New funds on the block
I
t might be a bit too early to call, but
I think superannuation is finally
starting to look sexy. Those of us that
can’t afford to buy a house are thinking
we’re probably going to rent for the rest
of our lives, so when we are 80 years old
and still paying the landlord every week,
it would be reassuring to know that our
super will keep us fairly comfortable (and
maybe even get us to Bali once a year).
The problem is that the new highly
attractive superannuation products
marketed to millennials might not be
the best thing for us right now.
There are two big things that millennials
are concerned about: social responsibility
and control. This has given birth to a range of
millennial-targeted super products. Some set
themselves apart by being socially responsi-
ble while others stand out because they
explicitly invest in things we know are “hot”.
Let’s take the newcomer Spaceship, for
example. Clearly targeted at millennials, its
highest weighting is in international shares,
with the fund’s website indicating that for a
portfolio balance of $100,000, around 35% is
invested in trendy tech stocks like Alphabet
and Facebook. Its catch-cry is “invest in the
future – where the world is going”.
Kirby Rappell, from SuperRatings, says
some of the new super funds on the market
Steph Nash STARTING OUT
Staff writer Steph Nash has a bachelor of
communications degree.miss the mark when it comes to investment
returns and fees.
“If you were to look at the average person
who may have $60,000 in super, and then
look at what the funds’ expectations are, it’s
just so different to what you’d expect for mil-
lennials,” he says. “The key challenge for the
funds at this stage is on the investment side.
What sort of returns are you going to get out
of this stuff? And are you going to get a better
get somewhere else?”offers a balanced option at a whopping
$1078pa, or 2.15%, for a balance of $50,000.
Australian Ethical is another super fund
that’s starting to target millennials. It has
an actively managed investment team that
selects stocks based on social values. The
rate of return over 10 years for Australian
Ethical’s growth option is 1.9%pa. Accord-
ing to SuperRatings, the average rolling
10-year return to April 30 this year was
4.8%pa for balanced options, which is a
huge difference – especially considering
the Australian Ethical option is growth.
New funds won’t have a long-term
returns history for comparison purposes.
Instead, Rappell says you should check the
fund’s investment objectives, which should
be listed in its PDS. Spaceship’s growth
option aims for a return equivalent to the
consumer price index (CPI) plus 2%. “The
median balanced option in the market is
currently CPI plus 3.5%,” he says. “Space-
ship is being pretty cautious. For a growth
portfolio, the objective is usually around
inflation plus 4%-4.5%. So that sticks out a
little bit – it’s pretty different.”
It’s really easy to be lured by marketing
into a financial product that may not be the
best option. While I have no problem with
these new funds (and there are a lot of
them – most recently Grow Super, which
was successfully promoted on the satirical
news website The Betoota Advocate, and
Zuper, which is expected to release its PDS
this month), I think young investors need
to take a more active approach to selecting
and monitoring their super. Ideally, you
should choose a fund that has low fees
and performs well.
You should always look beyond the sur-
face when weighing up your financial deci-
sions. Sure, not profiting from war or
climate change would be amazing, but is it
worth possible hardship in your old age?
It’s definitely something to think about.It’s wise to look beyond the surface when deciding where to put your super
Some new funds miss the
mark when it comes to
returns and fees
According to the SuperRatings database,
the average fee for a balance of $50,000
across all super funds is around $650pa,
or 1.3%. If you had a balance of $50,000
invested with Spaceship, you would pay
$878pa in fees on that balance (there are
some reports that fees will be lowered
thanks to recent new seed funding).
Another new super fund, Good Super,