Australia hits 'Bottom' on portfolio holdings disclosure

Global research and ratings house, Morningstar has marked Australia down in its latest biannual Global Investor Experience (GIE) report.  

It assigned a 'Bottom' grade to Australia, noting that it remains the only market without regulated portfolios holdings disclosure and has yet to adapt to increasing investor expectations around environmental, social and governance (ESG) and stewardship disclosure. 

Commenting on the poor mark for Australia, Morningstar director, manager research, Grant Kennaway told Money Management it was a disappointing outcome for Australia in circumstances where the industry had the systems in place to deliver the necessary information but was failing to do so. 

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He said there was a need for the Australia to redouble its efforts to bring itself up to the standards which were common in other, overseas jurisdictions. 

“Using a grading scale of 'Top', 'Above Average', Average, 'Below Average', and 'Bottom', Morningstar gave Top grades to India and the United States which it described as “the two most investor-friendly markets in terms of global best practices for the disclosure of portfolio manager names, fund ownership, and compensation”. 

It said that, conversely, it had assigned a 'Bottom' grade to Australia, which remained the only market without regulated portfolios holdings disclosure and has yet to adapt to increasing investor expectations around ESG and stewardship disclosure. 

“Led by India and the U.S., most markets around the world have made gradual progress in their disclosure practices,” the Morningstar analysis said. “Six markets—Canada, Korea, Taiwan, Thailand, South Africa, and Sweden—received 'Above Average grades. France and the Netherlands took jumps upward, benefiting from incremental improvements across EU markets, while South Africa’s grade also improved.” 

“However, there are some notable laggards, such as Australia, that lack industry pressure or political will to make corrective changes,” one of the co-authors of the study, director of manager research services, Christina West said. 

Dealing specifically with Australia, the Morningstar study said that Australia “stands alone as having the weakest disclosure regime among the 26 markets evaluated in this study”. 

“As an otherwise sophisticated market, Australia remains the only market where portfolio holdings disclosure is not required. Australian Corporations Act amendments that would require super trustees to publish portfolio holdings online were due to come into effect on Dec. 31, 2019 before being postponed. The deadline had already been extended three times previously, in 2017, 2016, and 2015," it said.

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When one invests simply for returns without know what they are investing in, enivatably dodgy assets get included and in the end, these assets fail. Industry Super just needs negative net inflows and time. The inevitable end will follow.

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