“How much can I borrow against my investment portfolio?” is usually the first question a HNW client asks about Lombard lending. The more important question is how much can be borrowed while leaving enough collateral headroom for the facility to remain resilient when markets move.
There is no universal Lombard loan-to-value ratio. A lender does not normally take the headline value of an investment portfolio and apply one simple percentage to it. Instead, it examines the underlying securities and determines how much lending value it is prepared to recognise against each asset.
Cash, government bonds, diversified funds and listed equities can all be treated differently. A concentrated shareholding can be discounted heavily. Some illiquid or difficult-to-value investments may provide little or no borrowing capacity at all.
The result is that two clients with investment portfolios each worth £10m can receive materially different credit limits.
The Number That Matters Is Lending Value, Not Portfolio Value
Market value tells you what the investments are worth. Lending value tells you how much of that value the bank is prepared to recognise as collateral.
Understanding the difference is fundamental to assessing borrowing capacity, available headroom and margin-call risk.
- How Lombard LTVs work
- Market value versus lending value
- How different assets can be treated
- What is a Lombard haircut?
- Why portfolio concentration matters
- How currency affects collateral
- Can your LTV change after drawdown?
- What actually triggers a margin call?
- How much headroom should you retain?
- Using Lombard LTV strategically for property
- Why comparing lenders matters
How Do Lombard Lending LTVs Work?
At its simplest, loan-to-value measures borrowing relative to the value of the collateral supporting it.
If £5m of eligible investments supported £2.5m of borrowing, the borrowing would represent 50% of the portfolio's headline market value. But this simplified calculation does not tell you how the lender arrived at the £2.5m facility.
In practice, private banks and securities-backed lenders assess the underlying portfolio. Different securities can receive different collateral or advance values according to the lender's risk methodology.
The bank may recognise a substantial proportion of one asset while giving another holding a much lower lending value. Some securities may be deemed ineligible altogether.
The total recognised values then determine how much borrowing the portfolio can support.
Why a £10m Portfolio Does Not Have One LTV
Consider a £10m portfolio containing high-quality bonds, diversified global equities and a substantial position in one listed company.
The bank may assign a relatively strong lending value to the bond allocation, a lower value to the diversified equities and a significantly more conservative value to the concentrated shareholding.
The resulting borrowing capacity is therefore based on the sum of those recognised collateral values rather than simply applying one headline percentage to £10m.
The actual treatment of each holding is lender-specific and can change over time.
Market Value Versus Lending Value
The distinction between market value and lending value is one of the most important concepts in securities-backed finance.
Market value is the current value of an investment. Lending value is the amount of that market value the lender is prepared to recognise when calculating borrowing capacity.
The difference provides protection against the possibility that investments fall in value before the bank can take action.
A highly liquid, relatively stable security may receive a stronger lending value because the lender has greater confidence in its ability to realise the asset if required.
A volatile or illiquid holding creates more uncertainty. The lender may therefore recognise a much smaller proportion of its market value or exclude it from the borrowing base.
Which Investments Support the Highest Lombard LTV?
There is no universal hierarchy that applies identically across every private bank. Nevertheless, the fundamental credit logic is broadly consistent: assets that are liquid, transparent and relatively stable are generally more useful as collateral than assets that are volatile, concentrated or difficult to realise.
The exact lending value of any security must therefore be established with the lender rather than inferred from a generic asset-class percentage.
Cash and Cash-Like Assets
Cash and certain highly liquid cash-like assets can provide strong collateral because their value is relatively transparent and they can normally be realised without the market-price uncertainty associated with equities.
Currency still matters. Sterling borrowing against sterling cash creates a different risk profile from sterling borrowing supported by cash denominated in another currency.
Government Bonds
Certain high-quality government securities can be attractive Lombard collateral because of their liquidity and established markets.
This does not mean every sovereign bond receives the same treatment. Currency, issuer credit quality, maturity, duration and market conditions can all affect recognised lending value.
Investment-Grade Bonds
High-quality corporate fixed income may also provide useful borrowing capacity, although the lender must consider both interest-rate sensitivity and the creditworthiness of the issuer.
A portfolio of short-duration investment-grade bonds therefore presents a different collateral profile from longer-duration or lower-rated debt.
Diversified Equity Funds and ETFs
Broadly diversified and liquid funds can potentially support meaningful lending values because risk is spread across multiple underlying holdings.
However, the word “fund” does not automatically imply low risk. A leveraged, thematic, sector-specific or geographically concentrated fund may behave very differently from a broad global index fund.
Individual Listed Equities
Large, liquid listed companies can be eligible collateral, but equity prices can move significantly over short periods.
The lender will therefore consider volatility, liquidity and the size of the individual position relative to the wider pledged portfolio.
