The Ultimate Guide to Portugal Golden Visa Funds

Introduction: Navigating the Nuances of Portugal Golden Visa Fund Investments

For sophisticated individuals and families pursuing the Portugal Golden Visa through investment funds, the landscape can appear both promising and complex. While the fundamental requirements – the crucial 60% allocation to Portuguese companies, the mandatory five-year holding period, and the exclusion of real estate – provide a clear framework, understanding the underlying mechanics and selecting the optimal fund demands a deeper level of scrutiny.

This guide is specifically designed for investors who have already grasped the core tenets of the Golden Visa program and are now at a critical juncture: discerning the intricacies of the Portuguese fund market. Unlike general overviews or promotional materials from fund providers and immigration agents, we offer an independent and rigorous exploration of how these qualifying funds operate.

Our objective is to empower you with the knowledge necessary to navigate this specialized investment space effectively. We will delve into the essential building blocks – from the capital structures of the companies these funds invest in to the diverse array of fund types and their distinct strategies. We will elucidate the nuances that differentiate debt-focused funds from equity-driven approaches, and explore the implications of legal structures like UCITS versus AIFs.

Crucially, while we will not endorse specific fund names, we will equip you with a robust framework for evaluating potential investments. This includes understanding the risk-return profiles associated with different capital stack layers and the strategic objectives behind various fund classifications. Our aim is to provide you with the intellectual tools to assess fund managers, their investment philosophies, and the potential pitfalls to avoid in this evolving market.

Recognizing that many international players in the immigration space may lack deep expertise on the investment side, and that individual funds will naturally highlight their own strengths, our independent perspective is invaluable. We are committed to educating investors, fostering a clear understanding of the market dynamics, and ultimately enabling you to make well-informed decisions that align with your long-term financial objectives and residency goals. When you are ready to leverage this understanding for personalized guidance, our team stands ready to assist.

Understanding Golden Visa Fund Eligibility: Key Requirements and Crucial Caveats

To reiterate, for an investment fund to qualify under the Portugal Golden Visa program, it must adhere to the following three fundamental criteria:

• 60% Investment in Portuguese Companies: A minimum of 60% of the fund's capital must be directed towards commercial entities based in Portugal, directly contributing to the national economy.
• Minimum 5-Year Holding Period: The fund's legal structure must stipulate a minimum maturity of five years, aligning with the mandatory duration of the Golden Visa investment.
• Strict Exclusion of Real Estate Investments: Qualifying funds are prohibited from investing in real estate assets and must instead focus on investments in businesses through equity or debt instruments.

Important Note: No Official "Golden Visa Approved" Stamp Exists. It is crucial for investors to understand that there is no official government or CMVM (Portuguese Securities and Exchange Commission) stamp or list explicitly designating a fund as "Golden Visa eligible." Eligibility is determined by the fund's compliance with the aforementioned requirements as explicitly stated within its management regulations (the fund's legal document deposited with the CMVM).

Be particularly cautious of newly created funds specifically targeting Golden Visa investors that may promise guaranteed buy-backs, money-back schemes, or strategies exploiting perceived "real estate loopholes." These often operate in a grey area and may not genuinely align with the spirit or letter of the Golden Visa regulations. We address these potentially risky approaches in a separate article.

In the subsequent sections, we will delve into the operational mechanics and diverse categories of these eligible funds. Our aim is to provide you with a clear and rigorous understanding of their structures and strategies, without recommending specific fund names. By grasping these fundamental concepts – from a company’s capital structure to fund types and strategies – you will be better equipped to select an investment that truly aligns with your objectives. When you are ready for personalized guidance, our team is available to assist you in navigating this critical decision.

Laying the Foundation: Why Understanding Company Capital Structure Matters for Your Fund Investment

To truly grasp the investment strategies of Portugal Golden Visa funds, it's essential to first understand the building blocks of their investments: the companies themselves. These funds raise capital to deploy into businesses, primarily through instruments of debt, equity, or a combination thereof. Each of these financing layers within a company's "capital structure" carries distinct risk and return profiles. Therefore, a foundational understanding of how these layers operate is crucial for discerning a fund's underlying risk appetite and potential for returns, ultimately informing your investment decision.

