Vest Unveils Synthetic Borrow™ for Portfolio-Based Financing Through Derivatives

Vest today introduced its new offering, Synthetic Borrow™, a portfolio-based financing mechanism using listed derivatives to give advisors and their clients access to upfront liquidity all without selling securities.

The platform is designed to help clients tap into the value of their existing portfolios through fixed-term, institutional-grade financing delivered via a digital investment interface. Leading the initiative, Vest emphasises that clients can bypass traditional bank lending, credit checks and pledging requirements.

How Synthetic Borrow™ Works

• Clients select a portion of their equity portfolio and use Vest’s platform to generate sample borrowing terms instantly showing indicative rates and durations. No banks or margin lines are required.
• The financing is achieved via a derivatives strategy (e.g., short box spreads) that mimics borrowing: the client receives upfront cash in exchange for a fixed payoff in the future.
• Borrowers remain fully invested in their portfolio rather than liquidating assets while gaining access to capital and avoiding floating-rate or variable-loan structures.

Why This Matters for Financial Advisors and Investors

• Novel approach to liquidity: Synthetic Borrow introduces a fresh alternative to pledged-asset lines or direct loans, enabling access to capital without selling core assets.
• Fixed-rate clarity: By locking in a fixed implied borrowing cost via derivatives, investors avoid the variable-rate uncertainty that comes with many credit lines.
• Efficiency and speed: The platform enables sample terms in seconds and reduces operational friction for advisors, supporting quicker client decisions.
• Portfolio continuity: Because the investor’s assets remain invested and active, they maintain upside participation while accessing liquidity.
• Market differentiation: For advisors, offering a derivatives-based financing option can position their practice further down the path of innovation and client service expansion.

Key Considerations

• Derivatives exposure and margin: While the strategy avoids traditional loan structures, it introduces option-strategy risks (e.g., liquidity of box spreads, margin requirements) which must be understood.
• Collateral and account requirements: The portfolio must meet standards for derivatives usage and may involve margin accounts or trade execution costs.
• Regulatory and tax implications: Because the approach uses options and derivative contracts, tax treatment and borrower suitability must be assessed carefully.
• Suitability and scale: This product is likely best suited for high-net-worth or advisor-managed portfolios rather than smaller retail accounts; advisors should assess fit.
• Operational readiness: Implementation will require advisor education and client communications about how Synthetic Borrow differs from standard credit products.



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