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Here’s why Spaceship super was fined by ASIC

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The corporate watchdog found Spaceship super's advertising to be false and misleading.

Spaceship, the millennial-focused superannuation fund that claims to invest where the world is going with a heavy weighting towards tech stocks, has been fined $12,600 by the Australian Securities and Investment Commission (ASIC). The new super fund was fined for false and misleading conduct, but what does that mean, exactly?

ASIC was concerned with how the fund was advertising its GrowthX investment option, and pin-pointed one phrase in particular that it found to be misleading. The phrase, which has since been removed from Spaceship's website, read: "We will fight to get you the very best assets in your portfolio…. We will measure companies in our portfolio based on their ability to provide defensibility of profits and high levels of product differentiation."

In a statement by ASIC, the regulator explained why it found these statements so problematic: "ASIC’s concern is that these statements mislead prospective members of the fund because at the time 79% of the fund was invested in index-tracking funds, which involved no qualitative analysis of the underlying companies."

What is an index-tracking fund?

Rather than a managed fund, which has portfolio managers actively scouring the market and hand-picking stocks to buy, an index fund or exchange traded fund (ETF) simply tracks a particular index. For example, you can select an index fund that mirrors the performance of the top 200 companies listed on the ASX. Because such a large proportion of Spaceship's fund is invested in index funds, ASIC believes Spaceship's advertising incorrectly implies that the fund's managers actively cherrypick stocks. It is in this regard that the fund was found to be false and misleading.

It's important to note that this penalty is not at all a reflection on the value of index funds as investment vehicles. In fact, ETFs are becoming increasingly popular investment products for their instant diversification and their easy nature. Many retail investors are attracted to the idea that index funds aren't reliant on a fund manager trying to beat the market by hand-picking stocks.

Is Spaceship's fine acting as a warning for other millennial-focused funds?

Over the past few years we've seen a raft of new super funds pop up with an aggressive focus towards millennials, such as Spaceship, GROW Super and soon-to-launch Zuper. All claim to be shaking up the notoriously stale super industry as they each fight for a piece of the increasingly large superannuation pie which is now worth more than $2.3 trillion.

ASIC's penalty towards Spaceship is potentially a warning by the regulator for these new super funds to ensure they're not getting too carried away with their engaging advertising and clever marketing. The statement by ASIC's deputy chair Peter Kell read: "New entrants to the superannuation sector have the potential to offer benefits to consumers, but it is critical that they provide accurate and clear information, especially if they are targeting a younger demographic."

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