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Illustration: A company’s capital stack ranges from Senior Debt at the bottom (secured loans with first claim on assets) to Equity at the top (ownership with residual claims). Each layer carries a different risk/return profile.

• Senior Debt (e.g. senior bank loans or bonds) sits at the bottom of the stack. It has first priority for repayment – meaning if the company generates cash or is liquidated, senior debtholders are paid first. Because of this protection (often secured by collateral), senior debt carries the lowest risk and correspondingly lower returns​. Investors in senior debt receive a fixed interest rate, and their expected return is the lowest of the stack (typically single-digit annual returns)​. For example, traditional senior debt investments often target returns below 10% per year​, reflecting their relatively safe position.
• Junior Debt (subordinated debt) is a layer below senior debt but above equity. “Junior” or subordinated means it gets repaid only after all senior debt claims are met​. Because it’s lower in priority (often unsecured or second-lien), junior debt is riskier than senior loans and thus offers a higher interest rate to investors​. Junior debt investors still receive regular interest payments, but if the company runs into trouble, their claims rank behind senior lenders. Expected returns for junior debt are higher than senior debt – generally in the mid-to-high single digits annually, depending on the company’s credit risk. This compensates for the moderate risk assumed.
• Mezzanine Debt is often considered a hybrid or “quasi-equity” layer – hence the term mezzanine, meaning middle. Mezzanine financing usually comes after other debt but before equity in priority. It’s typically unsecured and may include special features like profit participation or warrants (options to buy equity), which give it an equity-like upside potential​. Because mezzanine investors take on more risk (only getting repaid after senior and junior debt), they demand even higher returns. Mezzanine debt often carries expected returns in the low-to-mid teens (≈10–15% or more per year)​. It usually pays interest (sometimes part of it can be deferred or paid-in-kind) and may give a small equity kicker. This layer is riskier than pure debt but safer than common equity, offering a balance of current income and potential upside​.
• Equity sits at the top of the capital stack. Equity investors are the owners (shareholders) of the company. They are last in line for repayment – meaning they only get paid after all forms of debt are serviced. In a worst case (e.g. bankruptcy), equity could be wiped out if debts exhaust the company’s assets. Because equity holders take the highest risk (their return is entirely dependent on the company’s performance), they also have the highest return potential​. There are no fixed interest payments; instead, equity returns come from dividends (if the company pays profits) and capital gains when the owners eventually sell their stake, ideally at a higher valuation. A successful equity investment can target 20%+ annual returns in the context of private equity or growth ventures​. However, returns are not guaranteed – they can be very high or zero, reflecting equity’s volatility. Equity investors bear the greatest risk but also stand to gain the most if the business thrives​.

The table below summarizes the key differences among these capital layers:

In general, the lower a layer’s repayment priority, the higher the risk to investors – and thus the higher the return investors will expect as compensation​. Senior debt offers stability but limited upside, whereas equity offers uncapped upside but with much greater risk of loss. Understanding these concepts is important because Golden Visa funds employ different strategies – some invest in debt (for steadier, modest returns) and others in equity (for growth-oriented returns). Next, we’ll see how fund types align with these instruments.

Structuring Fund Evaluation: A Framework for Understanding Key Characteristics

To facilitate a clear and structured evaluation of Portugal Golden Visa funds, we have organized our analysis along four fundamental dimensions. This classification framework is designed to provide a foundational understanding of how these investment vehicles are constructed and operate, enabling a more informed assessment of their characteristics and strategic focus. By examining these core elements, investors can better discern the key differences between funds and align their choices with individual investment objectives.

There are several ways to classify funds (see, for example, Funds: Private Equity, Hedge and All Core Structures by Matthew Hudson, Wiley) and many sources on the subject. For the purpose of our analysis, and to ensure a common understanding and consistent presentation of information to investors, we follow a classification based on four key dimensions:

• Legal Form: UCITS or AIF

• Main Structure: Open-ended vs. Closed-ended

• Base Instrument: Debt or Equity

• Investment Strategy: Corporate Bonds, Public Equities, Distressed, Mezzanine, Junior Debt, Turnaround, Venture Capital, Growth, and Buyout

The following diagram illustrates how these concepts are organized and interrelated.

