When investing €500,000 in a private equity fund for your Golden Visa, the quality of your due diligence can significantly impact your investment outcome. While fund managers will present their strategies and track records, it's crucial to engage in detailed discussions that reveal both opportunities and potential risks.

This comprehensive guide will help you structure meaningful conversations with fund managers. The questions are designed to elicit detailed responses about the fund's operations, strategy, and risk management approach. Remember, experienced fund managers should welcome thorough due diligence questions and provide transparent, thoughtful responses.

Due Diligence Questions

Fund Manager Background & Track Record:

1. What is your total assets under management excluding Golden Visa funds?
2. What percentage of your capital comes from institutional investors?
3. How many Golden Visa investors do you currently have, and what's their geographical distribution?
4. Is the fund also open to non-Golden Visa investors? What's the current mix?
5. Can you share examples of past exits and returns?
6. What is your track record in your target sectors?
7. How many people are in your investment team and what are their roles?

Fund Economics and Alignment:

1. Is the management team personally invested in the fund? What percentage?
2. What are all the fees involved?
   • Subscription fee
   • Management fee (calculation basis)
   • Any other fees
3. Regarding returns:
   • What is your target return?
   • Is this net of all fees and carried interest?
   • What key assumptions drive these projections?
4. Performance structure:
   • What is your hurdle rate?
   • What is your carried interest structure?
   • How does the waterfall distribution work?

Note: Please refer to our guide for terminology.

Investment Strategy and Deal Sourcing:

1. What are your target sectors and why have you chosen them?
2. What is your typical investment size and stage preference?
3. How many companies do you plan to invest in?
4. Do you take controlling or minority positions? Why?
5. How do you source your deals? Tell us about your network and deal flow.
6. Do you already have target companies identified? Can you tell us about them?
7. What specific value do you add to portfolio companies beyond capital?

Performance and Risk Management:

1. Could you provide a spreadsheet simulation for your target case scenario?
2. What are your expected holding periods for investments?
3. What has been your worst-performing investment, and what did you learn from it?
4. How do you structure deals to protect downside risk?
5. What happens if a portfolio company underperforms?
6. How many board seats do you typically take?
7. How do you manage concentration risk?
8. How did your portfolio perform during COVID, and what lessons did you learn?
9. What's your strategy for a potential market downturn?

Fund Structure & Operations:

1. What is your investment team's capacity given your other funds?
2. How frequently do you report to investors and what information is included?
3. How do you communicate with investors when things don't go as planned?

Exit Strategy and Liquidity:

1. Who are your typical buyers? Do you have relationships with potential acquirers?
2. What happens if market conditions prevent an exit at fund maturity?
3. Can investors exit after the 5-year Golden Visa holding period?
4. Do you have experience with secondary market sales?
5. How do you maintain relationships with potential buyers throughout the investment period?

Red Flags to Watch For

• Vague or evasive answers about track record
• Reluctance to discuss past failures or challenges
• Overemphasis on Golden Visa investors versus institutional investors
• Unclear exit strategies or unrealistic return expectations
• Limited team capacity or over-reliance on key individuals
• Weak reporting and communication structures

Remember, the quality of answers matters more than specific numbers. Look for:

• Transparency about both successes and failures
• Clear understanding of risks and mitigation strategies
• Realistic approaches to challenges
• Strong governance and investor communication practices
• Balanced focus between Golden Visa requirements and investment performance