Singapore and Hong Kong: Fund Fees Above Average

Singapore and Hong Kong: Fund Fees Above Average

Mutual fund fees have declined across global markets but those in Singapore and Hong Kong remain higher than the global average.

Most investors of mutual funds in Singapore and Hong Kong still pay higher fees versus those in other markets due to front-load charges and ongoing commissions charged by funds and/or distribution channels, a study by Morningstar found.

As a result, Singapore and Hong Kong are comparatively less friendly for retail investors, based on the investment research firm's Global Investor Experience (GIE) report published on Wednesday. The biennial report grades the experiences of mutual fund investors in 26 markets across North America, Europe, Asia, and Africa.

Decline Across Global Markets

Asset-weighted median expense ratios for domestic and available-for-sale funds fell in a majority of the 26 markets surveyed since the 2017 study. The Netherlands saw the biggest drop in fees, followed by India and Canada. In the meantime, many regulators worldwide are encouraging fee transparency, Morningstar noted.

«Since the last study in 2017, we've seen fund fees continue to decline across global markets. This reflects a number of key trends including orderly competition, regulatory intervention, and changing practices that have led to the unbundling of advice and sales fees from fund expense ratios in some markets,» said Grant Kennaway, Morningstar's global practice leader of manager research said in a media statement.

Singapore: Below Average

Morningstar uses a grading scale of Top, Above Average, Average, Below Average, and Bottom for 26 markets in the study. Australia, the Netherlands, and the U.S. scored Top grades, denoting these as the most investor-friendly markets in terms of fees and expenses. 

This year, Singapore maintained the grade «Below Average», as was the case in 2017.  The use of front loads, limited availability of retrocession-free share classes, and several high asset-weighted medians contributed negatively to the market's scoring. «More than 85 percent of funds, whether domiciled or available for sale in Singapore, report charging front loads,» Morningstar wrote.