We've just released the 2017 edition of the Morningstar Global Fund Investor Experience report, which was created in 2009 to encourage a dialogue about global best practices for mutual funds from the perspective of fund shareholders. This year’s report covers 25 countries across North America, Europe, Asia, and Africa. The report has been produced every two years. Previous reports have generated significant debate and discussion in numerous markets around the globe and have contributed to a raft of changes. We think our 2017 report will be no different.
Evaluating mutual fund investors’ experiences
The report examines the treatment of mutual fund investors from multiple viewpoints: fund industry practices, fund distribution practices, the structure and effectiveness of regulatory bodies, disclosure policies, and tax codes.
We know that many outside factors can affect the global investor experience. Our report isn't meant to be a commentary on a country's fund industry, but rather how investors may experience it (as evidenced by the title). Because of this, our report doesn't cover countries that have many funds but few investors (Luxembourg, for example).
Our global team of researchers evaluated countries in these four categories: Regulation and Taxation; Disclosure; Fees and Expenses; and Sales. The grading scale was changed in the 2017 report to better express where a country sits relative to its global peers. The 12 letter grades used in our previous reports have been replaced by a five-tier scale: Top, Above Average, Average, Below Average, and Bottom.
An improving environment for mutual fund investors
Here are some key changes and takeaways from the Global Fund Investor Experience report:
- Across the globe, regulation and better practices have helped improve the environment for mutual fund investors.
- As evidence mounts that fees can be a crucial factor in investment performance, we've weighted Fees and Expenses more heavily than in previous editions in determining a country's overall grade.
- The United States remains at the top of the table in 2017 for overall treatment of investors, but continues to trail other markets in Sales and Regulation and Taxation.
- The investor experience in Belgium, France, Italy, Finland, and Spain all ranked at the low end of our scale, but no country received a Bottom overall grade. Europe's impending MiFID II regulations will bring tougher investor-protection rules, and we believe this should lead to better grades for European markets in future studies.
- Regulatory developments led to better scores for South Africa, Australia, and Thailand.
- India's Disclosure score is now on par with the United States', and those two countries are the only markets requiring disclosure of fund managers' pay.
- Improving the quality of management discussion around fund performance in investor communications remains a global priority. Our analysts note that it is rare for such commentary to be insightful or truly valuable for investors.
- While there is a global trend moving away from commission-based advice, advisors are still paid predominantly through commissions in 15 of 25 countries surveyed.
Morningstar has many views about what makes for a good experience for mutual fund investors—views that are reflected in the survey's questions and in the scoring of the answers.
But we’re open to hearing opposing views and discussing unresolved issues. We hope this report encourages further discussions and debate about how everyone can make investing better for investors everywhere.