Australia rated poorly on managed fund disclosure

Weak disclosure practices and high tax costs have seen Australia placed 16th out of 24 countries in terms of the conditions experienced by managed fund investors, new research from Morningstar has found. 

In its Global Fund Investor Experience Report, countries from North America, Europe, Asia and Africa were scored on regulation and taxation, disclosure, fees and expenses and sales and media, based on a combination of research and interviews with Morningstar analysts in each country. 

On a scale from A to F, the United States was given an A rating, and was followed by Korea (B+), Netherlands (B) and Singapore (B). 

Australia was given a C+ rating - falling behind the UK (B-) - with investors favouring the fees and expenses of Australian share, multi-sector and fixed income funds. 

In contrast, the survey found disclosure practices to be relatively weak and tax costs high when compared to other countries. 

According to Morningstar, Australia benefits from “open architecture platforms and a variety of sale channels” for managed funds. 

“The Future of Financial Advice (FOFA) regulations [have] a fiduciary standard requiring financial advisers to place investors’ interests ahead of their own,” the research house said. 

Australia was the only country in the report without any form of mandated, periodic portfolio holdings disclosure - presently or in proposed regulations - for managed funds. 

“There have been positive steps, however, with voluntary disclosure standards well-advanced and a mandated requirement due to be introduced under the MySuper regulations,” Morningstar said. 

Product disclosure statements in Australia were also found to be lacking, specifically in relation to information on portfolio managers, standardised returns and investment strategy and risks. 

“Australia is one of only a handful of countries in which capital gains are passed through to fund investors annually, rather than deferred, and accumulated in the gains in the fund unit price,” the report said. 

“Fund investors also pay consumption taxes in the investment management service.”