A core tenet of wealth management is to remain invested over the long term. In reality, however, life is rarely so straightforward. Capital is often required, whether to pursue a business venture, acquire property, send kids to school and college, or fund other significant opportunities, which can force investors to liquidate assets at suboptimal times.
Lombard lending offers a solution to this tension. It enables clients to stay invested while unlocking liquidity against existing portfolios.
In this article, we explore how Lombard lending evolved, how it 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.
These merchants 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, Lombard lending can defer the need to realise assets, allowing portfolios to continue compounding while managing the timing of taxable events or intergenerational transfers.
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 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 twofold: the client secures the property with speed and certainty, while continuing to benefit from the portfolio’s long-term compounding. In effect, Lombard lending enables the client to remain invested while accessing liquidity, preserving both strategic positioning and optionality, provided the structure is managed with appropriate discipline.
Conclusion
Staying invested is a core principle of long-term wealth creation, but in reality, liquidity needs arise.
At Typhoon Capital, Lombard lending bridges this gap. Working closely with our custodian banks, we structure facilities that enable clients to pursue opportunistic investments, particularly in real assets such as property, without disrupting core portfolios.
