Originally Posted by
Dassets
Hi Balance, I was going to post this yesterday but waivered.
It will be very hard for institutions to get "interested" basically firstly due to the efforts of the FMA to level the playing field in terms of information availability to all types of investors and secondly the inability of brokers to advise on non-researched companies. Dealing with the later first unless the institution has and wants to use proper analysts to do full analysis. Frankly a lot don't have the resource and if they do unlikely to be used on a small cap. The funds management industry has moved away from that capability at this end of town. And brokers basically don't cover it to a level the institutions could get comfortable. The brokers cover is very light touch. So it is pretty much impossible for a portfolio manager to go to the investment committee to pitch the idea and get sign-off. Every conversation a broker has with a client especially those that lead to an order need to be detailed in the client's account through whatever the CRM the broker is using or other method. This is reviewed by internal compliance and, I guess, external when the NZX comes for its audit of the firm.
The FMA's efforts has led to an information vacuum because companies are loath to say boo outside of formal briefings such as the one this week or HY and FY reportings/ Annual report. What this has done is resulted in a massive imbalance, precisely what the FMA was trying to avoid. Why? Because sophisticated large private investors can have a field day. What the FMA failed to realise is there are other sources of information outside the company. Most private investors do not have the knowledge or access to these sources or even the time. I was going to try to make a submission when some sort of consultation was open but I have got to the point where I think it would be a waste of effort.
In summary this one will be up to large private investors or corporates. The private investors will have to flex some muscle at some point and you have to be careful with that so you can't be deemed to act in concert.