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Tim Fuller and Damien Klassen of Nucleus Wealth.
The universe of new-broom superannuation funds is expected to expand further in 2018 with Melbourne-based Nucleus Wealth among those expected to enter the increasingly crowded sector.
Nucleus launched a tailored separately managed account service last July and, with $14 million under management, 140 clients on board and 1500 individuals in the process of signing up, hopes to introduce a super iteration of the service by July this year.
In so doing Nucleus will join a growing list of young funds, such as Grow Super, Spaceship, Zuper, Human Super and Tomorrow Super, hoping to grab market share off the long-standing incumbents, which collectively control about $1.6 billion of retirement savings.
Head of operations Tim Fuller said that like other funds, Nucleus would have to work to retain young members, who were more likely to select fund providers with a world view in line with their own.
Mr Fuller argued younger savers tended to base their investment decisions less on the past performance of a fund and more on a fund’s values and investment philosophy.
“It’s all about the future. Track records have gone out the window,” Mr Fuller said. Whereas previously investors would only have left if they had lost trust in a product or fund, younger investors might leave if they found better alignment of values or views of the world elsewhere.
One way that Nucleus aims to retain investors is by offering blogs, webinars and financial advice.
“It’s about offering more information, about opening up the black box,” said Damien Klassen, head of investments.
Nucleus is perhaps more similar to Tomorrow Super than other rivals because rather than pooling members’ assets in a unit trust structure, it uses separately managed accounts. This means that members own the assets in the underlying portfolios so their tax positions are ring-fenced from those of other members. Mr Fuller questioned what other disrupters were bringing to the market, given that they were using the traditional unit trust model.
“They are more of a marketing play,” he said.
The fund’s other distinguishing feature is that it uses qualitative and quantitative tools to create tailored portfolios that are adjusted to suit members’ risk and income profiles, as well their social and ethical values. The suite of products comes with 19 ethical overlays and six investment options. Four of the investment options are multi-asset, while two are equities only. When it comes to selecting equities, Nucleus prefers those with defensive qualities. “We are tilted towards defensive shares,” Mr Klassen said.
Financial adviser market
Nucleus hopes to amass between $200 million and $300 million of assets in three years. To achieve that, unlike other newcomers, it will not rely solely on attracting members directly from rival funds, but also intends to tap the financial adviser market.
“If you want to get lots of money in a short period, you need the advice market [although] that is changing,” Mr Fuller said. In order to enable access to the adviser market, the Nucleus executives hope to gain an all-important rating by a research house in about six months.
Nucleus’s platform provider, Linear Financial, is merging with Managed Accounts Holdings, which is likely to delay the launch of the Nucleus Wealth super fund. Mr Fuller and Mr Klassen would ideally like to launch the fund, which will charge about 1 per cent in investment fees, in a couple of months, but it may be pushed back until early in the 2018-19 financial year.