The Ultimate Guide to Portugal Golden Visa Funds

Introduction

As a recap, remember that to qualify for a Portugal Golden Visa via investment funds, the fund must meet three key requirements​:

• 60% Investment in Portuguese Companies – At least 60% of the fund’s capital must be invested in commercial companies based in Portugal​. This ensures the fund is contributing to the local economy.
  
  
• Minimum 5-Year Holding Period – The fund must have a minimum maturity of five years​. Golden Visa investors are required to maintain an uninterrupted investment for at least five years, aligning with the residency requirement.
  
  
• No Real Estate Investments – Qualifying funds cannot invest in real estate​. Instead, funds focus on businesses – whether through equity or debt – to meet the program criteria.

In the sections below, we’ll explore how these funds work and the different types available. We will not dive into specific fund names, but rather explain the structures and strategies in an approachable yet rigorous way. By understanding the fundamentals – from a company’s capital structure to fund types and strategies – you’ll be better prepared to choose an investment that suits your goals. And when you’re ready, our team can provide personalized guidance to help you move forward.

Capital Structure

At the heart of any fund’s strategy is the capital structure of the companies or projects it invests in. A company’s capital structure is often visualized as a layered “capital stack,” from senior debt at the bottom (least risky) to equity at the top (most risky)​. Each layer represents a different type of financing with distinct characteristics in terms of repayment priority, risk, and expected return.​

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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.

Fund Classification

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 funds invest in startups and early-stage companies with high growth potential. This strategy involves substantial risk due to the inherent uncertainties and failure rates typical of startups. However, successful investments can yield exceptionally high returns by capitalizing on early market entry, innovation, and rapid scaling.

Private Equity

• Growth Capital (Expansion-stage companies):
  Growth capital targets companies that have proven their business models, after becoming profitability, aiming to accelerate their expansion. These companies typically seek capital for international growth, product launches, expanding production capacities, licensing acquisitions, or strengthening distribution networks. Value creation in growth capital hinges primarily on operational improvements, strategic growth initiatives, and increased market penetration, resulting in targeted returns around 15% annually. Unlike venture capital and leveraged buyouts, growth capital involves less financial leverage, making it moderately less risky.
• Buyouts (Mature companies - Leveraged Buyouts - LBO):
  Buyout funds acquire controlling stakes in mature, stable companies, with history of consistent cash-flows, often using financial leverage (debt) to enhance returns. Value is primarily created through competencies (skills and processes), assets (financial assets and brand) and relationships (deal sourcing and complementarities). There are 3 levers for increasing the equity value in LBO: deleveraging (reducing debt using cash flow to repay debt), EBITDA expansion  (increasing sales and/or reducing costs) and multiple expansions (selling for a higher multiple of the EBITDA) - see figure below.

• Turnaround/Special Situations (Companies in Distress):
  Turnaround or special situations strategies involve investing in companies experiencing financial or operational distress, requiring substantial restructuring. Unlike distressed debt strategies (where investors buy discounted debt), turnaround investments involve acquiring equity stakes in distressed companies. Value is created through rigorous restructuring, cost rationalization, operational improvements, and restoring profitability and financial stability. These strategies carry high risk due to uncertainties inherent in restructuring efforts, yet can offer substantial returns if successful.

Private Debt or Private Credit

Private Debt is one of the fastest growing segments, due to increased bank regulation since the financial crisis, with regulations like Basel  which requires banks to reserve capital based on weighted risk

• Junior Debt: Junior debt, also known as subordinated debt, ranks below senior debt in repayment priority. It is typically unsecured or lightly secured, making it riskier for investors. To compensate for this increased risk, junior debt offers higher yields, generally in the range of 5% to 10% annually. Most corporate bonds are structured as junior debt, paying periodic interest with the principal repaid at maturity. In private equity, junior debt is often used to finance acquisitions, growth initiatives, or leveraged buyouts, sitting between senior debt and equity in the capital structure.
• Mezzanine Debt: Mezzanine debt is a hybrid financing instrument that combines elements of both debt and equity. It typically provides regular interest payments while also offering equity-like returns through features such as warrants, conversion rights, or profit participation. Expected returns generally range between 10% and 15% annually, reflecting its position between senior debt and equity in the capital structure. Investors in mezzanine debt can expect periodic distributions and may also benefit from upside potential if the company achieves predefined financial or operational targets. This structure makes mezzanine debt an attractive option for funding acquisitions, expansions, and leveraged buyouts while aligning investor interests with company performance.
• Distressed Debt: Distressed debt involves purchasing non-performing loans or bonds at significant discounts. This strategy can generate substantial returns if the underlying assets recover in value or are successfully restructured but carries higher complexity and risk.

Market Statistics

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.

Next, learn more about how capital distributions work.