India and the US are the two most investor-friendly markets in the world in terms of best practices for portfolio disclosure, while Australia ranks last, according to a global study by Morningstar Inc.
The two countries received top marks for their robust disclosure regimes in six categories, including fees, transparency of fund holdings and issues such as conflicts of interest. The report covering 26 markets in North America, Europe, Asia and Africa highlighted Australia as a notable laggard.
“The United States has consistently led the pack in this area, while India has gradually added global best practices to its disclosure framework,” Christina West, Morningstar’s director of research services for administrators and co-author of the study, said in a statement. “India has also set a high standard with disclosure of required monthly portfolio holdings.”
Morningstar applied an above, above, average, below average, and minimum rating scale to assess 26 markets based on six disclosure criteria: easy-to-understand prospects, fees, portfolio holdings, portfolio management disclosures and compensation, and , for the first time, ESG and stewardship, and sales disclosures.
Despite being a sophisticated market, Australia remains the only one without regulated disclosure of portfolio holdings, according to the report. The nation has yet to adjust to growing investor expectations around ESG and stewardship disclosures, he said.
Belgium, Italy, Japan, Singapore, and Switzerland were below average, while Canada, Korea, South Africa, Sweden, Taiwan, and Thailand were above average.
Most fund managers in Australia post their top 10 positions on their websites, but it’s difficult to get the full portfolio breakdown, said Grant Kennaway, director of Australian manager research at Morningstar and one of the report’s co-authors. . In India, fund managers publish full portfolio allocations and what percentage is invested in them, he said.
Requirements for pension funds in Australia are tightening. But even when the regulations are finally implemented, they will not bring the nation closer to global best practices because they only require semi-annual disclosure and do not cover mutual funds, Morningstar said.
“It’s really difficult to explain how Australia has failed to act,” Kennaway said in an interview. “Being transparent about portfolio holdings should be a simple matter. Some markets offer portfolios to investors every month. With the interest in ESG factors and sustainability, it is becoming increasingly important to investors. “
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