New Zealand's capital markets and those in them need a wake-up call.
Fuelled by a growing pool of KiwiSaver funds, our markets have the potential to embark on a growth journey spanning the next 10 to 15 years.
This will provide capital to grow New Zealand businesses, attractive investment opportunities for KiwiSavers and investors, create high value jobs and improve our nation's productivity.
This is our big chance to recapture the opportunity lost when New Zealand did not emulate the savings policy instituted by Australia in 1992 that ultimately created the fifth largest capital market in the world today.
Current state of play
Markets are networks that rely on participants working together to be effective.
In the past few years we have started to witness the results of co-ordinated efforts over many years by NZX, market participants and government, to rebuild our capital markets.
It has been tremendous to see growth in scale, liquidity and valuations (no longer lagging other markets) for NZX listed businesses; strong primary issuance and large secondary placements completed with confidence by issuers, sellers and market participants, often overnight.
We are starting to see the benefits: 18 high growth businesses have raised more than $1.6 billion in growth capital over the past three years.
NZX has a role to play to ensure we continue this progress, but clear direction and commitment is needed from everyone involved to build and grow our markets to their full potential.
Unfortunately there are worrying signs we are starting to lose momentum.
Loss of momentum
The clearest sign of this is the lacklustre number of IPOs this year. We have had similar market conditions to Australia but will only have four IPOs in 2015 compared to around 40 on ASX. Adjusted for market size, New Zealand should have had six to eight this year.
This is not for the lack of companies looking for capital; New Zealand has hundreds of high quality businesses that have tremendous growth potential.
One of the issues is that parts of our funds management community seem unwilling to research and invest in smaller New Zealand companies - a position at odds with their Australian counterparts.
New Zealand fund managers seem in many cases to be content passively managing KiwiSaver funds at high margins.
Recent KiwiSaver analysis by Treasury highlighted fee levels are in the upper third of comparable countries. More worrying, the portfolio of assets in KiwiSaver is heavily weighted toward income assets (debt products) relative to growth assets, compared to other similar schemes.
Left to continue like this, there will be lower retirement incomes for KiwiSavers, and less growth capital available for businesses.
This lack of interest by investors has led to some New Zealand companies bypassing our markets to raise money elsewhere, where willing investors are prepared to invest.
Resistance to change
Despite views to the contrary, the reality is that raising capital on NZX is cheaper than via ASX, private equity, venture capital, or crowd funding.
There are substantial benefits from listing: a market value for the business, easier access to additional capital, increased customer and supplier confidence, and employee ownership.
This year NZX launched NXT, an innovative, world-class market aiming to lower the cost of listing for smaller, higher growth companies.
But rather than embracing this new market, some seem ready to rally against it before it even gets momentum.
It highlights the disappointing "glass half empty" approach parts of our financial community take to business development and change in New Zealand.
As an important shaper of public opinion, the media can amplify this negativity by allowing unnamed sources to deride business people and ideas, or hide behind anonymous comments, which can be genuinely damaging.
Building markets takes time and commitment: NZX's success in dairy derivatives, five years after its launch, is an example of the time and effort required.
Where to from here
As we continue to develop our markets, we need to work together, recognising New Zealand is a small country and our market structures need to reflect this.
We needed improved regulation post the GFC and finance company collapses.
But we must be careful increasing compliance costs of this new regime doesn't force brokers or advisers out of our market, or inhibit development of smaller fund managers. Unfortunately, we are seeing signs of both already.
There are positive signs, however. The review of the financial adviser regime underway is a valuable opportunity for government and industry to work together to ensure New Zealanders get access to useful financial advice and ensure appropriate investment of savings.
NZX wants lead a genuine, renewed focus on New Zealand's future market development and direction. We want to encourage a mindset change and inspire industry commitment to our markets.
2016 is the year for us to work together more effectively towards a common direction that will benefit generations of New Zealanders to come.
Tim Bennett is chief executive of the NZX.