Aligning Fund Lock-up with Your Citizenship Timeline

Golden Visa Minimum Hold: 5 Years
You must maintain your €500,000 investment for at least 5 years to keep your Golden Visa residency status. Selling before this voids your residency rights.

Citizenship Eligibility: Two Scenarios

Application-Date Counting Rule (Critical)
Under the current favorable interpretation, your clock starts from application submission, not card issuance. An applicant in Q1 2025 can target citizenship eligibility by 2030 under current rules—regardless of AIMA processing delays.

Fund Duration: Varies

• Open-ended mutual funds: No fixed term, but check redemption terms
• Closed-end PE funds: Typically 6-10 years
• VC funds: Often 10+ years

The Alignment Challenge (Liquidity Mismatch):
Your fund's timeline should match your citizenship goal—under both current and proposed scenarios. If pursuing citizenship:

• A 6-year fund + 10-year path = Liquidity Mismatch (reinvestment required)
• A 10-year fund + 10-year path = Aligned
• An open-ended fund = Maximum flexibility

What is Liquidity Mismatch?

Liquidity Mismatch occurs when your fund's term is shorter than your citizenship timeline. If your fund matures before you're eligible for citizenship, you must:

1. Find and invest in another qualifying fund (€500k+ again)
2. Navigate a potentially different regulatory environment
3. Accept reinvestment risk (fund availability, terms, fees)

Risk Assessment Matrix

Why This Matters Now

With Law 61/2025 under review, you're essentially planning for uncertainty:

• If 5-year path continues: Any fund 5+ years works
• If 10-year path enacted: 6-7 year funds create gaps
• Prudent approach: Choose funds that work under either scenario

Mitigation Strategies

1. Choose 10-year closed-end funds: Aligned with proposed law; if current law remains, you simply hold longer
2. Use open-ended funds: Maximum flexibility; exit when ready
3. Verify reinvestment provisions: Some funds allow rolling into successor funds
4. Understand extension clauses: Many PE funds can extend 2-3 years if needed

Scenario 1: Residency Only (5-7 Years)
If you only want Golden Visa residency (not citizenship), you can exit after 5 years.

• Fund choice: Open-ended funds or 6-7 year PE funds work well
• Key consideration: Ensure fund allows exit after minimum period
• Watch for: Funds with penalties for early redemption

Scenario 2: Citizenship Path - Current Law (5-6 Years to Eligibility)
Under current rules, citizenship eligibility at 5 years; application takes 12-24 months.

• Fund choice: 7-year funds provide buffer
• Timeline: Apply for citizenship in year 5, receive in year 6-7
• Key consideration: Application-Date Counting Rule means clock starts at submission

Scenario 3: Citizenship Path - Proposed Law (10+ Years)
If Law 61/2025 is enacted with 10-year requirement:

• Fund choice: 10-year PE/VC funds or open-ended
• Timeline: Apply for citizenship in year 10, receive in year 11-12
• Key consideration: Avoid Liquidity Mismatch with shorter funds

Scenario 4: Hedging Both Outcomes
If uncertain about final law:

• Recommended: Open-ended funds or 10-year closed-end
• Rationale: Works under either scenario
• Trade-off: May hold longer than necessary if 5-year path continues

Scenario 5: Family Considerations
If including family members:

• Remember: Each family member's status depends on main applicant's investment
• Plan for: Longest timeline needed by any family member
• Consider: Children aging out if timeline extends

Open-Ended Funds

• No fixed maturity date
• Can typically redeem after initial lock-up (often 5 years)
• NAV-based redemption
• Advantage: Flexibility to exit when ready
• Disadvantage: Redemption may face queues or restrictions

7-Year Closed-End Funds

• Fixed 7-year fund life
• Capital returned at fund termination
• Common for PE funds
• Advantage: Matches original citizenship timeline
• Disadvantage: Now misaligned with 10-year citizenship rule

10-Year Closed-End Funds

• Fixed 10-year fund life
• Aligns with new citizenship timeline
• Common for PE and VC
• Advantage: Natural alignment with citizenship goal
• Disadvantage: Very long commitment if plans change

VC Funds (10-15 Years)

• Often longest holding periods
• Exit depends on portfolio company outcomes
• May have extensions beyond stated term
• Advantage: Potential for highest returns
• Disadvantage: Uncertainty on actual exit timing

Before Investing, Understand:

1. How does redemption work?

   • Is there a notice period?
   • Are there redemption fees?
   • What's the valuation methodology?

2. What happens at fund maturity?

   • Cash distribution?
   • In-kind distribution?
   • Option to roll into successor fund?

3. What if the fund extends?

   • Many PE/VC funds have extension provisions
   • You may not have a choice in extensions
   • Understand the extension terms upfront

4. What if you need to exit early?

   • Secondary market for fund interests?
   • Transfer provisions in fund documents?
   • Penalty structures?

5. What if the fund manager changes?

   • Key person clauses?
   • Impact on investment strategy?
   • Your rights if management changes?

If Pursuing Citizenship (10-Year Path):

• Prefer 10-year funds that align naturally
• Or choose open-ended funds with reinvestment options
• Ensure fund manager has long-term stability
• Factor in extension risk for closed-end funds

If Uncertain About Citizenship:

• Choose open-ended funds for flexibility
• Or 7-year funds with clear exit/reinvestment terms
• Avoid 15-year VC funds that lock you in
• Value optionality over potential returns

If Only Want Residency (5-7 Years):

• Open-ended funds work well
• 7-year PE funds align perfectly
• Check redemption terms carefully
• Ensure no penalties for post-minimum exit

For All Scenarios:

• Read fund documents carefully before investing
• Understand exact exit mechanisms
• Don't assume flexibility—verify it
• Consider what happens if your plans change