The CFA Institute yesterday set out research in support of its call for more harmonised reporting standards for retail funds across Asia-Pacific.
The association for investment professionals recently completed a study of rules around reporting requirements for retail investment funds in response to rising cross-border fund sales and a growing array of financial products in the region.
The research – covering Australia, China, Hong Kong, India, Japan and Singapore – finds that investors seek more information beyond simple performance measures.
Hence the CFA Institute recommends a common standard for calculating returns, presenting current and past performance, selecting appropriate benchmarks, and presenting historical expense ratios to compare with trends in cost.
It suggests that the Global Investment Performance Standards, used by institutional investors to calculate performance, can serve as a guide.
CFA recommends disclosure of the historical performance on both an annualised and cumulative basis for the periods from three months to 10 years since inception. Benchmarks that reflect the same investment style, strategy and objective should be chosen.
Fees is another area where standardisation is needed, argues the institute. CFA recommends harmonising the calculation of total expense ratios for meaningful comparison between jurisdictions, proposing that fees and charges should be disclosed in both absolute terms and percentages.
The institute calls for greater transparency in information disclosure, suggesting at least quarterly reporting of fund performance. It also says that annual reports should contain more details regarding financial statements, operations and performance.
For the disclosure of portfolio holdings and asset allocations, CFA proposes that fund reports include full details of sector and geographical allocations. For fixed income, they should contain the details of maturity dates, duration and credit ratings.
Lee Kha Loon, head of standards and financial market integrity for Asia-Pacific at the CFA Institute, cites investing in sub-funds as an example. “In Singapore, if your fund is investing more than 30% in a sub-fund, you are required to disclose the top 10 holdings in the sub-fund and disclose the expense ratio of the sub-fund.”
The institute says a more harmonised fund-reporting standard would facilitate the cross-border selling of funds.
There has been increased dialogue over the concept of cross-border funds passporting in Asia, including at the Third Pan-Asian Regulatory Summit last November.
In May last year the Monetary Authority of Singapore opened consultation on a funds passporting scheme between Asean countries, as reported.