Portugal GV Fund Comparison?

Residencies & citizenships Portugal Golden Visa šŸ‡µšŸ‡¹
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1214

Ah, I see now.

I agree there are many risks in PE and one must tread carefully. I am fine with the choices I made, but also there were some of us way back who did much research into the funds and came to great awareness of the entire situation and made informed decisions. It required much, much work and discussion and even then we went in with eyes open to the large risk we were taking. And there were many funds even back then for whom the only clear winner was the fund manager. I cannot imagine it is so much better now.

You will see in many posts here where I despair of the situation as a whole, of people taking significant risks investing in products they know little about on the guidance of firms whose bread appears to have butter on the right side but no one speaks of the butter on the other side, and the rich layer of jam on top of that. I wish there was more that could be done to educate people, but alas.

My only point would be that there are some reasonable fund investments available for those for whom the risk profile is appropriate and are willing to put in the effort to find them. Or at least there were; I have not paid attention in some time since I no longer need to care. :slight_smile: but broadly I think we are more in agreement than not, and if so I would applaud you for informing your customers of the risks instead of simply buttering the other side of the bread.

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1215

Good afternoon,

Please, if i may jump in to ascertain from you both, Sayginvedat and Jeff, and in one else in the community please, exactly what would constitute an educated bet on a fair-return multiple on capital input in the GV fund space? it was mentioned above that a fund with 20% IRR should be considered as to high a targeted return, if i understood correctly.

For edification please kindly help me understand how the 15 - 20% IRR expected in any other VC space should not be acceptable in this particular VC space ?

Iā€™m new here (hi!) so i donā€™t know what i can share of funds iā€™ve seen but it appears most offered IRRs range between 9% and 25%. Keeping in mind that in the traditional VC space anything below 15% in the startups VC space can be considered already safe if not too much so. Therefore, is it generally suggested that VC funds should provide lower IRRs and if so why ?

Very curious to have your thoughts, and hi everyone !

1216

The level of potential return is reflective of the level of risk. Target returns of 20%pa IRR suggest that the fund is fairly high risk and the risk of loss of original capital is high.

However, be wary of GV funds that offer low returns and claim to be safe - some of these funds really arenā€™t, theyā€™re using the low returns on offer as a selling feature to make it seem they are lower risk than they actually are, and they are just not passing most of the returns on to investors.

In reality, venture capital is inherently high risk. Many businesses fail and you could lose some or all of your capital. Real estate funds are generally less risky than true VC as there are underlying real assets - thatā€™s not to say theyā€™re not risky - they are, and you can lose money, but they are typically less risky than VC.

That is why itā€™s such a shame the new GV rules exclude real estate investments through funds. Given that most GV investors are not professional investors, VC funds are generally not suitable investments for your typical GV investor, as you should not be investing your life savings or money you canā€™t afford to lose in VC investments. For this reason if I was investing under the current regulations where real estate is excluded, I would look at the most diversified fund I could find - ideally one with 100s of investments, to reduce the risk as much as possible. If the fund invests in listed equities thatā€™s also hugely volatile - swings of minus 40% in a year arenā€™t unheard of. If youā€™re in this type of fund Iā€™d assume I may need to hold it long term, much longer than 7 years or so. Hopefully some of the real estate fund managers will find a way to structure a fund that works under the new regulations.

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1217

I understand what youā€™re saying and i think you are right.

We can either go for Equity funds with safety but low return, though with all the eggs in one basket.
Or go for Real-estate funds that are also safe, though not without risk, but it still very unclear whether they will actually have capacity to continue in the market, and finally Startup VC funds that either offer too low returns for the risk incurred with too few investment diversifications, unless :pray: they aim around 14% IRR with a good volume of multisector deals, and as you say, with a competitive G/L-P split.

Early next year iā€™ll also be on the look out for one of those VC funds too then !

Thank you @Beanieskis !

1218

Hi Gabriel

No thatā€™s not what Iā€™m saying, let me try to rephrase. At the moment I would not go for a real estate fund of any kind until thereā€™s certainty on what is or is not accepted for the GV.

Equity funds (and I assume by this you mean the listed equities open-ended funds) are not low risk - as they are listed they are likely to be very volatile. They become less high risk if you hold them long term - the 7 or even 9 years of the GV process is not long term, by long term I mean 20 years plus. Look at what can happen to stock markets over say 5, 10 and 20 years. If you invest just before a down turn in the market it could take a long time to break even. So if you invest in this option, Iā€™d be prepared to hold it very long term.

