Liberty Financial and NZ Finance leaders go head to head

Sherman Ma and John Callaghan

Sherman Ma

* Position: Founder, managing director, Liberty Financial.
* Age: 33
* Lives: Los Angeles, Las Vegas, Australia and elsewhere.
* Family: "I'm not married. I'm too busy. It wouldn't be fair."
* Interests: Basketball, golf, music, U2. He came to Auckland for the concert, subsequently cancelled.
* Educated: Won a place at Stanford University but rejected that for University of Pennsylvania.
* 1992: Joined Credit Suisse First Boston, Wall St.
* Returned to university at Wharton School, graduating with MBA, first-class honours, engineering and economics.
* 1994: Joined McKinsey as consultant to US, British and European financial institutions and banks.
* Working for McKinsey clients in Australia tempted him to shift there.
* January 1997: Founded Liberty Financial, which now has 340 staff in Australia and 20 in New Zealand.


Speaking with an amiable American accent, Sherman Ma is wide-eyed and passionate about a U2 track from the Rattle and Hum album.

God Part II is his favourite song from the Irish band, taking a crack at money and business. Ma can rattle off the lyrics easily.

Don't believe in excess
Success is to give
Don't believe in riches
But you should see where I live
I ... I believe in love

This track gets a walloping on Ma's iPod. He loves it for its satire, parody, sarcasm, for the joke. He really gets Bono's jest against money and wealth.

Running an Australian and New Zealand business with a loans book of "maybe $A10 billion, no ... say A$8 billion", Ma can afford to jape at money.

Explaining where he lives is a more challenging task. Not Melbourne, where his Liberty Finance is based on Bourke St; nor Sydney, where it has a large office. Not Los Angeles, where his parents, Ted and Serena, live and where he has other business interests. Not Asia, where his family came from - originally Beijing, then Taipei.

"I live all over," says the businessman, once a Wall St dealer who ran with the bulls of the early 1990s. "But I rent quite a few places."

For this week, he has been in Auckland. Whether it was his ticket for the now-cancelled U2 concert or a desire to buy a blocking stake in Mike Pero Mortgages, Ma is also relatively casual about what brought him here.

One thing he is certain of: He has A$100 million looking for a home and some of it could be ploughed into Mike Pero. Liberty's 19.9 per cent stake in the mortgage-broking business controlled by New Zealand Finance is an opportunity for the two companies to really expand Mike Pero, he believes.

As for ironing out an agreement with Pero's majority shareholder, Ma says none has been reached.

"We want an amplification of what Mike Pero does well. We want that business to be successful and outperform our competitors. With NZ Finance, we're going to form a much better partnership by working together."

He also praises NZ Finance founder and managing director John Callaghan for spotting the Pero opportunity. "You've got to hand it to the guy. He got there first and he holds all the cards."

Ma had humble beginnings as the son of migrant parents trying to fit into the United States during the 1970s. Serena was a self-employed real estate agent and broker and Ted was a home-furnishings buying director.

Ma's worst memory is of the reaction of southern Americans upon hearing his parents speak in their native tongue when the family lived in Jackson, Mississippi. "You could just feel the reactions, the racism," he recalls.

His grandparents had fled Beijing for Taipei around 1949 but it was Ted and Serena who moved to the US to study. Ma was born in Portland, but his parents moved to Tennessee and Boston before settling around Los Angeles. Ma went to Rowland High School, LA.

When he was 14 and a Dungeons and Dragons fan, he invented a dial-in electronic bulletin board which enabled teenagers to play electronic games against one another.

That first business, Pit of Pandemonium, drew dozens of keen players in a few weeks, each contributing US$10.

Ma draws parallels between that first venture and his business today, saying many of the ideas from his teens have been translated into information technology advances at Liberty, a pioneer in the "non-conforming" loans sector.

The firm trailblazed lending to those who did not conform to the guidelines of traditional lenders, charging slightly higher rates to those suffering from divorce, illness, broken work records or poor credit history. It established an Auckland office in 2001.

One of Ma's biggest satisfactions was pioneering 110 per cent mortgages and lending to wealthy people. "Our biggest loan so far in New Zealand was for a house and it was for $4 million."


