Although India stands alongside US in terms of mutual fund disclosures, it earns a top grade for disclosing the fund manager’s remuneration, states Morningstar’s recent report titled, ‘Global Fund Investor Experience Report 2017’.
The report grades the experience of mutual fund investors in 25 countries across North America, Europe, Asia and Africa.
Thanks to SEBI’s regulatory norms, India scores over US in terms of better mutual fund disclosure policies. The report says, “Disclosure in India earns a Top grade. Transparency of portfolio holdings remains the best of any market, with monthly disclosure required and those portfolios typically released after 10 days. It is now mandatory for asset managers to disclose fund manager compensation levels as well as manager investments in their funds. Regulations have also been introduced requiring the disclosure of commissions earned by distributors. Point-of-sale documents include details around fund risks, but our analysts observe that the descriptions of investment strategies are often insufficient.”
India currently follows the best fund disclosure norms according to Morningstar Analyst. Sharing some improvement tips, Kaustubh Belapurkar, Director- Fund Research, Morningstar said, “In terms of disclosures, we are ahead of many major markets. However, we can level up our disclosure standards by making a few more changes. For instance, AMFI currently publishes Quarterly AUM of fund houses data, it could instead publish it share class level AUM data monthly for more transparency. Also, the recent categorization of the mutual fund schemes will now make investment mandates more clear for investors.”
While the US is the most investor friendly market, India has retained an overall grade of ‘Average’ in terms of investor friendly market, said the report.
The report further highlights that investment advice has improved over time. It attributes the improvement to a range of initiatives starting from Investment Advisory Regulations in 2013 and more-recent moves to put caps on upfront commissions paid by product providers.
The report also states that India’s ‘Fee and Expenses’ grade is below average. “It reflects some of the highest expense ratios for equity funds in the study and the reliance of ongoing trailing commissions to pay for advice”, the report said.