Let's begin by exploring these concepts in more detail.

Legal Form

The EU framework for the so-called collective investment funds,  there are 2 main that an investor can find in the market eligible fof the Golden Visa. When it comes to investment funds eligible for the Golden Visa, there are two main categories to know, according to : UCITS mutual funds and Alternative Investment Funds (AIFs). The distinction matters because Golden Visa-eligible funds almost always fall into the latter category.

Mutual Funds (UCITS)

UCITS stands for “Undertakings for Collective Investment in Transferable Securities,” which is an EU framework for retail investment funds. In simple terms, UCITS are traditional mutual funds that everyday investors can buy. They are highly regulated for investor protection, following strict rules on diversification and liquidity. For example, UCITS funds must comply with the 5/10/40 rule: they generally cannot invest more than 10% of assets in a single security, and any holdings over 5% each can’t collectively exceed 40% of the portfolio​. This ensures a broad diversification – a UCITS fund typically holds at least ~16 different investments​.

Retail-friendly, highly diversified, daily liquidity, invest mainly in public markets. In Portugal, their strict diversification rules make them a less common choice for Golden Visa (given the PSI’s limited scope).

While this is great for reducing risk, it can be challenging in a small market like Portugal. The Portuguese stock index (PSI) currently comprises only about 15–17 companies, and the top three alone make up nearly half of the index’s market value (dominated by large firms in energy and utilities)​. A UCITS equity fund that invests only in Portugal would struggle to meet the diversification rules without venturing abroad or holding a lot of smaller positions. This is one reason most Golden Visa funds are not UCITS – the narrow Portuguese market doesn’t lend itself well to the UCITS model.

Furthermore, UCITS funds tend to be more limited in strategy (mainly public stocks and bonds) and must provide high liquidity (often daily pricing and redemption for investors)​. For Golden Visa purposes, liquidity is less of a benefit because your capital is essentially committed for 5 years anyway - Redeeming early would break the Golden Visa requirement of maintaining the investment (more below). 

Alternative Investment Funds (AIFs)

AIF is a broad category that includes any non-UCITS funds, typically aimed at qualified or professional investors. These include private equity funds, venture capital funds, real estate funds, hedge funds, etc.. 

In Portugal’s context, Golden Visa funds are often structured as Venture Capital or Private Equity AIFs. AIFs offer much more flexibility in investment strategy – they can invest in private unlisted companies, take significant stakes in a few businesses, or focus on specific sectors or asset types that UCITS funds might not be able to. They are not bound by the 5/10/40 rule, so an AIF could, for example, put 20% or more of its capital into a single promising startup if its mandate allows. This flexibility is crucial given Portugal’s market size; it enables Golden Visa funds to pursue flexible investment strategies (e.g. a few high-growth companies or projects) without breaching regulations.

Flexible strategies (private equity, venture capital, credit, etc.), typically for qualified investors, can be less diversified. They are the prevalent choice for Golden Visa investors because they can target Portuguese private market opportunities more effectively. Most funds advertised for the Golden Visa (venture capital funds, PE funds) are AIFs under Portuguese law​.

AIFs are less liquid and have higher minimums, catering to informed investors. They often come in a closed-end structure (more on that next) with a fixed term. In Portugal, these funds are regulated by the CMVM (the securities commission) just like UCITS, but they are permitted to take on higher risk and employ complex strategies. 

Main Structure

Investment funds can be structured as open-end or closed-end, referring to whether new investors can join (and existing investors can exit) after the fund’s launch.

