Mutual fund study: Singapore goes from A to B to C grade

The Singapore Exchange headquarters. The Morningstar Asia report says that while Singapore has no major weaknesses, it is more
expensive than other markets and disclosure practices have room for improvement, specifically portfolio holdings disclosur
The Singapore Exchange headquarters. The Morningstar Asia report says that while Singapore has no major weaknesses, it is more expensive than other markets and disclosure practices have room for improvement, specifically portfolio holdings disclosure.PHOTO: BLOOMBERG

SINGAPORE'S ranking as an investor-friendly destination has taken a knock in a new report.

It recorded a C grade, down from B in 2013 and an A in 2011, when it shared the top spot with the United States.

The biennial report compiled by Nasdaq-listed Morningstar assesses the experiences of mutual fund investors in 25 markets across North America, Europe, Asia and Africa.

Morningstar Asia, an independent investment research provider and a subsidiary of Morningstar, named South Korea and the US as the most investor-friendly markets and China as the least investor-friendly. It said: "While there are no major weaknesses, Singapore is more expensive than other markets in this study and disclosure practices have room for improvement, specifically around portfolio holdings disclosure."

Hong Kong, which scored a C- in 2013, was awarded a C this time while China received the worst grade, a D+.

The report out last week looked at investor protection, transparency, fees, taxation and investment distribution. Countries were evaluated based on four categories: regulation and taxation; disclosure; fees and expenses; and sales and media.

It noted that Asian markets continued to have the lowest mutual fund taxation rates.

The US and Taiwan both received an A on disclosure while Canada scored an A-. Singapore lagged behind in this area with a C- as "there are areas where more investor-friendly outcomes can be achieved. For example, there is no requirement for funds to provide monetary examples of fees", said Morningstar.

Singapore's strong regulatory regime with zero investment taxes helped it land an A in 2011 and 2013 but this time it received a B+. Morningstar did not explain the lower grade but said "the absence of taxes on mutual fund investments is a feature of Singapore shared by few other markets - although input services to a fund are subject to sales tax".

joycel@sph.com.sg

A version of this article appeared in the print edition of The Straits Times on June 17, 2015, with the headline 'Mutual fund study: S'pore goes from A to B to C grade'. Print Edition | Subscribe