CFA calls for harmonized reporting

By Staff | January 18, 2013 | Last updated on January 18, 2013
2 min read

Harmonized standards for reporting fund performance is needed to enhance investor protection and rebuild trust in the retail funds market, says a CFA Institute study titled “Periodic Reporting for Retail Investment Funds in Asia Pacific.”

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The report covers six markets, including Australia, China, Hong Kong, India, Japan, and Singapore; and focuses on five areas including frequency of disclosures, fund fees and charges, fund performance, fund holdings and asset allocation, and disclosure of conflicts of interest and management discussions.

Key Recommendations

  • Quarterly reporting of fund performance to investors.
  • Adopt a common standard for calculating returns, presenting current and past performance, and selecting appropriate benchmarks. The principles stated in Global Investment Performance Standards Handbook, the global standard used by institutional investors to present past performance, can serve as a guide.
  • Use historical expense ratios to facilitate comparison of trends in the cost of managing the fund.
  • Adopt the CFA Institute Asset Manager Code of Professional Conduct, which requires greater disclosure of policies that affect the information provided to investors.
  • Harmonize regulations and best practices to improve periodic reporting of fund performance.

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Findings from study group

Frequency of disclosures

  • Annual reports should be audited and contain more details regarding financial statements, operations, and performance of the fund.
  • Semi-annual, quarterly, and monthly reporting could be less detailed.
  • More frequent disclosures are desirable while semi-annual reports are becoming increasingly common and required by most jurisdictions.

Disclosure of fees and charges

  • All fees and charges should be itemized and disclosed both in absolute amounts and in percentages.
  • Calculation of total expense ratios (TERs) should be harmonized for meaningful comparison within and between jurisdictions.

Disclosure of fund performance

  • There is a lack of a consistent methodology for calculating returns that is comparable in the Asia Pacific region.
  • Historical performance should be disclosed on both an annualised and a cumulative basis for periods from three months up to 10 years since inception.
  • Benchmarks should reflect the same investment style, have the same investment strategy, and fit the same investment objectives.

Disclosure of portfolio holdings and asset allocation

  • Annual and semi-annual reports should include full details of assets in the portfolio, along with sector and geographical allocations.
  • Fixed-income securities should have details of the maturity date, duration, and credit ratings.

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Disclosure of conflicts of interest and management discussions

  • All conflicts of interest should be noted, along with when the conflicts occurred in the periodic statements until such time the conflicts are no longer relevant to the short- or long-term performance of the fund.
  • Annual and semi-annual reports should contain an operations and performance review, whereas quarterly and monthly reports should contain only a performance review and any material operational issues.
  • Details about the fund manager should be in the annual reports, and any changes during the year should be updated on the website. staff


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