Diversify Into a Good Investment, and Have Two Asset Classes Working for You

How Can HedgeLender Help?

A HedgeLender securities loan can produce the cash needed to take advantage of opportunities in non-marginable investments, thereby putting two separate sets of assets to work.

John's licensed financial advisor identified a high yield investment (HYI) with an anticipated yield of 17%, and after further research, recommended it as a good investment for John. He needed cash - but didn't want to liquidate his entire position and lose all rights to any future growth in a portfolio that he felt had good future prospects. The portfolio was temporarily down in value, too, below what he paid for them. He'd planned on waiting until prices recovered, but really wanted to take advantage of his advisor's recommended investment right now, before the window closed. A conventional outright sale seemed to be the only choice he had. Or so he thought.

HedgeLender's Suggestion: John obtained a 70% loan-to-value HedgeLoan at 85% and 4.35% (floating LIBOR +2). He put his 85% of today's portfolio value, into his higher yielding investment, while maintaining an upside of 100% of his stock's prospects thanks to a securities-backed loan strcutured with no limits on the portfolio's growth while serving as collateral for the loan. If the HYI he chose performs as expected under this scenario, John could meet his objectives.

Behind the Numbers:

Analysis:

We assume a $1MM portfolio and a Premier institutional HedgeLoan at 4.35% interest. His higher yielding investment returns both principal and accrued interest by end of loan term. There is a 3 year maturity for both his securities loan and his investment as he carefully mates both.

Because John's investment generates more return than the debt service of the loan, he could in theory realize a positive cash flow as he goes (remember, dividends are paid directly to the borrower from the collateral securities portfolio as dividends are earned). Securities including mutual funds, Treasury bills, and municipal bonds could also be used.

The value of this plan would depend on many factors that cannot be foreseen, of courfse, and the plan itself should be vetted by your licensed financial advisor beforehand. But should your collateral portfolio rise in value along with your investment, you would essentially have two asset classes working for you in a positive manner, simultaneously.

With this suggestion you would still retain the growth potential of your stocks or other securities. If your portfolio delivered even moderate returns you could be ahead of the game - all without having to take out your checkbook!