India and the US are the two most investing markets in the world in terms of best practice for portfolio disclosure, while Australia is at the bottom, according to a global study by Morningstar Inc.
The two countries have earned good grades due to their robust disclosure regimes across six categories including fees, transparency of fund holdings and issues such as conflicts of interest. The report on 26 markets across North America, Europe, Asia and Africa selected Australia as a notable laggard.
“The US has consistently led the group in this area, while India has gradually added global best practices to its overarching framework,” said Christina West, director of managerial research services at Morningstar and co-author of the study. “India has also set a high standard with a monthly required disclosure of portfolio.”
Morningstar applied an upper, average, average, lower, and lower grade scale to evaluate 26 markets based on six disclosure criteria: easy-to-understand prospectuses, fees, portfolios, portfolio manager and compensation disclosures, and for the first time ESG and stewardship, and sales levels.
Despite being a complex market, Australia remains the only one without revealing a regulated portfolio, according to the report. The nation has also not yet adapted to growing investment expectations around ESG disclosures and management, it said.
Belgium, Italy, Japan, Singapore and Switzerland were ranked below average, while Canada, Korea, South Africa, Sweden, Taiwan and Thailand ranked above average.
Most fund managers in Australia publish their top 10 holdings on their websites, but it’s hard to destroy the entire portfolio, said Grant Kennaway, director of research management for Australia at Morningstar and one of the report’s co-authors. In India, financial managers publish full portfolio allocations and what percentage is invested in them, he said.
Demands are tightening for pension funds in Australia. But even when regulations are finally implemented, they won’t bring the nation anywhere close to global best practices because they only require a half-year disclosure and don’t cover mutual funds, Morningstar said.
“It’s really hard to explain how Australia has failed to join its action,” Kennaway said in an interview. “Being transparent about portfolio holdings should be just a simple matter. Some markets provide wallet assets to investors on a monthly basis. With the interest in ESG and sustainability, it is becoming increasingly predictable for investors. “