The researcher has looked a fund management practices in 16 countries in an effort to try and highlight issues and raise standards.

Countries were scored on six categories: investor protection, prospectuses and investors' reports, transparency in sales practices and the media, fees and expenses, taxation, and distribution practices.

Top of the list was the United States with an A, and China was second highest ranked with a B+. Two countries New Zealand compares itself with, Australia and the United Kingdom also faired poorly scoring a C and C+ respectively.

On the surface the results appears to be in severe indictment of the industry in New Zealand. However Morningstar says one of the biggest problems in this country is around regulation.

Morningstar Manager, Fund Analysis Chris Douglas says while he isn’t critical of the people doing the regulation, the issue is really around the regulators lack of resources. Morningstar also rated New Zealand down on tax issues and disclosure.

Douglas says many countries provide tax incentives for long term savings. However that isn’t the case in New Zealand. Although KiwiSaver is an incentive for long-term managed fund savings in this country that didn’t count when comparing tax issues.

Morningstar Head of Adviser and Research Anthony Serhan acknowledged that tax issue are complex and difficult to compare across jurisdictions.

The third area New Zealand was marked down on was transparency, such as the disclosure of holdings and fees.

Serhan says the study noted that entry and exit fees for Kiwi funds are moderate relative to other countries, and that expense ratios for share and cash funds are in line with those of other countries.

The study did, he says, point out that expense ratios for New Zealand fixed income funds are higher than those of other countries.