Australia is crap when it comes to important fund disclosures, according to a global study
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Morningstar has assessed the experiences of mutual fund investors in 26 markets across North America, Europe, Asia, and Africa. Australia is doing a poor job, it says.
A mutual fund is a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets.
Consistent, transparent disclosures are important to mutual fund investors because it helps them make better decisions.
It also creates trust in the funds and the firms that manage their assets, Morningstar says.
In its study of 26 markets Morningstar considered things like whether financial advisors were required to disclose conflicts of interest, whether a market has ESG-relevant regulation, or a stewardship code that requires the disclosure of information “to support a fund’s claimed green credentials and stewardship activities”.
The two most investor-friendly markets in terms of global best practices for the disclosure of portfolio manager names, fund ownership, and compensation are India and the US.
Australia was the worst.
Australia remains the only market without regulated portfolios holdings disclosure and has yet to adapt to increasing investor expectations around environmental, social and corporate governance (ESG) and stewardship disclosure, Morningstar says.
“Led by India and the U.S., most markets around the world have made gradual progress in their disclosure practices,” said Christina West, director of manager research services at Morningstar and co-author of the study.
“There are some notable laggards, such as Australia, that lack industry pressure or political will to make corrective changes.”
Australia stands alone as having the weakest disclosure regime among the 26 markets evaluated in this study.
According to a September report, of the 165 investment managers identified by the Responsible Investment Association Australasia (RIAA) as practising responsible investment, just 36 per cent disclose their full investment holdings and a further 28 per cent disclose some of their holdings.
“As an otherwise sophisticated market, Australia remains the only market where portfolio holdings disclosure is not required,” West says.
“Australian Corporations Act amendments that would require super trustees to publish portfolio holdings online were due to come into effect on Dec. 31, 2019 before being postponed.”
“The deadline had already been extended three times previously, in 2017, 2016, and 2015.”
On December 8, 2020, this was postponed again for an indefinite period.