Leveraged Equities Finance Limited
Level 21
157 Lambton Quay
PO Box 621
Wellington

Telephone 04 495 5013
Facsimile 04 495 5015
Toll Free 0800 MARGIN
  (0800 627 446)
Email email us

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Your email address must be registered with Leveraged Equities before we can despatch your Client Statement to you by email. If your email address is not registered, please contact Leveraged Equities on 0800 Margin (0800 627 446) or info@leveragedequities.co.nz.


A traditional wealth creation strategy used by New Zealand investors has been to gear into property (especially housing). Gearing simply means borrowing money to invest. Over time your investment has the potential to grow in value over and above the cost of borrowing.

Leveraged Equities applies this same principle and offers investors the means to gear by using money that you already have to invest and/or your existing portfolio plus a margin loan. Put simply, our money and your shares (or fixed interest securities) enable you to take advantage of investment opportunities as they arise.

The Margin Lending Facility is flexible. For example, you have the flexibility to decide what investments you make with the proceeds of the loan, when you draw down and repay the loan, how much you borrow (subject to the amount of credit we give you), and whether you pay interest on a periodic basis or have the interest capitalised and added to your loan.

Leveraging a portfolio of securities may significantly increase your return on investment over time.

For example A client has $30,000 to invest in Company ABC Limited. The following table illustrates how their leveraged portfolio can increase in value with different levels of gearing.

  Ungeared Geared (50%) Geared (70%)
Initial Investment $30,000 $30,000 $30,000
Margin Lending - $30,000 $70,000
Total Investment $30,000 $60,000 $100,000


Leveraged Equities lends up to a percentage of the market value of certain approved securities and this is known as the margin lending ratio or ‘MLR’. Different investments have different MLRs. To work out the maximum to which you can "purchase" the following formula is used:

By way of example, a deposit of $30,000 will enable you to purchase up to $100,000 of ABC Limited with a MLR of 70%.

If your deposit is in the form of cash, you borrow from Leveraged Equities up to $70,000 ($100,000 - $30,000).

If your deposit is in the form of shares, you borrow from Leveraged Equities the full $100,000.

Scenario 1 (10% Share Price Increase)

   Ungeared   Geared (50%)  Geared (70%)
 Initial Investment $30,000   $30,000   $30,000  
 Margin Lending -   $30,000   $70,000  
 Total Investment $30,000   $60,000   $100,000  
 10% Share Price Increase      
 Increase of 10% on total investment $3,000   $6,000   $10,000  
 Value of Investment $33,000   $66,000   $110,000  
 Return on Initial Equity ($30,000) 10%   20%   33%  


Scenario 2 (15% Share Price Increase)

   Ungeared  Geared (50%)  Geared (70%)
 Initial Investment $30,000   $30,000   $30,000  
 Margin Lending - $30,000   $70,000  
 Total Investment $30,000   $60,000   $100,000  
 15% Share Price Increase      
 Increase of 15% on total investment $4,500   $9,000   $15,000  
 Value of Investment $34,500   $69,000   $115,000  
 Return on Initial Equity ($30,000) 15%   30%   50%  


These examples illustrate capital growth only. Brokerage and interest charges are not included. Further, as security prices can go down (as well as up) losses may be magnified by gearing. Please refer to our Product Disclosure Statement (PDS) and Brochure, which outline the risks of using margin lending.

Another alternative is to transfer securities as the deposit (rather than cash) in order to borrow from Leveraged Equities.

In addition to potential gains in security prices, leveraging can increase earnings through dividends and income credits providing an income stream to offset interest charged to your margin lending facility.

What type of finance is available?
A margin lending facility with Leveraged Equities will allow you to draw down funds in New Zealand Dollars and Australian Dollars. This will allow you to participate directly in both New Zealand and Australian investment opportunities.

Loans are currently not available in U.S. Dollars or G.B. Pounds. However, you can participate in both United States and United Kingdom listed investment opportunities by contacting your broker to make such an investment. Your broker will then contact us to advise us of the amount required (in either New Zealand Dollars or Australian Dollars) in order to settle the purchase of the United States or United Kingdom Securities. We will then advance the applicable amount in either New Zealand Dollars or Australian Dollars to your broker to settle the purchase.
  
Generally, advances are made on a floating rate basis.

However, you may be able to elect to draw down some, or all, of your loan on a fixed rate basis. The minimum amount for a fixed rate advance and the funding period to which a fixed rate advance will be made can be found by contacting us.

Once you have decided what amount and funding period you choose for your fixed rate advance, we will advise you whether we are willing to make the advance, and the interest rate applicable. You must then confirm whether you accept that interest rate.

Securing your loan
The securities which you wish to borrow against or new investments you make will be held as security against your Margin Lending Facility. To do this ownership of the securities is transferred into the name of Leveraged Equities or our nominee. Upon repayment of any outstanding balances, ownership will be transferred back into your name at your request. You may sell any of these securities through your broker at any time. The proceeds will be credited to your account with Leveraged Equities.
 
Falls in the market value of the secured property may trigger a margin call. If you fail to meet your obligations under a margin call, we may sell some or all of the investments. Please refer to our Product Disclosure Statement (PDS) and Brochure, which discuss margin calls in more detail.

Securities held by Leveraged Equities are still available to participate in all dividend and interest payments.


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