Open-End Funds

Open-end funds allow continuous subscriptions and redemptions. Investors can typically invest at any time, and the fund issues new units (shares) to accommodate inflows. Likewise, investors can redeem (cash out) their units regularly—often daily or monthly—at the fund’s Net Asset Value (NAV). This structure provides greater liquidity and flexibility, much like an “open shop.” Most UCITS mutual funds are open-end by nature; their NAV is calculated daily, allowing investors to buy or sell at that price. For Golden Visa purposes, an open-end fund might invest in more liquid assets (such as public equities or corporate bonds) to meet potential redemption demands.

It is worth noting that Golden Visa investors must hold their investment for 5 years. Even if an open-end fund allows daily redemptions, redeeming before the 5-year mark would jeopardize the visa. In practice, if you sold out of a qualifying fund before 5 years, you would need to immediately reinvest in another qualifying fund without any gap - which is operationally challenging since it typically takes around 5 business days from the sell order to receiving your funds. Any gap or lapse could violate the “uninterrupted investment” requirement. Therefore, the liquidity of open-end funds during the first 5 years is not relevant for Golden Visa purposes.

Closed-End Funds

Closed-end funds accept subscriptions only during an initial fundraising period (usually until the target capital is achieved or until two years have passed). After that period, the fund is closed to new investors and does not allow voluntary redemptions until it reaches maturity. An investor may be allowed early redemption if they find a new investor willing to take their position—typically at a discount and with authorization from the fund (via a secondary market transaction). A closed-end fund issues a fixed number of units, which may be distributed among several "categories" or "classes" of investors (grouping investors by different rule sets, such as for the management team, institutional investors, and individual investors for the Golden Visa).

When investing in a closed-end fund, investors should be prepared to hold the investment until maturity, although, as explained in our article on capital distributions, funds have a strong incentive to distribute capital as soon as possible to maximize returns. Closed-end funds have a clearly defined lifespan and 2 separate periods. investment during the first half and divestment during the second half (harvesting). Many private equity and venture capital funds follow this structure because they require a stable, committed pool of capital to invest in illiquid assets and patiently wait for them to mature.

For Golden Visa investors, closed-end funds typically align well with the program’s requirements, often having terms ranging between 5 and 10 years, comfortably covering the mandatory five-year minimum investment period.

Important to note: It is important to note that while private equity investors are traditionally accustomed to "capital calls" — where they initially commit capital but deploy funds only when the fund manager identifies suitable investment opportunities—the Golden Visa operates differently. Investors are required to deploy their full €500,000 commitment upfront, although this capital can be diversified across several qualifying funds, as previously explained.

This upfront deployment requirement can negatively impact the investor’s overall returns, as measured by Internal Rate of Return (IRR). IRR heavily depends on when capital is invested and begins generating returns. If your capital is committed early in the fund’s lifecycle and the fund manager has not yet identified target investments, the uninvested capital—often termed "dry powder"—does not earn returns, thereby dragging down your overall IRR. Therefore, investors must carefully evaluate the fund's investment pipeline, strategy, and capital deployment timeline when selecting a closed-end fund for their Golden Visa investment.

Investment Strategies 

Different fund structures lend themselves to different investment strategies in Portugal:

Open-Ended Fund Strategies

Open funds, with their need to provide liquidity, stick to public market investments (exchange). The two common routes are either a public equity fund or a corporate bond fund (or a mix of both). An open-ended Golden Visa fund might, for example, buy shares of companies listed on Euronext Lisbon (e.g. the PSI index) or invest in Portuguese corporate bonds. The idea is that these assets can be valued daily and sold if an investor redeems.

Public Equities

Public equity refers to ownership in companies that are publicly traded on stock exchanges. These investments typically offer daily liquidity, transparent pricing, and regulated disclosures, making them a popular choice for more liquid, lower-risk investment strategies—especially in open-ended fund structures. Investors can buy and sell shares with ease, and fund managers can value portfolios daily, which aligns well with structures that must accommodate investor redemptions, such as UCITS funds.

However, while these features make public equities attractive in theory, they come with important limitations in the context of the Portuguese market.

Portugal’s stock market is small and highly concentrated. There are just 47 listed companies, and the primary index, the PSI, contains only 15 components. Of those, the three largest companies, primarily in the energy and utilities sectors, make up around half the index’s total market capitalization. This creates significant sector concentration risk.

