How safe are the Bulgarian ETF UCIT?
Last Updated on September 2, 2024 by Bulgarian Citizenship Team
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 more sensible investment options.
The latest Bulgarian Citizenship Act offers investors a Bulgaria Golden Visa if they invest 512,000 EUR in a Bulgarian fund. This visa can be converted to Bulgarian citizenship if the investment is maintained for 5 years and a Bulgarian language test is passed. The Act mandates that the fund be located in Bulgaria, managed by a Bulgaria-based fund management company, and invest solely in Bulgarian assets, including shares of Bulgarian companies.
As a financial instrument, ETFs are considered riskier compared to bonds. However, being riskier does not necessarily make ETFs more profitable. One of the ETF UCITs meeting the requirements of the Citizenship Act has been rather erratic over the past 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 was 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.
Bulgarian AIFs
The few ETFs eligible for the Bulgaria Golden Visa program mainly invest in the Bulgarian SOFIX index, which limits growth potential. In contrast, AIFs focus on investing in innovative startups and existing businesses that lack the expertise to scale, particularly in sectors like insurance, recycling, health, and agriculture. These companies, though well-managed, often miss out on AI-driven solutions that can significantly enhance profitability. AIFs not only provide funding but also the critical knowledge and resources needed to implement AI automation, helping businesses grow their market share and boost profitability.
You may read more about how to buy Bulgarian ETF remotely.
FAQs:
Can the ETF depreciate in value?
Yes, like any financial instrument, the value of an ETF can appreciate or depreciate over time.
Can I buy the ETF through my home country brokerage firm?
Yes, 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 a Bulgarian ETF to get Bulgarian citizenship?
You need to invest 512,000 EUR.
For how long should the ETF investment be maintained?
The ETF investment must be maintained for at least 5 years from the time permanent residency is granted.
