UBS: Why borrow if you’re already wealthy?

Written by: UBS Posted: 02/07/2019

CITY_UBS_Helen OllivroThe Financial Intermediaries (FIM) team at UBS Wealth Management in Jersey has been providing a dedicated offering to external asset managers (EAMs) for over 10 years. Rather than selecting borrowing as a strategy for emergencies only, we believe that investors can also deploy it as a tool to provide flexibility, enhance returns, and increase their ability to achieve financial goals. Helen Ollivro, Executive Director and Head of FIM at UBS Wealth Management in Jersey, gives an insight into Lombard lending solutions at UBS

What is a UBS Lombard loan?

A UBS Lombard loan is a lending facility offered against readily marketable assets that can provide a client with an attractive and flexible means of acquiring liquidity.

The maximum loan to value depends on the value of the securities in a client’s investment portfolio that are eligible as collateral for the loan. Most liquid assets can be used as collateral. 

A fully diversified equity portfolio can attract a lending value of up to 70%, whilst a diversified bond portfolio may have a lending value of up to 90% – subject to a number of different factors, such as volatility, market capitalisation, trading volumes and, in the case of bonds, credit rating, maturity and currency.

How does it work?

The EAM or the underlying client requests the loan facility and conditions of the loan (amount, tenor, currency, fixed or variable rate). The FIM team then reviews the portfolio and provides the EAM with the maximum loan to value and pricing. Upon acceptance of the terms, the FIM team issues the loan documentation to the client for acceptance and execution. 

Upon receipt of the executed documentation, the loan is established in the client’s records and it is available for drawdown.

What are the benefits?

– Available to private individuals, private investment companies, trusts and partnerships 
– Quick and simple access to liquidity 
– Ability to customise the loan to the client’s requirements – amount, tenor, rate (fixed or variable) and currency
– Loans available from a minimum borrowing of £100,000 (or currency equivalent)
– Single stock lending available

– Cost-effective procurement of additional funds without having to sell existing assets

– All costs clearly defined up front
– No arrangement fee or hidden costs
– No non-utilisation fee

– Vanilla loans up to CHF 5 million (or currency equivalent) can be approved with the documentation ready to sign within 24 hours of receipt of all required information.

Why might I borrow? 
Capital expenditure
– Liquidity for a capital outlay (for example, property, boat, plane, business purchase) without having to sell existing assets
– Mitigate the risk of triggering a potential taxable capital gain and incurring transaction costs

Increase diversification
– Decrease concentration risk 
– Decrease correlation 
– Improve risk adjusted returns

– Increase return potential 

Tax planning
– Borrowing strategies may confer tax advantages in estate planning

With interest rates in many major currencies at historical lows, UBS lending solutions can be an attractive means of leveraging your portfolio.

What needs to be considered?

1. The custody of the assets must be provided by UBS Wealth Management Jersey.
2. The client has sufficient collateral for the loan to be approved.
3. The client has sufficient liquidity to meet margin calls if the value of the underlying collateral falls due to 
market movements.
4. In the case of a corporate vehicle, it 
has authority to borrow.

Some investors may avoid borrowing, viewing it as a sign of living beyond one’s means. While borrowing does come with costs and risks, all of which need to be appreciated, it can also represent an often overlooked opportunity. We believe borrowing should be considered as part of a sensible financial strategy. 

Find out more
Helen Ollivro, Head of Financial Intermediaries Jersey 
1, IFC
St Helier
Jersey JE2 3BX
01534 701031

UBS AG, Jersey Branch is authorised and regulated by the Jersey Financial Services Commission for the conduct of banking, funds and investment business. UBS AG, Jersey Branch is a branch of UBS AG (a public company limited by shares, incorporated in Switzerland whose registered offices are at Aeschenvorstadt 1, CH-4051, Basel and Bahnhofstrasse 45, CH-8001 Zurich) (“UBS”) with its principal place of business at 1 IFC Jersey, St Helier, Jersey JE2 3BX. Terms and Conditions are available upon request. © UBS 2019. All rights reserved.

• This advertising feature was first published in the 2019 City Edition of Businesslife magazine

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