Additional key findings of the 2015 report include:
- Korea received an A this year because of its improved sales practices, up from a B+ in 2013, and is the only other country aside from the U.S. to achieve the top grade.
- The U.S. garnered the highest score for the fourth time with a top grade of A. While the U.S. boasts relatively low expenses and strong disclosure, its ‘Sales and Media’ category grade is average.
- The Netherlands rose to an A- grade in 2015, compared with a B in 2013, improving in the areas of ‘Fees and Expenses’ and ‘Sales and Media’ assisted by a newly implemented ban on advisor commissions.
- Finland received an average grade of B-, reflecting consistent practices that have developed from pan-European regulations.
- China received the lowest grade of a D+ because of high fees, limitations on overseas investing, and restrictions on foreign-domiciled funds.
(In its 2013 report, Morningstar inadvertently used incorrect expense data for Chinese funds. Morningstar corrected the data in the 2015 report, which lowered China’s grade for the Fees and Expenses category and was the primary factor in the drop of China’s overall grade from B- to D+.)
- Since the 2013 study, regulators in New Zealand introduced semiannual portfolio holdings disclosure, while Thailand plans to move from semiannual to quarterly disclosure. Australia is now the only market that does not implement portfolio holdings disclosure requirements. The global fund industry is generally ahead of regulatory requirements, with monthly holdings releases becoming common.
- Nearly every market has enacted new or updated regulations over the past two years, which shows active engagement by regulators in the areas Morningstar evaluates in the report.
- In the U.S., Australia, South Africa, and The Netherlands, ongoing fund fees are typically unbundled, which decreases reported fund fees. However, if investors are paying for both advice and an administration platform, the total cost of owning a fund could be an additional 1-1.5%.
- In 22 of the 25 countries evaluated, banks and insurance companies are named as one of the dominant fund sales channels. The next most common channel, cited in seven countries, is the independent advisor.
To read Morningstar’s complete Global Fund Investor Experience report, click here.