1219

The issue of course is that Portugal is such a tiny market that any sort of meaningful diversification just isnā€™t reasonably possible. I think people keep forgetting this. Itā€™s only a country of 10mm people at best, one thatā€™s got a ton of regulation and still leans a lot on ā€œfamily businessesā€ (AFAICT). Hardly a dynamic environment. And the whole regularized VC space only dates to 2018ish.

Not that I know in any detail, but certainly Gavin has expounded on this, and from what I saw in the VC space when I was looking (you can look this kind of thing up on Pitchbook and the like), no one had a huge deal book. There just isnā€™t that much going on. Itā€™s the same reason the PSI20 only has 20 S in its I. So, you have a hard time getting any diversity, which adds significant risk of loss.

I donā€™t say this to bash Portugal, I love the place. But you have to keep your expectations in line.

So I think if that is what you are going to sit around waiting for, youā€™re wasting your time.

Indeed, if you are looking to invest in order to get a GV, my recommendation would be to consider your investment a ā€œdonationā€ with an expectation to be happy with getting your money back with some small return. If you expect to both get a GV and get major-market returns with major-market risk profiles, you are fooling yourself.

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1220

I have mixed feelings about the whole thing.

I get what you are saying, broadly. I even agree that it would be good to take some of this cash and aim it at things like affordable-housing projects, SNS improvements, and other goals that the government wishes to promote.

However the government is attempting to steer the incoming flood of cash via policy, and itā€™s going to be a blunt and inexact instrument no matter how you do it. And then you have to sell the investors on giving you their money on these ā€œsub-optimalā€ projects with low returns.

Itā€™s just hard to even say what a ā€œreal estate investmentā€ is. A number of 's investments are in the form of the creation of a SPV where essentially the fund is buying property from an existing company with a clawback that lets the company guaranteedly purchase the property back from the fund at either the original price or a market price or whatever, then renting the property to the company. And sometimes that money from the sale is used by the company to do real estate construction, but not always, it depends. Is that a real estate investment? Or a tax-efficient way to pump capital into a company? Or simply an exotic loan-by-another-name? All of the above?

So why canā€™t someone effectively do the same thing or something like it, with a single house or apartment building? Iā€™m sure Lince would be all over that, some sort of standard-form lite ā€œfundā€. Ok, we can stop that, letā€™s make some rules to stop that. Well, more games. etc.

I think the fundamental issue is that

  • most GV investors are not professionals.
  • few are even sophisticated enough to understand the basic mechanics or understand what the heck it is they even bought, so they confuse it with something like a mutual fund back home, and make any number of assumptions that they really shouldnā€™t.
  • worse, theyā€™re in a foreign country, and probably just blithely thinking that ā€œit all works there like it does hereā€ when it really probably doesnā€™t -
  • and are expecting first-world returns in a country with what is essentially an emerging-market economy that canā€™t possibly provide them, and canā€™t get their heads around that -
  • and are taking advice from people who in the main have no reason to put the investorā€™s interests first.
  • meanwhile the government is trying to manage a situation (a sudden flood of investors) it truly didnā€™t expect which is operating through a new series of products it has no experience in managing and without a clear view where itā€™s even going because in the grander scheme of the timescales that governments operate on, this has all happened in the blink of an eye.

I suspect the better of these funds were originally started with an assumption that they would get a certain amount of mostly-invested sophisticated investors. Who else would invest in a VC fund? And why wouldnā€™t someone from the US with a half mil to spare be a sophisticated investor? What does someone in PT know about that, given anyone in PT with 500k counts as ā€œrichā€ and is probably using wealth managers? But thenā€¦ it happened how it did, and everything went off the rails.

IMO, Mercan is a far better model for most people. Have a large company with a significant back-story come in and present pre-canned safe options - Iā€™d count ā€œbuilding a hotel that can be easily franchised under a major multinational brand in a tourist-driven economyā€ as being a pretty damn safe bet - and funnel most people there. Sure, returns are modest at best, but a large company like that can invest resources to explain the what and why to its investors. I think Holborn/Excellium may not be too bad either. Thereā€™s a french firm doing construction in Portugal that could easily learn to play in this space. Just give those companies rules on what the gov wants built and stand back and regulate them, rather than to use the VC structures at all.

