BT sees renewed interest in geared equity investing

BT has announced two new equity lending products which it says are in response to renewed interest from investors in geared equity exposure.

Since the global financial crisis (GFC), investors have been deleveraging moving from equities to less risky products, but that trend is starting to reverse - particularly among high net worth investors, said Cathy Kovacs, head of gearing and investment solutions, equities at BT Financial Group.

It is important to understand what went wrong during the GFC, and if people borrowed more than they could afford and were relying on interest payments or other sources of income to pay off their investments, that created a higher level of risk, Kovacs said.

For example, if people borrowed heavily to buy one stock with no diversification that was problematic, but overall gearing levels are lower now - less than 50 per cent across BT's margin lending portfolio, she said.

The advice piece is also important because investors need to get the asset allocation right and have a long-term view. Gearing may help them achieve their goals, and it can be at a modest level rather than being 100 per cent geared, she said.

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Investors are far more risk aware and cost conscious now, and some want a more conservative investment strategy and the ability to proactively reduce some risk, she said.

The BT professional investment loans are designed for investors wanting to invest in a diversified managed portfolio over the medium term, and features no margin calls during the life of the loan.

BT has also relaunched the Westpac protected equity loan, which is designed for more sophisticated investors who want to pick their stocks and has a menu of more than 50 ASX-listed securities to choose from.

It is available for self-managed super funds and allows investors to borrow up to 100 per cent of the initial market price of the securities with the borrowed amount capital protected at the loan's maturity, Kovacs said.