As a result, a public equity fund focused exclusively on Portugal lacks diversification. If one major sector—such as energy—declines, the overall market and any fund tracking it will likely suffer disproportionately.

While the PSI has shown strong performance in recent years (~14% annual returns over the last 4 years), this has not been the norm. Over the past 10 years, the PSI has delivered less than 2% annualized returns, significantly underperforming broader indices like the STOXX Europe 600 (~6%) and the S&P 500 (~10%).

In the long run, performance has been even more disappointing: since 2000, the PSI has posted a negative annualized return of -1.7%, with 10 out of 24 years ending in losses. Its small size, low liquidity, and sector concentration make it especially vulnerable to Black Swan events.

Because of these structural issues, UCITS funds, which require broad diversification and risk management, are often impractical in Portugal. This is why many Golden Visa investment funds avoid the UCITS model and instead adopt the Alternative Investment Fund (AIF) structure. AIFs offer greater flexibility in how and where capital is allocated.

For investors seeking stable, predictable outcomes, a Portugal-only public equity fund may present an unfavorable combination of relatively high risk and limited upside. While a globally diversified equity fund could provide better risk-adjusted returns, it may not satisfy the Golden Visa requirement to invest at least 60% in Portugal.

Corporate Bonds

Corporate bonds are debt instruments issued by companies to raise capital. When an investor buys a corporate bond, they are essentially lending money to the company in exchange for regular interest payments (also known as coupons) and the return of principal at maturity. Unlike equities, which offer ownership in a business, bonds prioritize capital preservation and predictable income, making them a preferred choice for more conservative investment strategies.

In the context of investment funds—especially open-ended funds that require liquidity—corporate bonds are often used to build lower-risk, income-focused portfolios.

A bond-focused open-ended fund investing in Portuguese corporate debt typically carries lower volatility than equity funds. At any given time, there are over 200 different bonds listed on Euronext Lisbon, providing a reasonable pool of instruments for diversification.

Such a fund could deliver regular interest income and offer more price stability than an equity-focused strategy. This can appeal to conservative investors, especially those who value liquidity and capital protection.

However, the trade-off is in the return profile: expected yields are generally modest—around 2–5% per year. While this may preserve capital in nominal terms, it barely outpaces inflation and may fall short of covering the real costs associated with the Golden Visa (e.g., legal fees, government application fees, and currency risk).

Closed-Ended Fund Strategies

Closed-end funds can pursue illiquid and potentially higher-yielding strategies, as they are not required to meet ongoing investor redemption requests. These funds typically follow either equity-based strategies—such as Venture Capital and Private Equity—or debt-based strategies, commonly referred to as Private Debt or Private Credit.

Venture Capital and Private Equity strategies are easier to understand when viewed through the lens of a company’s lifecycle. The chart below illustrates how companies evolve through various stages—from early‐stage venture funding, through growth and buyout phases, and on to distressed or private‐debt situations. 

Venture Capital

Venture Capital (VC) is a subset of private equity that focuses on early-stage, high-growth companies with the potential for exponential scaling. Venture capital funds provide equity financing to startups in exchange for ownership stakes, often taking an active role in guiding the business.

VC investments are typically made in pre-revenue or early-revenue companies and involve higher levels of risk—offset by the possibility of outsized returns if the company succeeds. VC funds are structured as closed-end vehicles, with institutional investors (limited partners) committing capital for 10–12 years. The capital is deployed over the first 3–5 years and harvested through exit events such as IPOs or M&A transactions in the remaining years.

As a qualifying investment option for Portugal’s Golden Visa, venture capital funds offer a pathway into high-growth, innovation-driven sectors—while also supporting the country’s startup ecosystem.

Venture capital strategies are typically organized around the stage of the company’s development, with each stage reflecting different risk-return dynamics and capital requirements. VC funds may specialize in one or span across several stages.

