How high-net-worth investors are unlocking liquidity while preserving long-term portfolio exposure
A core principle of long-term investing is to remain fully invested. Yet in practice, capital is often required, whether to buy a property, fund a business opportunity, or send the kids to school or college. Too often, this creates a difficult trade-off: liquidate assets at suboptimal times and disrupt a carefully constructed portfolio, or forgo the opportunity altogether.
Lombard lending offers a more considered alternative, enabling investors to unlock liquidity against existing holdings while maintaining exposure to long-term market returns.
In this article, we explore how Lombard lending works in practice, and why it has become an increasingly relevant tool in modern wealth management.
From Medieval Origins to Modern Wealth Strategy
The term Lombard loan carries a distinctly European heritage, with origins tracing back to the Lombardy region in northern Italy in the middle ages.
The merchants of that time were among the first to formalise lending against pledged assets. While the mechanisms of Lombard lending have evolved significantly, its central purpose remains unchanged: extending liquidity without requiring the sale of underlying assets. Today, it is firmly embedded within the strategic toolkit of high-net-worth investors.
What is a Lombard loan?
At its core, a Lombard loan is a secured line of credit extended against a portfolio of liquid financial assets, typically including:
- Equities
- Bonds
- Investment funds
The portfolio is pledged as collateral, and a lender, usually a private bank or wealth manager, provides financing based on a proportion of its value, known as the loan-to-value (LTV) ratio.
Advance rates depend on asset quality and diversification
- Government bonds: 70–90%
- Blue-chip equities: 50–70%
- Diversified portfolios: blended LTV depending on underlying mix of assets and risk
How Lombard loans work in practice
Once established, a Lombard facility operates with considerable flexibility:
- The portfolio is assessed and assigned collateral values
- A credit line is extended based on its composition
- Funds can be drawn as needed, often across multiple currencies
- Interest is charged only on the amount utilised
Liquidity with purpose
Among high-net-worth and ultra-high-net-worth investors, Lombard lending has evolved into a deliberate tool of capital management and less a last resort for liquidity and more a strategic enabler.
One of its most common applications is in funding new opportunities. Whether acquiring property, allocating to private equity, or participating in co-investments, investors are often required to deploy capital quickly. Lombard facilities allow this to be achieved without liquidating existing holdings, preserving both portfolio integrity and timing advantage.
There are also more structural uses. In tax and estate planning and even divorce, Lombard lending can defer the need to sell assets, allowing portfolios to continue compounding and generate income while managing the timing of taxable events or intergenerational transfers.
Importantly depending on the market conditions and performance at the time the capital and income gains on the portfolio have the potential to deliver gains above the Lombard lending rate, effectively providing a very efficient rate of lending.
Case Study: Liquidity Without Disruption
A client with a USD 5 million diversified portfolio identifies an opportunity to acquire a USD 3 million property. Rather than liquidating investments, potentially disrupting their long-term asset allocation, crystallising gains or selling at unfavourable levels, the client establishes a Lombard facility against the portfolio.
Using a structured loan-to-value of approximately 60%, the client draws USD 3 million to fund the purchase while keeping the portfolio fully invested.
The outcome is two-fold: the client secures the property while continuing to benefit from the portfolio’s long-term compounding. In effect, Lombard lending enables the client to remain invested while accessing liquidity.
Conclusion
Staying invested is a core principle of long-term wealth creation, but in reality, liquidity needs arise. Lombard lending can help bridge this gap and enables clients to stay invested while unlocking liquidity against existing portfolios.
At Typhoon Capital we work closely with our clients and custodian banks, to structure portfolios and agree lending facilities that enable clients to pursue other demands on their capital, without disrupting their core portfolios.
