It’s a small mutual fund world

One issue around which there was strong consensus was that pension policy is a major preoccupation of governments worldwide. Many countries face the challenge of a disproportionately larger senior demographic. This puts enormous pressure on government resources, and individuals are becoming increasingly aware that they must take greater responsibility to save for retirement. In fact, ensuring that individuals are preparing for retirement has become a public policy concern. In every country, it is clear that investment funds have a crucial role to play in meeting retirement needs.

The challenge of providing investors with transparent and easy-to-understand disclosure documents was another common challenge. It is a fact everywhere, as it is in Canada, that the interests of consumers are not served by providing them with overly long, complicated and legalistic documents. The move is toward shorter documents and plainer language. The only exception is South Africa, which has never issued long, complex prospectuses but went straight to short, plain-language documents that cover most of the items identified to be disclosed in the two-page Fund Factsproposal released by the Joint Forum this year.

Financial reporting rules were another major topic of discussion. IIFA delegates resolved, on behalf of their member organizations, to support the development of a consistent worldwide regime for investment fund financial reporting that provides meaningful information to investors. IIFA members agreed that current international financial reporting standards do not provide a satisfactory basis for investment fund financial reporting. Delegates were of the view that some of the provisions are contrary to sound, long-standing practices for meaningful investment fund reporting. Investment fund reporting should be focused on the needs of investors and improving their ability to make informed investment decisions. To achieve this, financial reporting standards need to reflect the unique characteristics of pooled investment funds.

Delegates also shared information about trends. It was interesting to learn that sales of foreign funds have increased in most countries.

Canadians have been on an international buying spree since the removal of the foreign-content limitations in 2005. In the year ended Sept. 30, 2007, net sales into foreign funds accounted for almost 94% of total funds sales in Canada, vs 56% a year earlier. Foreign equity and foreign balanced funds made up the majority of the foreign fund sales, accounting for almost 96% of total foreign fund sales.

The same is happening elsewhere. In the U.S., Americans are buying up a significant amount of foreign/international equity funds compared with domestic funds. In the second quarter of this year, domestic equity funds were in redemption to the tune of more than US$3 billion, while sales in foreign/international equity funds were almost US$40 billion.

And in the Asia-Pacific market, which includes Australia, Hong Kong, India and Taiwan, domestic equity sales stood at almost US$1.3 billion in the second quarter of this year, while foreign sales were in the order of $3.1 billion.

Canada will host the IIFA conference next year, when members will again explore issues we have in common, and see how we can advance the interests of retail inves-tors. IE

Joanne De Laurentiis is president and CEO of the Investment Funds Institute of Canada.