 6-7 years. Are there anyone invested in this fund or intending to invest? Please share your thoughts.
Zafer
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Some comments on Portugal Gateway fund -
I decided to have another look at this fund. Iām not really sure why, but I did. Itās actually fairly interesting. Iāll skip what the glossies say since you can read that (funding late stage technology companies, typically a reasonable stake plus a seat on the board, they also try to help the company with access to partners/advice/services - accelerator model vs Y-combinator incubator model).
- they now take US persons and are compliant (whereas they werenāt before, IIRC)
- they will provide PFIC statements for QEF
- min investment 100K
- after they launched the fund, they got a bunch of institutional interest, so (interpreting) they have some EUR15mm in non-GV capital. As such, and unlike other funds, itās under outside professional scrutiny and has survived professional due diligence as opposed to just taking GV money from individuals. Of course you canāt know who they are before subscribing, but.
Portugal Ventures (one of the two managers) is 80% owned by Banco Portugues de Fomento, which is a government finance bank, one of those quasi-governmental entities thatās I suppose like SBA, there to help and promote new businesses. So on the one hand it is definitely not a fly by night and not out to rip anyone off - but itās also subject to potential political pressure to fund someoneās pet project and the like. There are counterbalances built in - Kigeni Holdings, the other partner, has no direct relationship to government and has a veto on investments, there are a bunch of commercial bank partners - but they acknowledge the risk. They say no one intends it to happen, even the government wants them to make money - the interesting quote being āThe government is seeing this fund as a flagship to attract further VC capital to Portugalā - but they acknowledge it could happen. Only you can determine how much that bothers you, and only you can prevent forest fires.
The MR has some interesting kinks in it around how itās managed (because of the joint management) but nothing in there concerns me any.
Itās a little bit of a weird combo - an Africa-based infrastructure/venture-capital firm plus a Portugal-based private/public venture creating a fund to boost tech startups. But thereās a lot of decent pieces there.
Iām thinking about Optylon Kreaās new fund āPrima Collectionā, which I believe launches in June. Anybody with further info on this?
Obs.: there is a development project with the same name but, in this case, it is a new investment fund, not the apartments.
I was looking at Portugal Gateway fund earlier. However, the minimum investment is 350K Euros and I needed a fund where I could split my money across two funds. hence I decided against investing in this fund
There is another thread that talks about Prima Collection here:
If you are a US citizen, note that Optylon Krea will not issue a PFIC statement. The discussion about this is in another thread:
I agree with your assessment of the Portugal Gateway fund. It does feel like a strange combination for sure and it does feel like a bit of a stretch for Kigeni compared to what/where their past funds have invested in. Their past funds have all performed very well:
Catalyst 1: 6 Investments, 3.27x TVPI from 1997 - 2008 (12.6% net IRR). 100% deployed.
Catalyst 2: 9 investments, 4.01x TVPI from 2011 - present (14.9% net IRR). 100% deployed.
Greeen Energy: 5 investments, 1.95x TVPI from 2017 - present (18.2% net IRR). 100% deployed.
Regarding fundraising, my understanding is that Kigeni partners and Banco Portugues de Fomento have each committed 10M for a total of 20M, with another 7M coming from GV and/or institutional investors.
Unfortunately they had incorrect information on their website. Their minimum investment is 100K. I have contacted them and they will be updating their website (and notifying NomadGate) shortly.
I spoke to Gavin from the Portugal Gateway fund and he confirmed to me that the minimum investment is 350K euros. I will reach out to him, possible that they changed their rule