Morningstar - Q1 2021 - 9

that requires weekly portfolio disclosure of
material positions. And India's regulations were
updated in October to mandate that fixed-income
funds disclose full portfolio holdings via a
downloadable Excel spreadsheet within five days
of each fortnight-an important step in
ensuring that data is accessible and up to date.

Disclosure Scorecard India and the U.S. lead, while Australia is the laggard.
Top

Above Average

Average

Below Average

Bottom

India

Canada

China

Belgium

Australia

U.S.

Korea

Denmark

Italy

South Africa

Finland

Japan

Sweden

France

Singapore

Taiwan

Germany

Switzerland

Thailand

Hong Kong

4 Investors should know who manages their

money and how they are compensated. This issue
aligns with an increasing focus on governance
practices. We find it illogical that fund investors
are not provided with the kind of information
about fund managers that they can easily
find about the people who lead the companies in
which fund managers invest. Investors need
to know portfolio managers' names and tenures
in order to understand who is responsible for
a fund's strategy and performance.
Only 12 markets in this study require that
the name and tenure of at least the lead portfolio
manager be included in fund literature, and
only six require disclosure of manager
compensation structures. India is the only market
in the survey that requires funds to disclose
managers' actual amount of compensation. Along
with India, the U.S. features global best
practices for the disclosure of portfolio manager
names, fund ownership, and compensation.
Top Grades: Key Drivers
India and the U.S. earned top scores as a result
of strong performance across our six key disclosure
dimensions: prospectus, fee, portfolio holdings,
portfolio manager name and compensation,
sales, and ESG and stewardship disclosure. Among
European markets, Sweden stood out with
an Above Average grade, scoring highly on most
dimensions and being a front-runner in the
disclosure of ESG and stewardship.

For the first time in this study, South Africa earned
an Above Average grade for disclosure. (It
landed an Average grade in 2017 and a Bottom
grade, along with Australia, in 2015.) South Africa
has made several new requirements since
2015 that have improved disclosure and introduced
reforms to the regulatory framework for
distributing retail financial products. South
Africa's simplified prospectus, called the minimum

Mexico
Netherlands
Grade change indicators
]Improved since last study
[Declined since last study
* New to study	

New Zealand
Norway
Spain
U.K.

Source: Morningstar.

disclosure document, achieves the objective of
fair treatment of investors, with the disclosure of
all relevant information and risks, provided in
language that is concise, clear, and not misleading.
Bottom Grades: Key Drivers
As in previous years, Australia landed with
the lowest awarded grade. As an otherwise
sophisticated market, it is remarkable that
Australia remains the only market among the 26
studied with no implemented portfolio holdings
disclosure regime. Australian Corporations
Act amendments that would force supertrustees
to publish portfolio holdings online were
due to come into effect on Dec. 31, 2019, but they
were postponed again, the deadline having
already been extended three times.

Singapore and Switzerland were downgraded
to Below Average in this study, joining
Belgium, Italy, and Japan. A common thread for
these countries is that they do not disclose
portfolio manager ownership in funds, do not
provide a monetary illustration of fees in
simplified prospectuses, and have less frequent
required disclosure of full portfolio holdings
than the global best practices. In addition, Italy,
Japan, and Singapore have made little

progress in introducing ESG and stewardship
disclosure to their markets, which is now formally
scored in this study. We acknowledge that
there are limited ESG investment options available
in some markets but prefer regulators to
be ahead of the game, particularly where a clear
global trend is evident, as it is with ESG.
Many of the markets that perform poorly
in disclosure are still decent markets for investors
overall, but they could be better if regulators
and lawmakers emulated best practices from
other countries.
Better for Investors
In the long run, mutual fund industry stakeholders
that fight transparency are likely to generate
outcomes that are bad for investors and bad for
the industry itself. Hence, we are pleased with the
improvements most markets have made in
disclosure practices since our previous study. K
Grant Kennaway is director, manager research, Australia,
with Morningstar Australasia. He is a member of the
editorial board of Morningstar magazine.
Christina West is director, manager research services,
with Morningstar Research Services LLC.

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