Where in the world is the best place to be a fund investor? According to Morningstar’s latest Global Fund Investor Experience report, Korea and the US are the most investor-friendly markets. Both countries scored an A grade in the report, which assesses the experiences of mutual fund investors in 25 countries across North America, Europe, Asia, and Africa.
China is the worst country to be an investor
The UK scored a grade of B+ in the report, falling behind Korea, the US, The Netherlands and Taiwan. This is an improvement from the country’s B- grade in 2013.
Morningstar evaluated countries in four categories that are weighted to calculate the overall grade: Regulation and Taxation, Disclosure, Fees and Expenses, and Sales and Media. Morningstar researchers generally favour active fund regulation; a low investor tax burden; more disclosure; lower fund fees; a varied fund distribution system; and local news media that helps to educate investors about their choices.
Analysts assigned countries a letter grade for each of the four categories and used the underlying scores to produce an overall country grade. The analysis was based on information from publicly available sources, Morningstar data, and Morningstar experts located in the company’s offices around the world.
In the area of Fees and Expenses, the UK saw some improvement on its 2013 category grade, with ongoing charges falling in most asset classes, and more assets moving into funds with unbundled pricing structures.
The UK continues to lead internationally in the Sales and Media category. UK investors benefit from a full spectrum of sales channels, with an estimated 80% of UK fund sales transacting through open-architecture distribution channels. The requirement upon advisers to consider all comparable investments when making an investment recommendation provides investors protection that is stronger than almost any other country evaluated in the report.
On Regulation and Taxation, the UK scored slightly above average and added marginal improvement to its 2013 category grade. Deferring capital gains taxes until sale of shares, large annual capital gains exemption, and relatively low tax rates on dividends and interest contribute to UK investors paying less in taxes than investors in many other countries.
The worst countries to be an investor were found to be China, Japan and Italy.
Christopher Traulsen, Morningstar’s Director of Manager Research, EMEA, said, “Our mission at Morningstar is to help investors reach their financial goals. The goal of our Global Fund Investor Experience report is to improve the investor experience by examining the treatment of mutual fund shareholders in various countries to spur dialogue about best practices. Every market we examined has areas for improvement, and we hope our research about the experience of fund investors worldwide will help serve as a catalyst for positive change.”
