How safe are the Bulgarian ETF UCIT?
The amended Bulgarian Citizenship Act cancelled the bond investment option and introduced the ETFs and AIFs. Logically, the government was left with no choice but to put an end to the affordable bond financing options, which brought no value to the country, and introduce a more sensible investment option.
The Bulgarian Citizenship Act offers investors Bulgarian citizenship by investment if they invest in Bulgarian ETF or AIF to the amount of 512,000 EUR, or 1,024,000 EUR for fast-track citizenship. The Act implies that the ETF should be licensed in Bulgaria, and its investment strategy is focused on the trading shares of Bulgarian companies listed on the Bulgarian Stock Exchange. The ETF, similar to bonds, can be purchased through either a Bulgarian-based or foreign broker.
As a financial instrument, the ETF is considered riskier compared to bonds. Being riskier does not make the ETF necessarily more profitable. One of the ETF UCITs to satisfy the requirements of the Citizenship Act has been rather erratic over the last couple of years.
The ETF above was launched at 1.0342 per share on 03.10.2016. It then increased to 1.3207 on 11.08.2017 before its substantial depreciation to 0.6966 on 23.03.2020.
As of 18.06.2021, the price per share is 0.9121. In other words, if you started the citizenship by investment program in 2016 and sold the ETF in 2021, you would have lost around 100,000 EUR if fast-track or 50,000 EUR if ordinary track.
The Bulgarian ETFs are expected to appreciate in value as they seem to be a good alternative to Bulgarian government bonds that satisfy the Bulgarian Citizenship Act. It might be wise to buy the ETF sooner than the 15th of September, when the requirements of the pre-approval stage will be published, and the mass purchase of Bulgarian ETF products will start. Still, the Bulgarian Investment Agency recommends applicants to invest only after they pass the pre-approval stage.
You may read more about how to buy Bulgarian ETF remotely.
Can the ETF depreciate in value?
Like any financial instrument, the ETF value can appreciate or depreciate over time.
Can I buy the ETF through my home country brokerage firm?
The ETF can be purchased globally, and there are no requirements to buy through a Bulgarian based brokerage or wealth management firm.
How much should I invest in Bulgarian ETF to get Bulgarian citizenship?
You must invest 512,000 EUR for the ordinary track and 1,024,000 EUR for the fast-track process.
For how long should ETF investment be maintained?
For the fast-track, you have to maintain the ETF for two years after the citizenship was granted. For the ordinary track, there are no requirements to hold the ETF after the citizenship was granted.