A “Boring Fund” with Interesting Prospects in Portugal

A “Boring Fund” with Interesting Prospects in Portugal
Pela Terra transforms worn-out Portuguese farmland into organic, sustainable agriculture for steady returns.|©iStock/ewg3D

After Portugal ended the residential property investment option to qualify for a golden visa, many wondered what would take its place. The remaining options include donations, business investments, technology startups, and venture capital funds.

Of these, the fund option is by far the most popular, with over 98% of golden visa applications. By investing a minimum of €500,000 in one or more qualified Portuguese funds, you can get a golden visa on the same terms as before. You get five (renewable) years of residency. You only have to spend seven days a year in the country, so you don’t trigger tax residency. And after the first five years, you can apply for a Portuguese passport.

€500,000 isn’t chump change, of course. But with the right fund, you can combine strong annual yields with appreciation of the underlying assets. Depending on the asset in question, you could be looking at some serious gains.

Recently I spoke to Alex Lawry-White, Managing Director of Portuguese fund Pela Terra. It’s had remarkable success over the last three years, with a 100% success rate in facilitating golden visas for its investors. Notably, 60% of those investors come from the United States.

Pela Terra isn’t a high-risk venture. As Alex says, “We’re proud to be the most boring fund on the market.” That’s because Pela Terra invests in the world’s safest and least volatile asset class: agriculture. Whilst other assets have seen frightening volatility over the years, farmland continues to appreciate at a steady pace:

The fund’s business model is to buy “worn out” Portuguese farmland that’s been subject to heavy fertilizer use and convert it into sustainable, organic agricultural production. This improves the quality of the land, boosting its value… and sustainably produced products attract a market premium, boosting the returns on investment.

Pela Terra is actually two funds. The first invested in olive and almond orchards, which Pela Terra rehabilitated. It’s seen a 38% gain in asset value in just a few years. Its first harvest is coming later this year. The second fund invests in existing sustainable farms, aiming for an average annual yield of 7%.

Investors lock in their funds for five years, at the end of which they can withdraw them if they’ve achieved Portuguese citizenship or roll them over to renew a golden visa. At the end of the fund’s contractual life, the farmland is sold, and the asset appreciation is distributed to investors.

Pela Terra would be attractive on this basis alone. But conversion to sustainable farming methods has a powerful impact on climate change, reducing the impact of chemical fertilizer production and sequestering carbon. With the European Union heavily favoring climate friendly agriculture, this makes Pela Terra’s farmland eligible for valuable subsidies.

That’s all good news. But there’s something about Pela Terra that many potential golden visa investors tend to ignore.

“When the government ended the residential investment option, it pulled the rug out from under the golden visa industry,” Alex explains. “Existing operations either shut down or tried to convert to the fund model. There are about 50 funds in the market, but 5% of them get nearly all the investment. We’re one of that 5%.”

Pela Terra is succeeding because it had already identified its business model before the big shakeout in the golden visa industry. It had an existing track record, so savvy investors gravitated towards it. At the moment it’s the only qualified and registered golden visa fund focusing on farmland. The fact that farmland is the safest investment class available makes it doubly attractive to people wanting to minimize their risk.

That's an important consideration. The other day, someone who'd consulted with me as part of my Global Citizen service sent me a prospectus for a Lisbon fund that claimed to be able to get you a golden visa dirt cheap by investing in office space. It was an obvious scam.

Pela Terra, on the other hand, seems to be the real deal.

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