It’s been a year since the changes to the Portuguese Golden Visa program, but I’m still being asked if this program is over. It’s hard to be surprised because there was a lot of confusion at the time. In the meantime, my answer remains the same: no, it is still possible to enter the path to European citizenship. The only part of my answer that has changed is that we don’t know how long the program will remain in effect and investors need to be smart about choosing their path.
The property pathway to obtaining a golden visa ended in October 2023, but non-EU investors still have viable pathways to obtain residency in Portugal and ultimately EU citizenship. Mutual funds in particular have emerged as a popular alternative. Compared to real estate, mutual funds have several advantages: the process is significantly faster, taxes and fees are lower, investments allow sector diversification and do not require management or maintenance, making it a more rational and efficient option for investors.
As the attractiveness of Golden Visa investments in Portugal continues to capture global investors, the future of this program becomes an increasingly crucial issue. Next Wednesday, October 16, we will host a webinar where we will discuss how the potential for residency through investment has opened doors for many people, but the reality is that these opportunities cannot last forever.
With regulatory changes and evolving market dynamics looming on the horizon, investors must be vigilant and proactive in navigating this changing landscape. Understanding the implications of these changes is essential for anyone looking to secure their future in Portugal.
One of the main questions I have is who are the investors applying for the program? Investments under the Golden Visa have long been associated with real estate, giving individuals a tangible connection to their host country. But in recent years, the move towards fund-based investing has been met with excitement by some and confusion by many others. Not everyone fully understands the world of fund-based investments.
The learning curve can be steep, but these avenues continue to gain traction and attract investors for reasons beyond just residency. These investments represent a blend of financial growth, wealth preservation and long-term family planning, making them attractive to global investors, especially those seeking stability in uncertain times.
Who are the investors behind the program?
People who choose the Golden Visa fund route usually do so for lifestyle, financial security and family reasons. For many investors, the possibility of obtaining European citizenship through a simple and regulated investment process is very attractive. But most of the reasons are family related.
For one of my clients in San Diego, the main interest lay in guaranteeing her children access to European higher education and allowing them to easily settle in Portugal or elsewhere in Europe. Another, from Istanbul, appreciated the ease of traveling around Europe on his frequent business trips. However, both consider the minimum visitation requirement throughout the six-year procedure to be a real advantage that will not interfere with their current residency situation.
Even clients who are polar opposites of each other may have similar reasons for investing. One client from Manchester, UK and another from Santiago were more focused on long-term family planning. The British client wanted to give his children the same freedom and opportunities he had growing up in Europe, which have been lost since Brexit. Santiago’s client saw the program as a way to ensure her semi-dependent children had the freedom to work, study and travel in Europe while she planned her own future move to Portugal.
In either case, the program’s ability to grant EU citizenship within six years is a big draw, making the Golden Visa Fund an attractive option for families planning their future.
Fund investments: a multifaceted strategy
For those investing in a fund eligible for the Golden Visa, this is increasingly part of a wider strategy. These funds, often backed by established managers, are designed to offer diversification into sectors such as renewable energy, healthcare, agriculture and hospitality. The inherent advantage of diversification is that it provides stability and spreads risk across sectors that are less affected by market volatility. However, there are also funds that primarily invest in a single area, such as the collector car market.
The problem for customers right now is that there are so many options. So it’s important to do your research and look at what other investors are doing.
For many, fund investments are not simple financial decisions, but strategic moves for family and succession planning. They provide access to citizenship or residency in countries such as Portugal, which provide access to quality education, healthcare and a better lifestyle. The investment therefore has a dual purpose: financial gain and a secure future for the family.
Risk and reward
As global economic uncertainty has become the new normal, the preservation of heritage has become as important as its creation. Fund-based Gold Visa investments are increasingly seen as a capital preservation mechanism in a low-risk environment. But risk always exists, as with any investment, and it is therefore important that investors understand the level of risk. Investors should look for fund structures that prioritize loss protection and management, and ensure they deal with regulated and licensed fund managers.
While the benefits of investing in Golden Visa eligible funds are obvious, the decision is not without risk. The appeal of capital appreciation and regular dividends must be balanced against the potential volatility of the sectors the fund invests in. For example, while the hotel and restaurant sector can offer high returns during economic booms, it is susceptible to downturns such as the COVID-19 bird flu- the pandemic.
In the medium term, fund-based structures will continue to be the preferred route for the Portuguese Golden Visa program. If chosen well, investors who approach these opportunities with a long-term view can benefit not only from a home, but also from a solid foundation for future financial growth. But investors should be cautious.
by Niamh Erbek, Sales Director at Athena Advisers
Disclaimer:
The opinions expressed on this page are those of the author and not The Portugal News.