Seed Capital (Concept to Prototype)

Seed capital funds invest in startups at the earliest stage of development—often when the business is still an idea, pre-revenue, and focused on building a minimum viable product (MVP). The investment supports early product development, market validation, and team formation.

These investments carry very high risk, given the lack of operating history and the reliance on founder execution. However, they also offer the highest potential upside due to low entry valuations.

Key Characteristics:

• Investment size: Typically up to €1M

• Return potential: High, but success rate is low

• VC role: Intensive mentorship and hands-on support

• Use cases: Product development, early market testing

Series A (Early Growth Stage)

Series A funding targets startups that have achieved product-market fit and are beginning to scale. These companies typically have early revenues or active user bases and require funding to build out their team, infrastructure, and go-to-market strategy.

Risk remains high, but is lower than in the seed stage. Series A funds are institutional in nature, with more rigorous due diligence and clear growth metrics.

Key Characteristics:

• Investment size: €2M–€15M

• Return potential: High, with increasing visibility

• VC role: Strategic guidance, board participation

• Use cases: Team expansion, initial scaling, technology buildout

Series B and Later Stage (Expansion and Pre-Exit)

Later-stage venture funds (Series B, C, and beyond) provide capital to scale already proven business models, often to enter new markets, build sales teams, or prepare for strategic exits. Companies at this stage have substantial revenues, operational metrics, and are positioned for either continued private growth or an IPO/acquisition.

These investments have lower risk than earlier stages and tend to attract a broader investor base, including private equity, corporates, or mezzanine funds.

Key Characteristics:

• Investment size: €10M–€100M+

• Return potential: Moderate to high

• VC role: Strategic partnerships, M&A preparation, exit planning

• Use cases: International expansion, acquisitions, IPO readiness

Risk Profile and Value Creation in Venture Capital

Venture capital is defined by a high-risk, high-reward profile. Many investments fail or yield minimal returns, but successful companies can deliver 10× to 100× multiples. VC funds rely on a portfolio model, where a small number of high-performing investments drive the majority of returns.

Value creation levers in VC include:

• Strategic guidance and mentoring by experienced investors

• Network effects, including access to talent, customers, and follow-on funding

• Governance support, including board representation and performance monitoring

• Staged investing, with capital released in tranches upon hitting milestones

Academically, VC returns exhibit a power-law distribution—a small percentage of companies account for most of the gains. Top-quartile VC funds consistently outperform, making fund selection critical for investors.

Key Distinctions Between Venture Capital Stages

Private Equity

Private equity refers to investments in private companies or buyouts of public companies that result in their delisting from stock exchanges. While sometimes used as an umbrella term to describe all private market strategies—including venture capital, infrastructure, and private debt—pure private equity typically encompasses two core strategies: growth capital, buyouts and turnarounds. Both seek to generate attractive risk-adjusted returns by driving operational and strategic transformation at the portfolio company level.

Growth Capital: Accelerating Expansion in Proven Models

Growth equity funds invest in expansion-stage businesses—companies that have passed the startup phase and achieved profitability, but seek external capital to fund their next phase of development. These companies are often pursuing:

• International expansion

• Product diversification or launches

• Capacity increases in production or operations

• Geographic or channel distribution

• Strategic licensing or acquisitions

Investors typically acquire minority stakes, requiring a trust-based partnership with existing shareholders and management teams. Given the lack of control, the success of growth equity hinges on alignment of vision, and collaborative value creation through strategic initiatives rather than governance overhaul or financial engineering.

Unlike buyouts, growth capital employs little to no leverage, making it a moderate-risk strategy with target returns around 15% annually, largely driven by operational improvements and market expansion.

Buyouts: Transforming Stable Businesses Through Control

Buyout funds focus on mature companies with consistent cash flows and established market positions. They acquire controlling stakes, often using financial leverage (LBOs – Leveraged Buyouts) to enhance returns. However, since the 2008 financial crisis, the use of leverage in private equity transactions has become more conservative. In Portugal, debt typically represents less than 50% of the capital structure, and in many cases significantly less. This reflects a cautious approach driven by market dynamics, risk management, and lending constraints.

