If we learn anything from times of uncertainty, it’s that spreading your risk by diversifying your portfolio really does make sense. However, if it’s not the right time to divest or realise your existing assets or investments, broadening your options could be tricky. Gary Edwards, Credit Advisory Specialist at HSBC UK Private Banking, explains how Lombard Lending could help.
“Lombard Lending allows you to borrow using your liquid financial assets as collateral,” explains Gary. “In the current situation, where uncertainty persists, one thing that’s particularly valuable from an investor perspective is flexibility. Setting up a Lombard Lending facility gives our clients flexibility, providing a war chest that offers them the chance to make the most of any opportunities arising.”
Delivering leverage and liquidity
By providing access to liquidity, or the ability to leverage into new opportunities, Lombard Lending increases your agility and ability to respond to shifting circumstances. Unlocking liquidity from your portfolio, for example, can create many benefits, such as:
- Staying invested in the market rather than selling off investment holdings to meet short-term personal or business liquidity needs.
- Flexibility to take advantage of compelling investment opportunities, without needing to sell your existing holdings and disrupt long-term strategies.
- Peace of mind knowing that a credit line against your investment portfolio is available, whilst remaining invested.
Meanwhile, applying leverage to your portfolio can help you achieve a number of outcomes, including:
- Diversifying your holdings, without committing additional funds to your portfolio.
- Generating income by applying leverage to your portfolio and then investing in income-producing strategies.
- Committing more than your initial equity stake to an attractive new opportunity, thereby potentially enhancing your returns.
Setting up a Lombard Lending facility gives our high net worth clients flexibility, providing a war chest that offers them the chance to make the most of any opportunities arising.
A bespoke solution
Easy to set up, Lombard Lending facilities are tailored to meet individual client requirements, says Gary. “Lombard Lending is delivered in a way that suits your personal needs and preferences, from loans in most major currencies, to different repayment options including interest only. Interest rates are based on prevailing money market and capital market conditions, and pricing is competitive.
“However, the most compelling reason for considering this facility and the flexibility it offers is that there is no arrangement fee. There is simply no cost unless you use it, so having that facility, that war chest available, costs nothing. What I would say, though, is that it can take several days initially to put the facility in place, so if you want to be ready to seize new opportunities, it’s vital to act sooner rather than later.”
Diversify your investments
Whilst recovery can take an uncertain and often volatile path, being able to respond quickly to risks and opportunities can make a difference to your investment outcomes. “We’re seeing some clients using Lombard Lending to avoid concentration to a specific asset class or sector.” says Gary. “So, they may be looking to diversify their holdings by investing in a combination of income producing and capital growth ideas, for example. Others are getting creative, using the facility as part of a currency hedging strategy in anticipation of movement in the FX market.”
For real estate opportunities too, Lombard Lending facilities can allow investors or purchasers the same leverage as a cash buyer, allowing you to act quickly if you see something that fits the bill, or take advantage of value shifts. “Once the facility is in place, credit is perpetual,” explains Gary, “so, depending on the collateral pledged and the LTV that provides, funds can be drawn at short notice.”
Be ready for any opportunity
Acceptable collateral depends on several factors, such as liquidity, price, volatility and the ratings of individual securities. In general, there are few liquid assets that don’t qualify. “For some clients, uncertainty and unprecedented circumstances make them re-evaluate their whole approach to wealth and lifestyle, so their desire to diversify may be less driven by long-term investment strategy and more by a ‘you only live once’ approach,” says Gary. “Lombard Lending can support that ambition, so if you’ve always dreamed of owning a yacht, a valuable piece of art or starting your own wine collection, you can make it happen.”
Whatever your personal circumstances and your motivation, Lombard Lending could provide you with the flexibility you need. For more information, please contact your Relationship Manager.