Private Equity, Unlisted Assets and Illiquid Funds
Assets that cannot readily be priced or sold can be considerably more difficult to use as conventional Lombard collateral.
Some lenders may assign no borrowing value to particular private or illiquid investments. Others may consider them only within more bespoke private-bank credit structures.
| Asset Type | Typical Credit Consideration | What Can Reduce Lending Value? |
|---|---|---|
| Cash / cash-like assets | High liquidity and transparent value | Currency mismatch or product-specific restrictions |
| Government bonds | Liquidity, issuer quality and maturity | Duration, currency and sovereign credit risk |
| Investment-grade bonds | Credit quality and liquidity | Credit deterioration, duration or concentration |
| Diversified funds / ETFs | Underlying diversification and liquidity | Leverage, sector concentration or volatile underlying assets |
| Listed equities | Liquidity, volatility and issuer quality | Concentration and significant price volatility |
| Private / illiquid investments | Highly lender-specific | Limited liquidity, valuation uncertainty and exit restrictions |
What Is a Haircut in Lombard Lending?
A haircut describes the reduction between an asset's headline market value and the amount the lender is prepared to recognise for collateral purposes.
Suppose an eligible investment is worth £1m but the lender's methodology recognises only £600,000 of collateral value. Economically, the lender has applied a substantial discount to the market value when determining borrowing capacity.
The haircut exists because the lender needs protection against adverse price movements and the risk that the security cannot be realised immediately at today's quoted value.
The more uncertain the future realisable value, the more conservative the lender may be.
What Determines the Haircut?
Several factors can influence how a bank treats an investment.
The bank can also consider issuer quality, credit rating, maturity, position size and its own internal exposure to a particular security or market.
This is why an individual security's lending value should not be treated as permanent.
Why Does Portfolio Concentration Matter?
A £10m diversified portfolio and £10m held in the shares of one company represent very different collateral risks.
The concentrated portfolio may appear extremely strong while the share price is rising. But a single corporate event could materially reduce the entire collateral pool in a short period.
This issue is particularly relevant to entrepreneurs and senior executives whose wealth can be heavily concentrated in the company they founded or work for.
The holding may represent genuine substantial wealth while still being less efficient for Lombard purposes than a diversified portfolio of equivalent market value.
Wealth and Borrowing Capacity Are Not the Same Thing
A concentrated £20m shareholding can make somebody extremely wealthy while still providing less robust collateral than a substantially smaller but diversified portfolio.
Lombard lending is therefore partly an assessment of how the wealth is held, not merely how much wealth exists.
Can You Improve Borrowing Capacity by Restructuring the Portfolio?
Potentially, but this needs careful separation between lending and investment advice.
A different portfolio composition may produce different recognised collateral values. That does not mean investments should be bought, sold or reallocated solely to obtain a larger loan.
Investment suitability, tax consequences and the client's long-term strategy need to be considered by the relevant investment and tax advisers.
Where Willow works alongside an existing wealth manager, the lending analysis can identify how different assets are likely to be viewed by potential lenders. The investment professional can then consider whether any changes are independently appropriate for the client.
How Does Currency Affect Lombard LTV?
Currency becomes important when the borrowing and collateral are denominated differently.
Consider a client borrowing sterling against investments predominantly valued in US dollars. Even if the underlying securities remain unchanged in dollar terms, a significant movement in GBP/USD can change their sterling-equivalent collateral value.
This means the facility can be exposed to two moving components: the price of the investment and the exchange rate used to value it against the loan.
International clients should therefore consider whether borrowing in the same currency as their assets or expected repayment source reduces unnecessary currency mismatch.
The appropriate currency structure depends on the client's wider position and should not be determined by the Lombard facility alone.
Can Your Lombard LTV Change After the Loan Is Drawn?
Yes. This is a fundamental difference between securities-backed borrowing and many conventional property mortgages.
An investment portfolio is market-priced. Its value can change continuously, and lenders can monitor the collateral supporting their exposure.
The recognised lending value of individual securities can also change.
If volatility increases, a company deteriorates, a security becomes less liquid or the lender changes how it treats a particular asset, available collateral capacity can be affected even without the client making a withdrawal.
Your Starting LTV Is a Snapshot, Not a Guarantee
A facility that appears conservative on the day it is drawn can become more highly leveraged if the portfolio falls.
This is why the unused capacity between current borrowing and the lender's intervention thresholds can be more important than the headline maximum facility.
What Actually Triggers a Lombard Margin Call?
A margin call can arise when the collateral supporting the loan is no longer sufficient under the lender's agreed facility terms.
The obvious cause is a fall in investment values, but it is not the only one.
