Mutual fund documents in India, despite running into pages, offer “typically generic and provide very little useful information,” a report by US-based investment advisory Morningstar has said.

In its evaluation of investor experience in the mutual fund industry in 25 countries, India has scored a C+, ranking below most developed markets in the West but, significantly, better than Hong Kong, Singapore and Japan.

China, with a D+ rating, brings up the rear. Korea and the US are the most investor-friendly markets in the world, according to the report.

For the Global Fund Investor Experience report, Morningstar evaluated countries in four categories — regulation and taxation, disclosure, fees and expenses, and sales and media.

Countries with active fund regulation, low investor tax burden, more disclosures, lower fund fees, a varied fund distribution system, and an independent local news media that explains investment choices drew top scores.

Lesser fee heads Elaborating on India’s performance, the report said: “India has a mix of outstanding practices and others that fail to meet global standards, relative to other markets evaluated in this report.”

Some of the positives include that the local fund market does not charge asset-based commissions or performance fees.

Also, the regulator’s requirement that funds have “skin in the game” — that is, they invest 1 per cent, subject to a maximum of ₹50 lakh — is a “positive step as it aligns the interests of the fund company with that of investors.”

However, total expense ratios are costlier in India while capital controls limit an investor’s ability to invest in foreign securities.

Regarding the poor quality of risk and return disclosures, the report said: “India requires disclosure of full fund portfolio holdings monthly instead of on a semi-annual basis typical of other markets evaluated in the report. India is one of only two countries that hold this distinction.”

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