Margin lending allows you to borrow money to invest, by using your existing shares, managed funds or cash as security.

Margin lending allows you to borrow money to invest, by using your existing shares, managed funds or cash as security.

How it works

Margin lending enables you to borrow money to invest. Using your existing investments as security, you are able to borrow to fund additional investments. (It’s also known as gearing – borrowing money to invest).

One of the most common wealth creation strategies of New Zealand investors has been to gear into property (especially housing). Investors have borrowed money to invest, recognising that over time their investment has the potential to grow in value over and above the cost of borrowing.

The Leveraged Equities service operates in the same way. We offer investors the opportunity to gear by providing a margin loan using their existing shares or fixed interest investments as security. This provides investors the flexibility to take advantage of investment opportunities without the need to sell assets.

Leveraging also creates the opportunity to increase your level of investment – whether that is by holding higher volumes of shares or by investing more broadly.

Margin lending in action

*Different investments have different MLRs (margin lending ratio). Find out more here.

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.

Margin lending ratios

You can borrow up to a percentage of the market value of an approved security - this is known as the margin lending ratio (MLR). To find up-to-date lists of approved securities that Leveraged Equities lend against and their lending ratios, please view our margin lending ratios documents.

Benefits of margin lending

Diversify your portfolio

This is a key strategy to reduce investment risk. Leveraging your portfolio can enable you to invest across a broader range of assets, achieving more balance, potentially reducing risk and increasing returns.

Increased investment potential

Leveraging your portfolio can increase your investment potential by allowing you to purchase more shares or invest in higher-value assets with the same amount of capital.

Access your equity

When an investment opportunity arises you may not always wish to sell your current investments. With the margin lending you can borrow against your existing securities without needing to sell them.

Flexibility through leverage

Leveraging your portfolio offers greater flexibility in managing investments, as you can adjust your holdings more easily and quickly in response to market changes or other factors.

Potential income tax deductibility 

Interest may be tax deductible provided the funds are used for taxable income generating purposes. Your taxation advisor may be able to assist you and we recommend you seek their advice.

Potential risks of margin lending

Changes to the value of your investments

Investments can fluctuate due to various market conditions and economic events, resulting in larger gains or losses. The risk can be reduced through regular monitoring, diversification, and setting a long-term investment strategy.

Changes to interest rate

The interest rate on margin lending can change over time, increasing the cost of borrowing and potentially reducing returns. The risk can be managed by diversifying investments across different asset classes and maintaining adequate collateral.

Margin call risk

If the value of the assets falls below a certain level, it can trigger a margin call. This requires the loan to be paid down or collateral to be provided. By setting a gearing level below the maximum ratio, this can reduce the risk of receiving a margin call.

Find out more about what we have to offer

Our expertise and guidance will help you understand how margin lending can work for you.

Connect with our experienced professionals

To learn more about how we can help, please contact the Leveraged Equities team.