Securities-Backed Lending – An Innovative Way to Leverage Your Investment Portfolio


London’s stock market has been showing positive momentum recently, with the FTSE 100 forecast to rise above 10,000 points by the end of March 2028. Despite very little growth in the last two years and previous fears about high inflation, now seemingly back under control, and recession risk declining, there are reasons to be optimistic about stock market performance. Whilst even after Brexit the FTSE remains a truly global trading index,  with over 80% of FTSE 100 sales stemming from overseas markets.

On the other side of the Atlantic the US stock market is considered by some to offer the best performance prospects over the next five years. According to Carson Group's global macro strategist Sonu Varghese, annual compounded returns of between 12% & 15% by 2028 are on the horizon. Underpinned by high levels of investor confidence given the U.S. Federal Reserve appears to have finished its recent rate-hiking cycle. A good predictor of potential market advancements. Analysts also predict the S&P 500 could surge by as much as 30% to reach 6,500 by the end of 2025 and similarly the NASDAQ, is expected to exceed 25,000 by 2032. Prospects are also encouraging for the Dow Jones which is also predicted to grow strongly, after ending on a closing high above 37,000 last year.

Other markets are also seeing a positive outlook. For example the Japanese equity market is forecast to rise about 13% to 2,650 by the end of 2024, boosted by solid global economic growth and stock market reform.


Encouraging – but what sectors are expected to perform particularly well?

The technology sector is an area seeing long-term growth due to continued advancements in Artificial Intelligence and Big Data. These gains have been spearheaded by the so-called Magnificent Seven. These are a group of high-performing and influential technology companies in the U.S. stock market, including Amazon, Tesla, and Apple, one of the most popular stocks on Wall Street.

Apple went public on 12th December 1980, at $22.00 per share. If you had invested $10,000 in Apple stock back in 1980, you would now be sitting on a substantial nest egg of over $14,000,000. It hasn’t all been plain sailing, however, with the company experiencing its fair share of poor trading performances over the years. On 29th September 2000, Apple shares saw their worst ever day, with a one-day drop of 51.89% to $13, from over $26 in the day prior, and it would be several years before they would make a recovery.

Whilst these turbulent periods can seem daunting, peaks and troughs are a natural part of market cycles, and often its those able to play a waiting game that often reap the greatest rewards. Afterall purchasing shares is often considered part of a classic long-term investment strategy. And looking ahead to 2029, Apple’s shares are predicted by some to trade at a whopping $445.

This sector though is not the only one expected to beat the norm. Certain types of stocks typically fare better than others during tougher economic times, including defensive sectors, gold, utilities, quality blue chip stocks, and real estate. The healthcare and consumer staples sectors are also predicted to continue to outperform in 2024 and beyond.

But stock market investments not only provide the potential for regular income and future returns. They can also be used as collateral to secure financing or other forms of capital, such as securities-backed lending. A strategy that many have yet to fully explore.


What is securities-backed lending?

Securities-backed lending is the practice of using stocks, shares, bonds, mutual funds, hedge funds, and other assets, including pre-IPO stock as collateral for a loan. These securities or investments are exchanged for a credit line from a lender, who uses them as collateral. You can use this credit line at any time during a pre-agreed period.


What are the benefits of securities-backed lending?

Securities-backed lending allows you to access cash or capital without having to sell your investments early. This means that you can access the funds you need, whilst avoiding a potential bill for capital gains tax. It’s also free of set-up fees, and often has a lower interest rate than other forms of credit such as high limit credit cards.

Securities-backed loans offer flexible repayment terms, so borrowers can structure their finances according to their wider goals and financial situation. It’s useful if you have urgent short-term financial needs, as the approval process is generally quite quick, with funds being available in a matter of days.

Simply put, it can help high-net-worth individuals raise the capital they need, without disturbing their investment portfolios. Surprisingly often those holding such securities are often unaware that they can be used in this way.


What can I use securities backed lending for?

Securities-backed lending offers an effective solution for a wide range of situations, such as managing unexpected expenses, paying for your children’s education, taking a dream holiday, renovating your home, or buying a new sports car. But often this form of lending is used to facilitate the purchase of a new home, second home, investment property or commercial property, with funds accessible in multiple currencies, ideal for international transactions.  It can also be used to take advantage of current market opportunities, such as investment opportunities or new business ventures. Whilst versus a traditional mortgage, securities-backed lending rates can be more competitive than what you’d see for mortgage, especially in light of the base rate moves we witnessed in 2023.


Anything else to consider?

Used strategically, securities-backed lending can be a win-win for both borrowers and lenders under the right circumstances. But for this type of specialist lending it will often be difficult to access the entire market via traditional or individual means. It’s therefore advisable to talk to a specialist broker who can take a holistic approach and make suitable recommendations based on your overall financial position.

At Enness for example, we have deep experience in this sector and are proud to be able to access a wide panel of private lenders. This is essential to source and create arrangements that are best tailored to meet a borrower’s individual needs. As with any type of borrowing of this nature your broker will also help you understand both the advantages and disadvantages of this type of borrowing. Another benefit of using a specialist to help.

Ultimately its important to know that, when you need funds such as for a property purchase, there are options to avoid a reluctant sale of precious investments. Helping individuals retain them in the long term, meaning they can continue to contribute to your future net worth.


The views and opinions expressed in this piece are those of the author and do not constitute advice or a recommendation. They do not necessarily reflect the official policy or position of Enness and are not intended to indicate any market or industry viewpoints or those of other industry professionals. The information in this article was relevant at the time of publishing. The stock market is continually changing; therefore, please do not rely on this article as a source of advice when making investment decisions. Enness does not give investment or securities advice and does not give advice on securities-back lending.