The US is the best market for fund investors based on such criteria as investor protection, transparency, fees, taxation and investment choices, according to Morningstar, a provider of
The US is the best market for fund investors based on such criteria as investor protection, transparency, fees, taxation and investment choices, according to Morningstar, a provider of independent investment research.
The firm has released results of a study that measures the experiences of mutual fund investors in 16 countries in North America, Europe, and Asia.
The overall country grades in order from highest to lowest scores are: US: A; Switzerland: C+; China: B+; UK: C+; Taiwan: B; Singapore: C; Japan: B; Australia: C; Netherlands: B; Germany: C; Italy: B; Hong Kong: C; Canada: B; ¬Spain: D; France: C+; and New Zealand: D¬.
The US received an A in the areas of prospectuses and shareholders’ reports and for fees and expenses. US mutual fund reports provide a uniform presentation of fees and expenses as well as complete disclosure of a fund’s total expense ratio history. The US also had the lowest overall annual expense ratio for its mutual funds. Most investors in the US pay below 0.75 per cent annually for fixed¬ income funds and below one per cent for equity funds. The US scored less well in the area of investor protection, garnering a C. It lost points because there is no requirement that fund assets be kept with a custodian that is separate from the fund manager.
New Zealand scored the worst overall, largely because of low grades for prospectuses and shareholders’ reports and taxation. New Zealand received a grade of D ¬for prospectuses and shareholders’ reports. This poor grade was given for several reasons, the most important of which was the lack of portfolio holdings disclosure. New Zealand also received a grade of D ¬in the area of taxation. Dividend and capital gains tax rates are high, and there is no tax incentive for long-¬term investing-tax rates are the same for dividends, short¬-term capital gains, and long-¬term capital gains.
Morningstar assigned a letter grade for each country in the study commensurate with its score in each category. Then, Morningstar added the category scores to produce an overall country grade. The study’s authors based their scores on a combination of factual research and interviews with Morningstar analysts residing in each country.
