How the facility works
The registrar marks a lien on the units in favour of the lender; the units stay in your name, continue to be invested, and continue to accrue returns. The lender opens an overdraft or demand loan against that lien, and interest is charged only on the amount drawn.
Because nothing is sold, there is no capital-gains event and no exit from the allocation. Repayment lifts the lien and the pledge is released.
Advance rates by scheme type
Loan-to-value depends entirely on the volatility of the underlying scheme. Debt and liquid funds attract the highest advance rates; equity schemes attract materially lower ones, and sectoral or thematic funds lower still.
- Liquid and overnight funds — the highest advance rates available, often with the finest pricing
- Short-duration and corporate bond funds — high advance rates, stable margin behaviour
- Diversified equity and index funds — mid-range advance rates, with a defined top-up trigger
- Sectoral, thematic and small-cap funds — lowest advance rates; several lenders exclude them
Margin calls: the term that actually matters
Every facility carries a threshold at which the lender requires a top-up in cash or additional units. The rate is negotiable; the trigger, the cure period and the lender's right to sell without instruction are what determine how the facility behaves in a falling market.
We compare offers on those clauses first. A facility fifty basis points cheaper with a two-day cure period is usually the worse instrument for a concentrated equity portfolio.
Typical uses at this ticket size
Bridging a property purchase ahead of a planned sale, funding an option exercise or tax outflow, meeting a capital call at a fund, or holding an allocation intact through a period of personal liquidity need.
Common questions
Do I have to redeem my mutual fund units to borrow against them?
No. A lien is marked on the units in favour of the lender. The units remain invested in your name and continue to earn returns; there is no redemption and therefore no capital-gains event.
How much can I borrow against a mutual fund portfolio?
Advance rates depend on scheme type. Debt and liquid funds support the highest loan-to-value; diversified equity schemes support materially less; sectoral and small-cap schemes the least, and some lenders exclude them entirely.
What happens if the market falls after I draw the loan?
If portfolio value falls below the agreed threshold, the lender issues a margin call requiring a top-up in cash or additional units within a defined cure period. The size of the trigger and the length of that period are negotiable and should be compared before rate.
Every facility described here is arranged case by case, across our full range of mandates and using the desk process. A first conversation is confidential and carries no obligation.
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