PORTUGAL Law and Practice Contributed by: João Nóbrega, Bernardo Marques and Francisco Miguel Gomes, EY Law – Sociedade de Advogados, SP, S.A.
• their constitutive documents explicitly authorise such investments; • the assets qualify as eligible under Portuguese law; and • the AIF complies with applicable risk management, custody and valuation rules. Investments in tokenised or virtual assets may also fall under the EU Markets in Crypto-Assets Regulation (MiCA – Regulation (EU) 2023/1114), which gradually came into effect from 2024 to 2025. In contrast, private equity AIFs cannot hold digital assets directly but may invest in companies engaged in the blockchain or digital asset sector, provided that such investments meet the “predominant elements” test (at least two-thirds of total assets in capital-risk exposures) and align with the AIF’s venture capital objectives. Cannabis-Related Businesses Investments in cannabis or cannabis-related com - panies are permitted only if the activities are duly licensed for medical or industrial purposes, as rec - reational cannabis remains illegal under Portuguese law. Consequently, private equity AIFs may invest in licensed entities operating in this sector, subject to the standard diversification and governance limits appli - Credit AIFs are authorised to originate or acquire cor - porate loan portfolios, adhering to borrower-level con - centration (20%) and leverage (60%) limits as outlined in Articles 25 and 26 of the RRGA. However, they are expressly prohibited from granting consumer credit or investing in portfolios of loans to natural persons. Residual AIFs may engage in credit-related strategies only if such activities are clearly defined in their con - stitutive documents and remain consistent with their category and prudential framework. Litigation Funding cable to their portfolio investments. Consumer Credit and Loan Portfolios Portugal does not currently have a specific regime governing third-party litigation funding or its treatment under the RGA. While litigation funding is not listed
among the eligible investment categories in the RGA or RRGA, it is also not expressly prohibited. In theory, an “other AIF” could pursue a litigation fund - ing strategy if its management regulations explicitly permit such investments and if the CMVM accepts that the underlying exposures qualify as permissible assets under the applicable prudential and risk man - agement standards. Any such fund would need to jus - tify its valuation methodology, liquidity management and investor protection safeguards to the CMVM, given the inherently high-risk and illiquid nature of liti - gation claims. At present, there are no CMVM-authorised AIFs pub - licly known to operate as litigation funding vehicles in Portugal. Therefore, while litigation funding remains a legally plausible but untested investment strategy under the Portuguese regime, any sponsor consider - ing such a structure should engage with the CMVM in advance to confirm regulatory feasibility and supervi - sory expectations. 2.7 Use of Subsidiaries for Investment Purposes The use of subsidiaries or special purpose vehicles by AIFs is legally permitted under Portuguese law, although it remains relatively uncommon in practice. The prevailing market model favours direct invest - ment by the AIF in the eligible assets that constitute its portfolio. However, subsidiaries may be employed in specific circumstances where indirect holding structures are warranted – typically for purposes such as risk man - agement, tax efficiency, joint ventures or co-invest - ment. These structures are most frequently observed in real estate AIFs, which may hold assets through property companies (PropCos), or in private equity AIFs, which may utilise holding vehicles (HoldCos) to consolidate equity interests in portfolio companies. The RGA does not impose restrictions on the use of subsidiaries, provided that: • the subsidiary’s activities align with the AIF’s investment policy and fall within its eligible asset scope;
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