A significant currency movement can reduce effective collateral value. A concentrated security may be assigned a lower lending value. A fund could become less liquid. The bank's collateral methodology may change.
The specific trigger and the action required depend on the facility documentation.
Once the relevant threshold has been breached, the borrower may need to add eligible collateral, contribute cash or repay part of the borrowing.
If the required action is not taken, the lender may have contractual rights to sell pledged investments to reduce its exposure.
What Does a Margin Call Look Like in Practice?
When Falling Markets Reduce the Buffer
Assume a client has drawn a Lombard facility against a diversified portfolio with substantial unused collateral capacity at the outset.
Markets subsequently fall and the recognised lending value of the pledged portfolio declines.
Initially, this simply consumes some of the unused headroom. If the decline continues far enough to breach the lender's agreed collateral threshold, remedial action may be required.
The client might then add eligible securities, introduce cash or reduce the outstanding loan. If they cannot meet the lender's requirements, the facility documentation may allow the lender to liquidate pledged assets.
The precise thresholds, cure periods and lender rights vary. They should be understood before the loan is drawn, not discovered for the first time during a market correction.
Should You Borrow the Maximum Lombard LTV Available?
The fact that a lender is prepared to provide a particular facility does not mean the client needs to draw all of it.
This distinction matters because unused borrowing capacity can act as a buffer against falling collateral values.
A borrower operating close to the lender's maximum permitted leverage has less room for markets to move before action is required. A borrower using a materially smaller proportion of available capacity has greater headroom.
There is no universal “safe LTV”. The appropriate buffer depends on the assets, volatility, currency, expected duration of the loan, access to additional liquidity and the client's tolerance for the possibility of a margin call.
Stress-Test the Facility, Not Just the Portfolio
A useful question is not simply whether the client can afford today's interest cost.
The structure should also consider what happens if financial markets fall significantly while the loan remains outstanding.
Would there still be adequate collateral? If a margin call occurred, where would additional liquidity come from? Could other eligible assets be pledged? Would the client be comfortable selling investments? Could the loan be repaid from another source?
The answers determine whether the facility is genuinely flexible or simply appears flexible while markets are favourable.
A Robust Lombard Structure Should Consider:
- current market value of pledged assets;
- recognised lending value of each material holding;
- portfolio concentration;
- currency mismatch;
- expected volatility;
- current facility utilisation;
- remaining collateral headroom;
- available unencumbered liquidity;
- margin-call mechanics;
- lender liquidation rights; and
- the intended repayment or exit strategy.
How Can Lombard LTV Be Used Strategically for Property Finance?
Property is one of the situations where the distinction between maximum borrowing and appropriate borrowing becomes particularly important.
A HNW client might use portfolio-backed liquidity to provide a property deposit, complete a purchase before a mortgage is available, bridge the period before another asset is sold or combine securities-backed borrowing with a conventional large mortgage.
In each case, the amount drawn against the portfolio determines how much market volatility the structure can absorb.
If a client uses almost all available Lombard capacity to complete a property purchase, they may have little room to respond if financial markets fall shortly afterwards.
A more conservative securities-backed facility combined with property finance may produce a stronger overall structure even if it means accepting a mortgage against the property.
Example: Funding a £1.5m Property Deposit
Assume a client is purchasing a £5m UK property and wants to provide £1.5m of the purchase price through a Lombard facility rather than selling investments.
The relevant question is not simply whether their portfolio can technically support £1.5m.
The analysis should consider what percentage of recognised collateral value that £1.5m represents, how volatile the pledged assets are, how long the facility will remain outstanding and what liquidity exists if the portfolio falls.
If £1.5m uses only a modest proportion of the portfolio's available capacity, the structure may have substantial room to absorb normal market movements.
If £1.5m represents almost the maximum the lender will provide, the same property transaction creates a very different risk profile.
Can Lombard Lending Support 100% Property Finance?
Potentially, where the client's balance sheet is sufficiently strong.
For example, a mortgage could finance part of a property while a separate Lombard facility finances the remaining purchase equity against an investment portfolio.
Economically, the entire property purchase price may therefore have been funded with borrowing, but the lenders have security over two different asset pools.
This should not be confused with an unsecured 100% mortgage. The client's investment portfolio is providing the economic collateral behind the Lombard component.
The combined leverage should therefore be assessed across the whole balance sheet.
Why Maximum LTV Can Be the Wrong Target
A high facility limit can be useful even when the client never intends to draw it fully.
The undrawn capacity itself can provide flexibility.
A client might arrange a larger facility but initially use only the amount required for the transaction. This can leave potential additional liquidity available, subject to the lender's ongoing collateral assessment and facility terms.
The strategy is very different from drawing to the limit simply because the credit is available.
Why Can Lombard LTV Differ Between Private Banks?
