Can you beat the big super funds by self-managing your super?
There is a real tension between wanting to run your own superannuation investments or simply giving the job to a super fund.
On the one hand managing your own investments cuts costs, which is one of the keys to improving overall investment performance.
That can be the case whether you are using a full bells and whistles SMSF or by using one of the many super providers who offer products to manage all the paperwork and regulatory side but leave the investment choices up to you.
Investing your own super has never been easier either, with ready access to very low-cost exchange traded funds (ETFs) across the major world markets which also give easy access and diversified coverage to other asset classes such as bonds and infrastructure.
Hands off has advantages
Of course, there are advantages to letting the professional managers at a super fund manage your investments as well, the main one being that you can be completely hands off and worry free, left to just think up ways to spend up your retirement income.
The other main advantage of a professional fund manager is that they still have access to some investment areas that the average punter does not.
A great recent example of this is the successful sale of a small stake in Canva, an unlisted graphic design company whose Australian co-founders Cliff Obrecht, Melanie Perkins and Cameron Adams are now some of the world’s youngest start-up billionaires while still in their thirties.
Sale confirms valuation
It is widely expected that Canva will be listed on the Nasdaq exchange at some stage in the future but the sale of a US$150 million stake in the company to San Francisco-headquartered ICONIQ Capital and US group Coatue Management, confirmed that the valuation of Canva is currently $US25.5 billion (A$39 billion) – lower than the last valuation of $US40 billion but still an impressive result for a company that was only founded in Perth in the middle of 2013.
Interestingly, that sale valuation was very close to one arrived at by two Australian super funds – Hostplus and Aware Super – who were early investors in Canva through the local Australasian venture capital fund Blackbird Ventures back in 2015.
You may remember that in the past both super funds have faced criticism of their valuation of their stake in Canva, along with general valuations of unlisted investments such as venture capital investments, but the sale price was within 5% of the most recent independent valuation, which is a strong vindication of the valuation process.
It is also an indication of the sort of investment – and staggering investment return – that it would be close to impossible to be accessed by an individual running their own super investments.
There are some venture capital ETFs around, such as VanEck Global Listed Private Equity ETF (ASX: GPEQ) but getting in on the ground floor on an investment like Canva is very different to a more diversified VC exposure.
Loss compared to a 337-bagger
To give you an idea of how different, the VanEck fund is actually down on its 2021 launch price but Canva has produced exceptional gains for Hostplus and Aware Super.
By contrast, one of the earliest 2013 investments in Canva by VC investor Blackbird has grown by 337 times on its current valuation.
That means that even the small amount returning from this latest small Canva share sale will probably pay for the entire initial investment, with the vast majority of that stake remaining invested with more potential high returns possible given Canva’s continuing growth even at a greater scale.
VC investment is high risk
Of course, investing in early-stage venture capital is high risk so whether you are a major Australian super fund or an individual super investor, a VC purchase is likely to only be a tiny percentage of your overall portfolio.
Still, the sort of “juice” that a 337 times investment can add to any fund’s overall performance makes that sort of risk really worthwhile.
It may also more than compensate for the occasional total loss, which is always going to happen at this high-risk end of the unlisted investment markets.
It is also a factor that should be put in the plus column for big super funds when you are making the tough decision between self-managing or employing a big super fund to do the investment work for you.