The United States is the best market for fund investors based on criteria such as investor protection, transparency, fees, taxation, and investment distribution, according to Morningstar’s Global Fund Investor Experience report, which assesses the experiences of mutual fund investors in 24 countries across North America, Europe, Asia, and Africa.
Morningstar researchers evaluated countries in four categories: Regulation and Taxation, Disclosure, Fees and Expenses, and Sales and Media. Morningstar weighted the questions and answers to give greater importance to factual, empirical answers as well as the high-priority issues of fees, taxes, and transparency. Morningstar assigned countries a letter grade for each category and then added the category scores to produce an overall country grade. The report’s authors gathered information from available public data and from Morningstar analysts.
Among the key findings of the study:
• Bans on advisor commissions are spreading around the world. In the UK, the Retail Distribution Review (RDR) has already brought such a ban into effect, while similar moves are underway in Australia and the Netherlands.
• While the U.S. and European fund markets are roughly similar in size, U.S. investors pay significantly lower fees than European investors.
• Fund companies in most countries continue to treat the names of portfolio managers as trade secrets, leaving investors no way to determine who is responsible for a fund’s success or failure.
• Australia and New Zealand do not require funds to publicly disclose full portfolio holdings, while France, South Africa, Korea, and the UK only disclose holdings to current owners.
The United States garnered the highest score for the third time with a top grade of A. While the United States is not a leader in the area of Regulation and Taxes, it has the world’s best disclosure and lowest expenses. South Africa, in contrast, received the lowest grade largely because of poor disclosure practices.
Below are the overall country grades, from highest to lowest scores and then in alphabetical order:
United States: A
United Kingdom: B-
Hong Kong: C-
New Zealand: C-
South Africa: D