Gearing shares for good returns

Sharebroking firm Forsyth Barr is moving into the margin lending business by acquiring the firm Leveraged Equities from JP Morgan for an undisclosed amount.

Margin lending (or gearing up shares) isn't widespread in New Zealand with just a handful of players including JB Were, ASB Securities and Fulcrum Securities, active in the market.

However, it is big business in Australia, and Forsyth Barr managing director Neil Paviour-Smith expects it will grow in New Zealand.

"It's something that increasing numbers of people are looking at," he says.

Although margin lending is a new operation for Forsyth Barr, Leveraged Equities is complimentary to the existing operations, Paviour-Smith says.

"It gives those with wealth the opportunity to gear up. This is really no different to what they do in housing."

Paviour-Smith says the company wants to offer a margin lending service to advisers, other than those who work for Forsyth Barr.

Leveraged Equities will be set up in a way which will make it independent from Forsyth Barr with its own offices and own staff, he says.

Also it will pay a trail commission to advisers who use the service.

Currently the Leveraged Equities only lends on New Zealand shares, but it is looking at offering services with Australian listed shares, and even managed funds.

While the price of the deal hasn't been disclosed, Paviour-Smith describes it as "very attractive."

Leveraged Equities has been in operation under the previous owners since 1994 and has a receivables book of over $20 million.

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