Could the lack of new listings on NZX be as simple as New Zealand not having enough traditional stock-broking and merchant banking firms?
The capital markets review's report mentions the issue: "Each of the five primary retail NZX firms has moved from broking models to wealth management models with a concentration on asset allocation and portfolio construction," it says.
"This has been beneficial for those who get this advice and service but has been at the cost of smaller-cap companies and those not covered by research," it says.
"Direct individual participation in the market has declined with only a few participants serving the smaller direct investor."
The numbers are startling. NZX's website still lists JBWere as a broker but New Zealand equities manager Rickey Ward says his firm does no broking these days and hasn't for more than a decade.
"We consider ourselves to be a wealth manager," Ward says. The firm doesn't have funds under management in the traditional sense either but concentrates on compiling individualised portfolios.
Its funds under advice have risen from about $8 billion 10 years ago to about $18 billion now.
"Too many people do commoditised offerings. That's good for KiwiSaver" but it's not good enough for JBWere's clients.
"The more money you have, the more likely it is that you're going to want to have a say in how it's invested," Ward says.
It's a similar story at Craigs Investment Partners, which has $19.2 billion in funds directly under management, not counting money managed by affiliates or its custodial services, says head of wealth research Mark Lister.
"We don't think of ourselves as a broker anymore and we haven't for decades," Lister says.
Craigs does still offer share broking services as well, though.
Jarden, formerly First NZ Capital, has $12.5 billion in funds under management, advice and custodial services, including Harbour Asset Management of which it owns 76.3 per cent. FundSource figures show Harbour had $7.7 billion in funds under management at June 30.
Forsyth Barr has about $10 billion in "fee-paying" funds under management but "if you took the funds under advice, you could more than double that figure," says managing director Neil Paviour-Smith.
"It depends on what services the client is receiving. It's definitely a big and growing in importance part of the broking business. Over time, typically our clients have wanted to consolidate their investments into one portfolio and receive advice on a holistic basis," he says.
As well as the traditional stocks business, such advice now includes fixed interest and international stocks, managed funds and other securities.
"The traditional NZX firms have developed the relationships they probably already had with people who had money," Paviour-Smith says, adding that he expects that side of the business will continue to grow.
Hobson Wealth Partners, which morphed from Macquarie Equities and the latter still retains a stake but doesn't control Hobson, has a little over $3 billion in funds under management but still does "broking/transactional" business as well, says managing director Warren Couillault.
Could this newfound emphasis on funds management be the reason why so few firms are willing to take risks?
Certainly, the routine underwriting of equity issues by already listed companies, even when it's blindingly obvious that the share sale will be rushed by eager shareholders, suggests a risk-averse attitude among merchant bankers.
A number of recent issuers have told BusinessDesk they were going to be charged the same fees in any case so they might as well accept underwriting.
The report says there are investment dollars available but a lack of sizable companies willing to come to market as well as a lack of capital available to invest in smaller companies.
"We received feedback that listings of companies with likely market capitalisations less than about $100 million receive little support from traditional brokers and investment banks who seem less willing to support or sponsor such smaller-scale listings," it says.
"New Zealand has experienced a significant consolidation in the number of brokers and investment banks capable of acting as lead manager to an issue."
It says there are about half a dozen firms remaining that will handle initial public offerings but many won't handle smaller companies.
"A small IPO can take as much resource as a larger IPO but earns less. They can also be less certain with regard to completion and arguably riskier to sponsor. In short, the opportunity cost of an investment bank undertaking a small IPO can be quite large."