Good question about IMGA vs BPI. Here’s my story on that. I initially thought I wanted to invest in real estate. I opened a bank account at Millennium Bank. Then I came to my senses and decided to invest in a PE fund. I found two or three PE funds that were appealing. Unfortunately, MB will not act as custodian for PE funds, so I had to open a new bank account at Bison Bank. Then I heard (not from Bison Bank, ironically) about IMGA. I decided I wanted to invest in an open end fund. When investigating the open end fund, I learned about BPI. I contacted BPI and they told me that I would have to open a bank account at BPI (or whatever bank they use).
At that point, UDS/EUR exchange rates were moving in the wrong direction. I had already had my lawyer open two accounts, and I wasn’t going to hassle with a third. I did no further diligence on BPI. My attorney told me that I could move my money from IMGA to BPI later if I wanted to, and it would not substantively affect my SEF application. (I do not know if that’s true, or if I understood what was said correctly, or if I am remembering that correctly, so don’t count on it). At the time, I figured, I will invest in IMGA now. It’s open ended. No subscription fee. No redemption fee. If I find something better later, maybe (and I say maybe) I can switch.
The fees charged by IMGA and BPI are just like US mutual fund management fees. You don’t actually pay them. Instead, they are paid from the fund. So they affect return on the NAV. I just checked BPI vs IMGA, and I see that BPI does appear to have marginally better long-term results that could indeed be attributed to a 1% lower management fee.
I see that someone who did more diligence than I did said that BPI was not as helpful with the PFIC. BPI will change their response if they get enough inquiries. There may be other pros and cons of BPI. I don’t know. I have no other information that would suggest BPI is not a good idea. For all I know, it is a better idea than IMGA.
Also, I have said this before in an earlier post, but one thing no one else seems to be aware of, and is a negative about open end funds like IMGA and BPI is that open end funds have less favorable Portuguese tax treatment than closed end funds. As I understand it, capital gains on closed end funds are taxed in Portugal at 10%. Capital gains on open end funds are taxed in Portugal at 28%. That’s what I heard, but I don’t know if it’s true, and don’t ask me to explain it, or to explain how Portuguese and US tax laws interact under relevant tax treaties. Do your own diligence on this subject. That’s a pretty big difference. I accepted it. 28% is basically the same as what I pay on capital gains in the US. Like others, I was thinking of capital preservation (in addition to transparency and liquidity of an open end fund), and thought any gain - anything - would be a bonus. Of course, now that I already have some paper gains in IMGA, I am greedy, and hate that 28% of the capital gain if I sold today would go to taxes. But that doesn’t make me unhappy that I invested in IMGA.