Millennial superannuation app Spaceship has responded to critics by cutting fees, increasing its exposure to tech stocks, launching a new investment option and forming an advisory board.
Some in the finance industry argued the 1.6% fee that the startup charged was not competitive. Another criticism of Spaceship, which opened to applications early this year, was that while it was marketing itself as a tech- and future-focused super option for millennials, it wasn’t actually investing in tech stocks any more than traditional pension funds.
Stockspot founder Chris Brycki, in a column for Business Insider in March, called Spaceship “clever marketing”.
“They get full marks for the use of flashy marketing and celebrity endorsers to distract people from the underlying financial product being sold,” he said.
“Look under the covers and you won’t find a tested process behind their investment strategy (to buy tech stocks), and no track record to support their high fees.”
To counter these criticisms, Spaceship has announced it will cut the fee to 0.99% and increase the tech component of its portfolio from 30% to 50%. The company has also introduced a second investment option – the Spaceship Global Index Fund – which charges just 0.65% and tracks the MSCI global index.
Spaceship chief executive Paul Bennetts told Business Insider cutting fees was a difficult task.
“Within superannuation there’s a thing called ORFR [operational risk financial requirement levy], which is a regulatory piece of capital you need – 25 basis points,” he said.
“The discretionary wealth players, the Stockspots of the world… Those guys are charging 95 to 100 basis points for effectively a very similar product to our 65 basis-point product.”
Bennetts said $19.5 million was raised from investors in a round completed in June, which closed $1 million higher than planned due to Atlassian co-founder Mike Cannon-Brookes wanting to buy extra equity.
Cannon-Brookes has also put his own retirement savings into Spaceship, despite his image and name being removed from promotional material in August.
“He put it in Q2 of this year. We’ve been managing his super and it’s doing pretty well,” Bennetts told Business Insider.
Over the winter, the startup also changed its Australian financial services licence holder partner, switching from Grosvenor Pirrie Management to Enva Australia.
“We used the licence of another super fund, and obviously that doesn’t make sense in the long term… Those guys are moving more and more into similar spaces to us and it doesn’t make sense for them to have access to everything we’re doing,” Bennetts said.
He said the change was not a factor in Spaceship’s ability to cut fees.
“We’ve done a good job of building the fund quickly and that’s allowed us to go back to our partners and rejig the commercial arrangements… That’s helped us create cost savings that we’ve passed onto our customers.”
In a move to assure customers of its prudence, Spaceship has formed an advisory board featuring former APRA executive general manager Sarah Goodman, Ellerston Global Capital director Paul Dortkamp and Blackhall & Pearl managing director Jodie Baker.
In March, Bennetts said Spaceship would have $100 million under management by April, but declined to reveal the figure now, other than to say it was more than $100 million.
Spaceship first hit the headlines September last year after Cannon-Brookes declared he would put his own retirement savings into it, calling it a “game changer”. His investment vehicle Grok Ventures had contributed to the startup’s $1.6 million seed round.
Bennetts took over as chief late last year from co-founder Andrew Sellen, is no longer involved with the company. The other co-founder, Dave Kuhn, departed in February.