The Markets May 12, 2009

U.S. Gets ‘A’ in Investing

A Morningstar study found that mutual fund investors in the U.S. have a better experience than in 15 other countries.
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In fact, the U.S. received the only overall “A’ grade in the study. However, it did not receive an A in every category.

The study measures the experiences of mutual fund investors in 16 countries in North America, Europe, and Asia. Morningstar researchers evaluated and scored countries in six categories—investor protection, prospectuses and shareholders’ reports, transparency in sales practices and the media, fees and expenses, taxation, and distribution practices.

The evaluation found that the U.S. is the best market for fund investors; New Zealand scored the worst. “We hope our global study will expand the dialogue about best practices for the mutual fund investor to investment companies, distributors, and regulatory bodies around the world,’ said John Rekenthaler, vice president of research for Morningstar, in a news release.

Below are the overall country grades from highest to lowest scores:

  • United States: A
  • China: B+
  • Taiwan: B
  • Japan: B
  • Netherlands: B
  • Italy: B
  • Canada: B-
  • France: C+
  • Switzerland: C+
  • United Kingdom: C+
  • Singapore: C
  • Australia: C
  • Germany: C
  • Hong Kong: C
  • Spain: D
  • New Zealand: D-


Why did the U.S. score so well? Apparently funds are less expensive here, for one. The United States received an A for fees and expenses. Morningstar found that the U.S. had the lowest overall annual expense ratio for its mutual funds. Most investors in the U.S. pay below 0.75% annually for fixed-income funds and below 1% for equity funds.

The U.S. also got an A in the areas of prospectuses and shareholders’ reports. U.S. mutual fund reports provide a uniform presentation of fees and expenses as well as complete disclosure of a fund’s total expense ratio history, Morningstar said.

The U.S. has a weak spot in the area of investor protection, where it received a grade of C. The U.S. lost points because there is no requirement that fund assets be kept with a custodian that is separate from the fund manager, according to the report.

The full report is available here.

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