According to Rainmaker Information, the vast majority of superannuation disruptor products, purpose-built for young fund members have either “collapsed, been shut down or failed to resonate with their target younger audiences”.
There were just 14 superannuation disruptors remaining at the end of 2022, with more collapsing in the first few weeks of 2023.
“The threat to shake-up incumbent superannuation funds posed by the businesses and promoters behind these disruptor products largely appears to have passed,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.
The market peaked at 30 challenger brands hoping to take on the established industry and retail funds, often with a focus on the youth.
Rainmaker Information said that even at their apex, these disruptors only represented 0.12 per cent of the market, or $3.8 billion in superannuation funds under management (FUM).
“The segment began in 2014 with the launch of products such as Future Super and Virgin Super, which were followed by Grow Super, Spaceship, Crescent Wealth, Human Super, and Zuper,” said Mr Dunnin.
While the number of funds in the disruptor space has more than halved, their overall FUM has increased by 124 per cent since 2017, growing from $1.7 billion at the time.
Future Super, Virgin Money, Spaceship, Crescent Wealth, and Verve Super are the major remaining super disruptors.
“These five funds account for 82 per cent of the market’s FUM, with Future Super currently growing at the fastest rate,” said Mr Dunnin.
“The major characteristic of these surviving disruptors is a clearly delineated product theme — four of the segment’s five largest products are heavily identified with ESG with others heavily focused on technology investments.”
Rainmaker Information said that the COVID-19 pandemic was a major factor in the closure of disruptor products such as Grow Super, Zuper, BrightDay, GigSuper, Max Super, Good Super, Super Prophets, and FairVine (Human Super).
The firm added that emergency measures by the government in 2020 to allow fund members to take up to $20,000 out of their superannuation accounts made these products particularly vulnerable.
The introduction of “stapling” in 2021, which ties young members to the first superannuation product they ever joined, have also made it harder for disruptors to attract new members.
“But poor product design didn’t help either,” said Mr Dunnin.
“The median expense ratio for disruptor superannuation products being 1.15 per cent p.a. was 10 per cent higher than the Rainmaker 2022 MySuper fee benchmark of 1.06 per cent p.a.. Their high fees were a symptom of their lack of scale.
“More surprising, however, was that the highest fees were associated with superannuation disruptors that emphasised ESG investing. As important as ESG is as an investment theme, there’s no reason why it should cost more.
“But what was most disturbing about the superannuation disruptor segment was how few of them regularly published accessible, comparable performance information.”