In early October, we've released the 2017 edition of the Morningstar Global Fund Investor Experience report, our bi-annual study first launched in 2009 to encourage a dialogue about global best practices for mutual funds from the perspective of fund shareholders.
The report covers 25 countries across North America, Europe, Asia, and Africa, examines the treatment of mutual fund investors from multiple viewpoint within these four categories: Regulation and Taxation; Disclosure; Fees and Expenses; and Sales.
Here’s how Singapore scored in the study:
Singapore’s overall grade is Average. Singapore scores well in regulation and taxation and sales, but it is one of the more expensive markets when it comes to fund costs. There is also room for improvement in terms of its disclosure practices.
Regulation and Taxation
Singapore receives an Above Average grade for Regulation and Taxation. Fund investors are generally exempt from all investment taxes in Singapore, which is a feature shared by few other markets. That said, fund management services in Singapore are subject to the goods and services tax. Funds registered in compliance with UCITS receive streamlined registration, and foreign domiciled funds are common in Singapore. The Central Provident Fund (CPF), Singapore’s mandatory retirement savings scheme, offers many investment choices. The Supplementary Retirement Scheme further encourages individuals to save by offering tax benefits at the income level. Moreover, the CPF is working to introduce a new retirement scheme that involves low-cost, passive investment options.
Singapore earns an Average grade for Disclosure. A Product Highlight Sheet (PHS) and a fact sheet constitute a simplified prospectus in Singapore, in which only the latter contains returns, and not necessarily in the form of standardised periods. The names and professional histories of portfolio managers are required, though information on their compensation or investments along investors is not disclosed. There is no requirement for management commentary on fund performance, although it can usually be found in marketing material. On a positive note, the Monetary Authority of Singapore is taking steps to standardise the disclosure format of trailer fees in the PHS.
Fees and Expenses
Singapore’s Fees and Expenses grade is Below Average. Investors in Singapore continue to pay for advice predominantly through front loads or ongoing expenses embedded in expense ratios. It is rare for investors to be able to avoid these fees, and this leads to a low level of transparency around the cost of advice. Domestic funds tend to be cheaper than those available for sale from foreign jurisdictions, although both groups show higher fees than the medians for this study.
Sales is another strong area for Singapore, and it receives an Above Average grade. Most distribution options are widely available, and Morningstar observes that more than 80% of funds are sold through intermediaries offering funds from multiple providers. Advisors are required to disclose conflicts of interest, such as being tied to a specific provider. There have been some positive developments since our last report, such as the use of a “balance scorecard” to regulate the remuneration of financial advisory representatives, rather than relying on pure sales measures.
Overall score for all markets covered in the study: