Lombard lending versus NAV lending: which fits a family office

Lombard lending and NAV lending both let a family office borrow against investments it would rather not sell, but they are built for different collateral. A Lombard loan is a private bank credit line secured on listed securities held in custody with the bank, priced tightly and callable at short notice. A NAV loan is a term facility secured on the net asset value of a portfolio of private fund interests and direct holdings, with a lower advance rate, a higher margin and a longer tenor. The choice follows from what the office owns and how long it needs the money.

What private banks lend against

Lombard lending is standard across Swiss and international private banks. The collateral is a portfolio of marketable securities, and the bank sets a lending value for each line by reference to the type, currency, quality, volatility and marketability of the security. UBS's Lombard loan factsheet describes eligible collateral as marketable assets such as shares, bonds or investment funds, offers either a current account facility with no fixed term or a fixed advance of up to 24 months from CHF 100,000, and reviews lending values at regular intervals.

Advance rates on listed collateral are high. Piguet Galland's Lombard loan guide quotes a loan to value of up to 60% on a diversified equity portfolio, up to 90% on high-quality bonds and up to 95% on cash, with investment funds and structured products assessed individually.

The margin call is the defining feature. If the pledged securities fall and the drawn amount exceeds the aggregate lending value, the borrower must add collateral or repay. If that is not done in time, the bank may restructure or liquidate the portfolio, and a balance may remain owing after liquidation. There is no cure period measured in months, and the test is continuous.

Why private fund interests are hard for banks

Three features of a limited partnership interest make it poor Lombard collateral. There is no daily price: the value is the GP's quarterly mark, reported weeks after the quarter end. The interest cannot be sold on an exchange, and most fund documents require GP consent to any transfer, so a bank cannot easily enforce a pledge. And the interest carries an unfunded commitment, which means the collateral can demand cash from its owner.

Banks therefore either exclude private interests from the lending value or assign them a nominal one. UBS's 2026 Global Family Office Report, summarised by Caproasia, found that 65% of offices used leverage, with 24% using margin loans or credit lines and 25% using portfolio-level leverage, which shows both routes in use across the same population. With alternatives at 42% of the average portfolio in the same survey, a large share of family office assets sits outside the Lombard perimeter.

How NAV lending fills the gap

NAV lenders accept the features that banks reject and price for them. The facility is made to a holding vehicle that owns the portfolio, secured on the vehicle's equity and the account receiving distributions rather than on each LP interest. The advance rate is set against eligible value, a defined subset of reported NAV, and is a fraction of what a bank advances against bonds. The tenor is measured in years, repayment comes from distributions through a cash sweep, and breaches of the LTV covenant are followed by a cure period rather than immediate liquidation.

The price of that flexibility is visible in the margin. Rede Partners' NAV Financing Report 2025 recorded weighted average margins of 5.2% for secured facilities and 6.6% for recourse-light ones, with most deals between 4% and 7% over the reference rate. Lombard pricing is not published in the same way, but it is set against money market rates with a bank margin and is lower by some distance. The NAV loans explainer covers structure and cost in more depth, and the covenants article explains how LTV triggers behave in a downturn.

When each fits

A Lombard line fits an office with a substantial listed portfolio and a short, predictable need: bridging a tax payment, funding a capital call that a distribution will cover within months, or avoiding a sale in a weak market. Its risk is the margin call arriving in the same drawdown that created the need, so the prudent use is well below the maximum lending value.

A NAV loan fits an office whose liquid assets are already committed or thin relative to its private book, and whose need runs for several years. The slower process, the covenant package and the higher margin are the cost of borrowing against assets that have no market price. Where the office holds both kinds of asset, the usual sequence is to exhaust cheap Lombard capacity first, keep a buffer against a margin call, and only then consider a NAV facility sized to the stressed case.

Neither product changes the underlying question, which is whether the office should hold the asset at all. Where the answer is no, a sale at the prices described in the secondaries coverage may be cheaper than either loan.