John Alan Callaghan

* Position: Managing director, New Zealand Finance.
* Responsibilities: Group strategic development, marketing, credit approval.
* Age: 37.
* Lives: Mt Eden, new house.
* Family: Wife, Jackie, sons Sam, 4, and Sean, 2.
* Interests: Boating, fishing, the Blues, favourite player: Justin Collins.
* Educated: Whangarei Boys High School.
* Tertiary: Bachelor of Business Studies, Massey University, Palmerston North.
* Career: Almost two decades in banking and finance.
* Early 1990s: joined Bank of New Zealand's business banking unit, Auckland.
* Then moved to BNZ's marketing division, Wellington.
* Mid-1990s: Joined ASB Bank, credit assessment, residential/commercial lending.
* 1997: Founded NZ Finance whose logo is "creating wealth, fostering growth".
* October, 2004: Listed NZ Finance on NZX at 30c a share.
* NZ Finance shares now trading around $1.25.


Never buy a car for more than $10,000. Never buy a flashy boat - charter one instead. Live close to work. Buy the newest house you can afford. And if you have money, don't flash it.

Rules of John Callaghan, an understated Kiwi joker, Blues fan and patriot from Whangarei, who works from a somewhat cheerless floor six of NZ Finance House at 52 Swanson St and proudly emblazons the silver fern on his company's logo.

As for those flashy cars or boats. "Those things cost $400,000 to $500,000 a year to look after," he says, gesturing towards cruisers at Westhaven Marina. "If you only go out on it four or five times a year, why would you want to own one that sits down there?"

When Callaghan wants to take a boat out on the Waitemata, he charters it.

There speaks the cautious credit controller. Could Callaghan be a somewhat mean millionaire?

"The rule about the car was one I had growing up - cars are just to get you from A to B," says the son of a Whangarei boat builder, adding that a Toyota Corolla is a favourite. "I don't like the idea of being flashy."

Despite his self-denial and determination, Callaghan's business ambitions have not always clicked.

His NZ Finance was in the midst of a $26.3 million takeover for Mike Pero Mortgages when, late last week, rival Liberty Financial from Australia made a stand in the market to increase its holding above the 10.1 per cent it took in February and block him.

Liberty now holds 19.9 per cent and, on Tuesday, Callaghan was meeting Sherman Ma, Liberty's managing director, to iron out a plan together. Speculation is that Ma wants a seat on the Mike Pero board. After the meeting, Ma said he had A$100 million ($115 million) looking for a home and wanted to strengthen Mike Pero.

Liberty was no stranger to NZ Finance when it blocked the takeover. It already sells its mortgages through Mike Pero and through New Zealand Finance's mortgage broking arms, New Zealand Mortgage Finance and Approved Mortgage Brokers, which together have 42 outlets.

Callaghan says Liberty's stand is one of the worst moments of his life.

"My objective was to do a takeover of Mike Pero and get 100 per cent and now I have got a situation where we are still in a controlling position but I didn't achieve what I set out to do."

Christchurch-based, NZX-listed Mike Pero, established 13 years ago now claims to be the country's largest home-mortgage financier. It wrote $7 billion in loans from 1990 to 2003. Chief executive Jeff Staniland anticipates writing a further $3 billion in the latest three-year term. Gould Holdings bought the company in March 2004 and floated it two months later.

As a student, Callaghan shifted from Whangarei to Palmerston North to study at Massey University and escape the tempting beach culture.

"I wanted to go to a university where I would not be distracted - call it a strange philosophy," he says, somewhat apologetically.

As for where he lives today, a new house in Mt Eden suits his young family, and Callaghan says it only takes him five minutes to drive to work.

He beats the rush hour by getting to work about 7am.

Callaghan owns 24 per cent of the company he founded nine years ago. NZ Finance has a market capitalisation of $92 million and is one of the largest broking businesses in the $120 billion mortgage sector - and one of its more admired, having been rated as one of the country's top companies for its return on assets last year.

NZ Finance owns 74 per cent of Mike Pero Mortgages, with a market capitalisation of $26 million.

So could Callaghan's net wealth be around the $20 million mark?

"It's all paper," he says, moving uncomfortably in the chair.

NZ Finance has a large chunk of the growing mortgage broking businesses. Mike Pero has 94 mortgage brokers and loan writers, giving Callaghan control of 150 franchised mortgage brokers and loan writers.

So the car he drives now: "A Ford Falcon - gets me from A to B."