1. Deleveraging: Using the company’s own cash flows to repay acquisition debt.

2. EBITDA Expansion: Driving profitability through revenue growth or operational efficiency.

3. Multiple Expansion: Enhancing the business’s valuation by improving strategic positioning or exiting in a favorable market.

In Portugal, many buyout opportunities stem from succession challenges. Founders nearing retirement often lack successors, and the businesses, while commercially viable, may operate with underdeveloped governance, non-institutionalized management, and suboptimal capital structures. Buyout funds step in not only as capital providers but as strategic partners, professionalizing operations and preparing these businesses for eventual sale or integration into global players.

Turnaround / Special Situations: Restoring Viability in Distressed Businesses

Turnaround strategies focus on companies in financial or operational distress, which require significant restructuring to regain stability and growth. Unlike distressed debt strategies (which target undervalued debt securities), turnaround funds acquire equity stakes and play an active operational role in the recovery process.

Key drivers of value include:

• Rigorous financial and operational restructuring

• Cost rationalization

• Management replacement or reinforcement

• Balance sheet repair

• Strategic repositioning to restore profitability

These strategies carry elevated risk due to the uncertainties and complexities of corporate recovery, but if successful, can deliver outsized returns. Execution requires deep operational expertise, stakeholder alignment, and resilience to volatility.

Key Distinctions Between Private Equity Strategies

Private Equity by the Numbers

In 2024, global private equity fundraising totaled $589 billion, with Buyout strategies capturing the largest share at $376 billion (63.9%). Venture and Growth followed with $102 billion (17.3%) and $97 billion (16.5%), respectively, while Other Private Equity strategies represented just $13 billion (2.2%).

In comparison, in Europe during 2023, total fundraising reached €132.9 billion, where Buyout also dominated with €95.4 billion (71.7%). Growth accounted for €17.2 billion (12.9%), Venture raised €14.2 billion (10.7%), and Generalist and Mezzanine strategies made up a smaller portion at €4.4 billion (3.3%) and €1.9 billion (1.4%), respectively.

When we step back and assess performance over the long term, private equity has consistently outperformed public equity, a trend reaffirmed by this recent McKinsey report. While short-term fluctuations—such as in 2023–2024—saw public indices like the S&P 500 (36.3%) and MSCI World (33.1%) outpace private equity, these spikes are not indicative of structural performance.

Over 10- and 25-year horizons, private equity returns—particularly in Buyouts and Growth/Venture strategies—are superior:

• Buyout funds delivered 14.1% over 10 years and 13.4% over 25 years.

• Growth/Venture funds achieved 14.5% over 10 years and 10.7% over 25 years.

• In contrast, the MSCI World Index returned 10.6% (10Y) and 6.9% (25Y), and the S&P 500 posted 13.4% (10Y) and 8.2% (25Y).

This consistent outperformance over multiple decades highlights the strength of private equity as a long-term investment strategy—particularly for investors seeking higher returns through active ownership, operational improvements, and long-term value creation.

Private Debt or Private Credit

Private Debt—also referred to as Private Credit—is among the fastest-growing segments of global private markets. Since the 2008 financial crisis, total assets under management in private credit have grown nearly tenfold, surpassing $1.6 trillion globally. This growth has been driven by institutional demand for predictable income and uncorrelated returns, combined with stricter banking regulations—notably the Basel III framework—which have made it significantly harder for banks to lend to small and mid-sized companies. These regulations require banks to allocate more capital to risk-weighted assets, particularly loans to private and unrated borrowers, reducing their appetite for this segment.

This has created a structural gap in corporate financing—one increasingly filled by private credit funds. These funds offer tailored, bilateral financing to companies, often with fewer constraints than traditional lenders. They are typically structured as closed-end vehicles with a 6-year maturity, making them well-suited to meet Portugal Golden Visa holding period requirements.

Private credit strategies differ from public corporate bonds in several fundamental ways:

• Private credit is not traded, so it avoids market volatility and duration risk. Investors hold loans to maturity.

• Returns are contractual and cash flow-driven, typically from interest-only payments throughout the term, followed by a bullet repayment of principal at the end.