Different lenders have different collateral methodologies, risk appetites, custody requirements and commercial objectives.
A portfolio that produces one level of borrowing with one institution can potentially produce a different outcome elsewhere.
One bank may be comfortable with a particular fund while another excludes it. One may impose a severe concentration adjustment on a single shareholding while another has greater appetite for that issuer. Some lenders may want the portfolio moved under their custody or management; others can consider assets managed externally under an acceptable security arrangement.
This means comparing only the lending margin can miss the more important difference: how much of the client's existing portfolio the lender actually recognises.
| Comparison Point | Why It Matters |
|---|---|
| Recognised collateral | Determines which holdings actually contribute to borrowing capacity. |
| Lending values | Determines how efficiently each eligible asset supports the facility. |
| Concentration treatment | Can materially affect clients with large single-stock positions. |
| Custody requirements | May determine whether investments need to move from an existing manager. |
| Margin-call mechanics | Determines how and when the borrower must respond to collateral deterioration. |
| Facility term | Determines the certainty of continued funding and potential repayment requirements. |
| Interest margin | Determines borrowing cost but should be considered alongside collateral efficiency and risk. |
Do Investments Have to Move to the Lombard Lender?
It depends on the institution.
Many traditional private-bank relationships have historically combined lending with custody or assets under management. In those circumstances, the investments supporting the facility may need to sit within the bank's platform or an agreed security arrangement.
That can have implications beyond the loan itself if the client already has an established investment manager.
However, there are also lending propositions capable of considering portfolios managed or custodied elsewhere, subject to the lender's requirements.
For a client with a longstanding wealth-management relationship, this can materially affect which Lombard proposition is most attractive.
Should You Change Investments to Get a Higher Lombard LTV?
A lending analysis may reveal that one portfolio composition would support more borrowing than another. That is useful information, but it is not in itself a reason to alter the portfolio.
Changing investments can create tax consequences, alter expected risk and return, disrupt an established strategy and introduce transaction costs.
Any investment decision should therefore stand on its own merits and be considered with the client's investment adviser.
The borrowing requirement should not dictate investment suitability.
How Willow Private Finance Approaches Lombard LTV
At Willow Private Finance, the objective is not to find the highest headline LTV and encourage a client to use it.
We look at the borrowing requirement, the assets available, the expected duration and the wider purpose of the facility. We can then assess how different lenders may approach the portfolio and where the material differences lie.
For a client seeking £1m against a £10m portfolio, the issue may be straightforward. For another seeking £4m against the same headline value, the detailed collateral analysis becomes far more important.
Likewise, a £10m portfolio of diversified liquid investments creates a different proposition from £10m concentrated in the shares of one business.
Where property is involved, we can compare the Lombard facility with large mortgages, private-bank property lending and bridging rather than assuming securities-backed finance is automatically the best route.
The goal is to identify a facility that provides the required liquidity while preserving sufficient flexibility for the client's wider balance sheet.
How Much Could Your Investment Portfolio Support?
The answer cannot be determined from portfolio value alone. Asset composition, concentration, currency and lender methodology can materially change the borrowing capacity.
Willow Private Finance can compare Lombard lending propositions and assess how the facility would sit alongside your wider property and borrowing strategy.
Explore Lombard Lending →Frequently Asked Questions
Lombard LTVs are specific to the lender, the individual securities and the wider facility. These are the questions HNW borrowers most commonly ask when assessing portfolio-backed borrowing.
What LTV can I get on a Lombard loan?
There is no single Lombard LTV. The lender normally assigns different lending values to individual securities according to factors such as asset type, liquidity, volatility, currency and concentration. The overall borrowing capacity is then derived from the recognised collateral value of the portfolio.
Which investments normally support the highest Lombard LTVs?
Cash, high-quality government securities and other relatively stable liquid assets can generally support higher lending values than volatile equities, concentrated holdings or less liquid investments. Exact advance rates are lender and security specific.
Can a bank change the lending value of my investments after I borrow?
Potentially. Portfolio collateral can be monitored and revalued, and the recognised lending value of securities can change. Market movements, volatility, concentration, currency movements or changes to lender eligibility rules can therefore affect available collateral headroom.
What triggers a margin call on a Lombard loan?
A margin call can occur when the collateral supporting the facility is no longer sufficient under the lender's agreed terms. This can result from falling investment values, changes in recognised lending values, currency movements or other collateral adjustments. The borrower may then need to provide additional eligible assets, cash or reduce the borrowing.
Should I borrow the maximum Lombard LTV available?
The maximum available facility is not automatically the appropriate amount to draw. Borrowing materially below the maximum can provide additional headroom against market movements and reduce the likelihood that a temporary decline in collateral values creates an immediate requirement for remedial action.