Australia still below par for managed funds

Australia has again scored below average in terms of managed fund investor experiences, according to a global Morningstar study.

Australia scored a ‘C’ along with five other countries to be rated equal 15th out of 22 countries — the same rating it achieved in the initial study in 2009.

Only South Africa with ‘C minus’ and New Zealand with ‘D minus’ were rated lower, while Singapore and the US were the most investor-friendly managed fund environments with an ‘A’ rating.

The study focused on the four categories of regulation and taxation; disclosure; fees and expenses; and sales and media. The study was based on publicly available information and interviews with local Morningstar analysts, Morningstar stated.

The study aimed to identify best practices in managed fund investor experiences to help fund managers, regulators, and market commentators focus on and enhance best practices for investors, Morningstar stated.

Australia stacked up well in the areas of fees and expenses with an ‘A’ rating because Australian share and cash funds have some of the lowest fees worldwide, and upfront entry fees are frequently rebated, the survey found.

Australia scored a ‘B’ for sales and marketing, with local coverage of managed funds considered typical in terms of frequency of coverage and content, although the open architecture nature of the Australian funds management industry was considered favourable, Morningstar stated.

Australia’s overall score was dragged down by ‘D’s in regulation and taxation due to high investment taxes; and in disclosure because fund managers are not required to disclose comprehensive fund portfolio holdings on a regular basis.

New Zealand scored similarly to Australia but fared slightly worse in fees and expenses (‘B’) and also in sales and media (‘C plus’). But these combined with poor disclosure and a complex tax system with few tax incentives meant New Zealand recorded the lowest score of the 22 countries rated.