• Maturities for individual loans are usually 2 to 3 years, aligning neatly with fund-level liquidity planning and visa timelines.

In Portugal, while private equity is more widely adopted, private credit remains relatively underdeveloped, representing a high-potential opportunity for investors seeking stable, contractual returns with a lower correlation to public markets.

Junior Debt (Subordinated Debt)

Junior debt, also known as subordinated or second-lien debt, ranks below senior secured loans in the capital structure. It typically lacks collateral or is lightly secured, resulting in a higher risk profile. To compensate, it offers elevated yields, generally ranging between 8% to 12% annually.

These instruments are used to complement senior debt in a company’s capital structure, especially in acquisitions, recapitalizations, or growth financings where companies aim to limit equity dilution. In the context of private equity-backed transactions, junior debt sits between the senior loan and the sponsor's equity, providing capital without surrendering ownership control.

Key Characteristics:

• Subordinated repayment priority

• Higher yield due to increased credit risk

• Typically no equity participation

• Commonly used in leveraged transactions

Mezzanine Debt (Hybrid of Debt and Equity)

Mezzanine debt occupies a space between debt and equity. While technically a form of subordinated debt, it is distinct in that it often includes equity-like upside through instruments such as warrants, convertible features, or profit participation rights.

Investors receive contractual interest payments (cash or payment-in-kind) and may benefit from capital appreciation if the company performs well. This structure aligns incentives between the company and the lender. Returns generally range from 10% to 15% annually, depending on the risk profile and terms.

Mezzanine is particularly attractive in growth capital scenarios, leveraged buyouts, or shareholder reorganizations, where senior debt alone may not provide sufficient capital.

Key Characteristics:

• Subordinated to senior debt but often unsecured

• Regular income + potential equity upside

• Used in buyouts, expansions, or generational transitions

• Appeals to investors seeking blended debt-equity exposure

Distressed Debt / Special Situations

Distressed debt strategies involve investing in the debt of companies experiencing financial distress, often trading at a deep discount. These funds aim to capitalize on turnaround or restructuring scenarios, with the potential for substantial upside if the company recovers.

Investments may include non-performing loans, defaulted bonds, or rescue financings, where the investor plays an active role in the restructuring process. These strategies are more complex and carry higher risk, including the potential for capital loss if recoveries fall short.

Returns can exceed 15%+ annually, but successful execution depends on legal expertise, restructuring experience, and active management. In Portugal, this strategy remains niche but could emerge as an opportunity in legacy family businesses or sectors undergoing structural change.

Key Characteristics:

• High-risk, high-return profile

• Requires deep restructuring or workout capabilities

• Often involves active engagement with borrowers and stakeholders

• Suitable for sophisticated investors comfortable with illiquidity and complexity

Key Distinctions Between Private Credit Strategies

Concluding Thoughts: Empowering Informed Investment in Portugal Golden Visa Funds

The landscape of Portugal Golden Visa-eligible investment funds presents a diverse array of options for qualified investors. As independent advisors, our aim has been to equip you with a critical understanding of the fundamental structures, strategies, and inherent considerations within this market. Recognizing that the majority of these investment opportunities are targeted towards professional investors – a classification that includes those pursuing the Golden Visa – thorough due diligence and a discerning investment perspective are paramount.

The nuances explored in this guide, from the intricacies of capital structures and fund classifications to the performance dynamics of various private equity strategies, underscore the importance of analyzing these opportunities through a rigorous investment lens. With numerous funds now available, each with its own distinct characteristics and risk-return profile, a well-informed selection process is crucial to aligning your investment with your long-term financial objectives and mitigating potential pitfalls.

To further support your journey towards making well-considered investment decisions, we offer a curated database of funds, accompanied by detailed information and analysis. Access to this resource, available following an initial consultation, is designed to provide you with a deeper level of insight into the specific opportunities within the Portugal Golden Visa fund market. Our commitment remains to education and the empowerment of investors, enabling you to navigate this complex landscape with confidence and clarity.

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