Super fund Spaceship accused of high risk and not enough returns

A start-up super fund that is aggressively targeting millennials via social media has investment advisers alarmed that it is more expensive than most super funds and is taking significant risk without promising higher returns.

But Spaceship, which has the backing of venture capital and tech luminaries such as Atlassian co-founder Mike Cannon-Brookes, says strict rules mean it can’t gamble customers’ super, while the fees are a small price to pay for the superior returns that will come from investing in technology.

The super fund says it expects to kick off with $100 million of funds under management from young Australians when it launches later this month, after “early adopters” moved $50 million of their super across in a bit over a month.

New customers are backing the belief that investing in the technology sector will make them richer in retirement. Investment advisers, however, are unsettled by the initial offering.

“It doesn’t sound like a good proposition to me,” Michael Rice of Rice Warner Actuaries told The Australian Financial Review. “Spaceship appears to be charging more and taking on more risk with a lower objective of projected returns than a MySuper product.”

Spaceship’s annual fees are twice that of non-profit industry funds while their stated return target of 2.5 per cent above the consumer price index is well below other comparable super funds. The current inflation rate implies a 4 per cent annual return. A comparable Australian super product targets 3.85 per cent above inflation.

Portfolio reflects what’s feasible

“If you are young you can take more risk in super but you would expect a higher return to go with the extra risks,” Mr Rice said.

The fund told prospective investors it would have more than 90 per cent invested in equities, with 34 per cent tech stocks, and the remainder mostly Australian shares. The largest single stake would be in Google, followed by Apple and the Commonwealth Bank.

Founder and chief executive Paul Bennetts said the portfolio reflected what was feasible from a standing start, but would “evolve quickly over 2017”. Spaceship, he said, was close to making its first private technology company investment in the second quarter.


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