Treasury Today Country Profiles in association with Citi

High fees and lack of disclosure hurt treasurers in UK, France and Germany

A new report from Morningstar argues that treasurers need more transparency and low cost competition to enter the money funds market. Investors in the US and Singapore, meanwhile, face a much…

…better experience in terms of regulation and taxation, disclosure, fees and expenses, and sales and media – the categories on which each country’s investment environment was ranked by the researchers.

Disclosure practices are criticised in the report, suggesting that treasurers would benefit from greater transparency in funds’ actions. Morningstar recommends French funds should consider ‘improving the frequency of holdings disclosure’, German mutuals should show a longer history of expense ratios than the current one-year practice, UK-based funds should disclose the tenure of managers, and that all three countries should create a centralised website with fund holdings and data. Fees in the Britain are judged to be relatively high, as they are in France (excluding money market fund (MMF) expenses) with Germany standing out as a cheaper location.

IMMFA – the trade association representing the European AAA-rated MMF industry – is keen to point out that the report looks at all publicly available open-ended funds, not just MMFs. In particular, the report covers funds directed at retail as well as institutional investors – and as MMFs are directed at institutions, they have different priorities and behave differently. For example, as professional, sophisticated investors, corporates investing in MMFs tend to be more able to access the information they need.

That does not mean there is no room for improvement, however. “We are strongly behind strengthening the disclosure rules funds must comply with to gain IMMFA membership so investors can get the information to compare funds,” the Association’s CEO Gail Le Coz told Treasury Today. “Our code of practice already requires MMFs to disclose the weighted average maturity, the weighted average final maturity, the liquidity profile – that is, what percentage of the fund is overnight, one day, one week, one month and so on – and, upon request, shareholder concentration.”

“The code is being updated and is due for re-release later this year. By way of example, we are currently looking at following the American practice of requiring monthly portfolio holding disclosure, thereby improving transparency and helping corporates manage risks more effectively.”