But. Itā€™s complicated.

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1221

AH i understand better now ok thanks, thanks for the clarification Selina.

1222

This article highlights some issues of ongoing concern with investments in funds in Portugal. Millenium BCP I believe is the bank that would ledger the fund shares in this situation. I donā€™t have a relationship with BCP so I cannot speak to this, but I have noticed some issues during my investments where conflicts of interest are common.

I donā€™t know if there is adequate oversight, but this certainly raises some questions that should be addressed by investors during the due diligence process. It does not appear that CMVM will take action, but in this climate where things become politicized, it is hard to tell what might happen in the future.

Chinese multinational linked to fund encouraging investment in companies where it holds major stakes - Portugal Resident

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1223

Interesting article, but not surprising. Select law firms may be included or aiding in such encouragement. That aside, I can speak from experience with a different fund managed by STAG that their actions seem contrary to the best interest of the investors. We, the shareholders, had to initiate action by the fund advisors to hold the fund managers (STAG) accountable for their actions. Thier processes are far from sound and their actions and interests are questionable, at best. Highly recommend anyone evaluating funds to perform due diligence regarding a STAG managed fund.

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1224

What was the issue with STAG? I am in one of their funds. Thanks.

1225

We are looking for very conservative investments, so mostly only open-ended funds (Thank you, Thomas, for listing 4 of them.) You can find a lot of information about the funds on the Financial Time Analysis page here - Equities, ETF and Funds prices, indices and stock quotes - FT.com
Itā€™s a start.

1226

Just invest in BPI or IMGA index funds. Most of the holdings are commodities, retail, energy - So i donā€™t think you can go wrong but iā€™m no financial expert by any means

1227

Hi Joel,
What is the BPI fund? Can you direct me to it?

So far we have found the following open-ended funds that participate in the ARI program (aka Golden Visa) -
IMGA AƧƵes Portugal A - Fundo de Investimento Aberto de AƧƵes - high mgmt fees, but very big, old and established
Sixty Degrees AƧƵes Portugal I Fundo de Investimento MobiliƔrio Aberto de AƧƵes - lower fees, but minimum investment of 100,000 Euros
Sixty Degrees AƧƵes Portugal T FIMMA - lower fees, but 5% one-time subscription fee
Optimize Portugal Golden Opportunities Fund Fundo de Investimento MobiliƔrio Aberto

Hard to tell which is the ā€œwinnerā€. Weā€™re thinking of distributing the investment among 3-4.
There could be other ARI
mutual funds. Iā€™m still researching.

1228

Itā€™s this one BPI Portugal - Fundo de Investimento Aberto de AƧƵes, PTYPIGLM0000:EUR summary - FT.com

Itā€™s on par with IMGA but slightly lower fee. Iā€™d say split into IMGA and this. Donā€™t worry about the fund fees though at this point, least of our concerns

1229

Terrific. Thanks so much!

1230

Hello everyone - On PGV funds topic, has anyone worked with ValorGreen, Portuguese Energy Efficiency Investment Fund 1 (PEEIF1)? Theyā€™ve announced a new fund (PEEIF 2) that invests in opportunities within the fields of Energy production, Energy Efficiency and Cleantech. renewables. Assets are managed by Quadrantis Capital. Any feedback would be great!

1231

sorry this was asked before. How can we check and verify if a fund is approved by the ARI program? Is there a comprehensive list of all approved funds somewhere? Thanks!

1232

Iā€™ll quote my own post from another thread:

Itā€™s true that redemptions in Portugal Liquid Opportunities can take up to six months officially, although the manager claims to generally process them in less than a month. This fund also maximizes the non-Portuguese exposure you can get, meaning you only have around ā‚¬300K exposed to the Portuguese market.

Regarding the potential issue I see for the fund tracking the PSI-20 index (BPI, IMGA, not sure about Sixty Degrees), that may just mostly be theoretical, but I think itā€™s a risk worth highlighting nonetheless.

1233

The government does not ā€œpre-approveā€ funds. All you can do is verify that the fund meets the Golden Visa requirements and that itā€™s properly registered with the CMVM.

Itā€™s not a 100% complete list, but we try to include nearly all eligible funds here: