The fee structure for new superannuation fund Spaceship doesn’t stack up against the competition, according to analysis by an industry expert.
Graham Hand from Cuffelinks, an online investment newsletter with a focus on the superannuation industry, argues that the fees associated with the fund are well above the market average.
Dubbed the “super fund for millennials,” Spaceship has made an immediate impact since it launched on March 31.
The company said it has already reached almost $100 million under management, pitching a fund that focuses its investments in the technology sector.
Despite a big entry into the market with endorsements from tech industry heavyweights Peter Thiel and Mike Cannon-Brookes, not all analysts are convinced that Spaceship’s business model is competitive.
Hand is also skeptical of Spaceship’s tech-focused superannuation model, arguing that the fees associated with the fund are well above the market average.
He compared Spaceships costs structure to Hostplus, which has an industry-leading management fee of 0.02%. Here’s how Spaceship stacks up:
“Putting aside buy/sell spreads and ignoring exit fees, a young person with $10,000 in Spaceship would have an annual fee of 1.6% plus 0.78%, or 2.58% pa,” Hand said.
Hand highlighted a passage from Spaceship’s Product Disclosure Statement, which said that a 1% markup in annual fees could reduce a super fund’s return by up to 20% over a 30-year period (e.g a nominal balance of $100,000 would be reduced to $80,000).
Noting that Spaceship’s current fee markup compared to its industry peers was more than 1%, Hand said that Spaceship’s current fee structure is non-competitive.
The Cuffelinks report also assessed Spaceship’s asset allocation structure.
Hand said that while Spaceship has a bigger focus in global stocks due to its tech-focused platform, the total portfolio allocation to the tech sector is just 34%.
The Spaceship fund has a 40% allocation to Australian shares, which means traditional Australian companies like bank and mining stocks would still account for a significant amount of the portfolio.
In addition to the portfolio and fee structure of Spaceship, Hand’s analysis also graded the customer experience and assessed the savvy marketing which has made the fund so popular with millennials.
While a report in The Financial Review in June said that the fund was currently worth around $70 million, Hand said that the current offering was not strong enough for the fund to succeed over the longer term.
Cuffelinks is published by Chris Cuffe, the outgoing chair of industry fund UniSuper