India and the U.S. have been ranked as the top two most investor-friendly markets in the world in terms of best practice for portfolio disclosure, while Australia ranked at the bottom.
India and US have set a high benchmark within the global mutual fund industry as it relates to monthly portfolio holdings disclosure requirements, according to a global study by Morningstar Inc.
The two countries earned top grades for their robust disclosure regimes across six categories including fees, transparency of fund holdings and issues such as conflicts of interest. The report covering 26 markets across North America, Europe, Asia and Africa singled out Australia as a notable staggler.
Key to India's high standing was SEBI's requirement for mutual funds to disclose their portfolio holdings on a monthly basis via their fact sheets, posted on the asset manager's website. Funds have to make these disclosures public within the first 10 calendar day from the start of every month. These regulations were further updated as recently as October 2020 when the SEBI directed that all fixed-income funds had to disclose their full portfolio holdings on a fortnightly basis, within five days of each fortnight
“The U.S. has consistently led the pack in this area, while India has gradually added global best practices to its disclosure framework," Christina West, director of manager research services at Morningstar and co-author of the study, said in a statement. “India has also set a high standard with monthly required portfolio holdings disclosure."
Despite being a sophisticated market, Australia remains the only one without regulated portfolio holdings disclosure, according to the report. The nation has also yet to adapt to increasing investor expectations around ESG and stewardship disclosures, it said.
Belgium, Italy, Japan, Singapore and Switzerland were ranked below average, while Canada, Korea, South Africa, Sweden, Taiwan and Thailand were ranked above average.
Most fund managers in Australia publish their top 10 holdings on their websites, but it’s difficult to get the entire portfolio breakdown, said Grant Kennaway, director of manager research for Australia at Morningstar and one of the report’s co-authors. In India, fund managers publish full portfolio allocations and what percentage is invested in them, he said.
Requirements are being tightened for pension funds in Australia. But even when regulations are finally implemented, they won’t bring the nation anywhere near global best practice because they only call for semiannual disclosure and don’t cover mutual funds, Morningstar said.
“It’s really hard to explain how Australia has failed to get its act together," Kennaway said in an interview. “Being transparent about portfolio holdings should be just a simple matter. Some markets are providing portfolio holdings to investors every month. With the interest in ESG and sustainability, it’s becoming increasingly front of mind for investors."
