Spaceship Super first super fund hit by DDO interim stop order

Spaceship Capital is the latest company to be hit by interim stop orders relating to the Design and Distribution Obligations (DDO) regime this time time relating to one superannuation product and three managed funds.

The Australian Securities and Investments Commission (ASIC has) said it had made interim stop orders due to deficiencies in their target market determinations (TMDs).  The funds are:

• Spaceship Super, a sub-plan of Tidswell Master Superannuation Plan, issued by Diversa Trustees Limited (Diversa),
• Spaceship Earth Portfolio (ARSN 643 773 282), Spaceship Origin Portfolio (ARSN 623 312 087), and Spaceship Universe Portfolio (ARSN 623 321 022) (together, the Spaceship Voyager Funds), issued by Spaceship Capital as the responsible entity.

The order made in respect of Spaceship Super is the first interim stop order on a superannuation product under the design and distribution obligations (DDO)

The interim orders stop Diversa and Spaceship Capital from issuing interests in, giving a product disclosure statement (PDS) for, or providing financial product advice to retail clients recommending an investment in, Spaceship Super and the Funds.  ASIC made the interim orders to protect consumers and retail investors from acquiring products that may not be suitable for their financial objectives, situation or needs.

Diversa and Spaceship Capital were served the interim stop orders on their products on 31 May 2023. The orders are valid for 21 days unless revoked earlier. ASIC will consider making final orders if the concerns are not addressed in a timely manner. Diversa and Spaceship Capital will have an opportunity to make submissions to ASIC before any final stop orders are made.

Spaceship Super

ASIC considered that the target market in the TMD for the Spaceship Super product was defined too broadly, and had not properly taken into account the risks of the product options.

ASIC’s concerns included:

• the target returns for the investment options were too low to be consistent with investors in the target market, who were identified as seeking high returns;
• a mismatch between the investment risk profile of the investment options (very high) and the return profile identified for investors within the target market (high); and
• insufficient consideration of the investment risk features associated with the investment options, including concentration, market and currency risks arising from the way in which the products are invested.

Furthermore, ASIC considered that the distribution conditions in the TMD were not appropriate to ensure that Spaceship Super would likely be distributed to consumers in the target market.

Spaceship Voyager Funds

ASIC considered that the target markets in the TMDs for the Spaceship Voyager Funds were defined too broadly, and had not properly considered the risks and features of the three funds.

ASIC identified that information within the TMDs for the funds was inconsistent.

ASIC’s concerns included:

• a mismatch between the investment risk profiles of the Spaceship Voyager Funds (very high-risk) and risk profiles identified for investors within the target markets (medium and high). The target markets included investors who intend to hold the funds as a core component (25–75%) or standalone component (75–100%) and the funds invests in a single asset class (i.e. shares);
• a potential investment timeframe of two years or more where the suggested minimum investment timeframe in the PDS is seven years; and
• the target markets included investors with a need to withdraw money daily when withdrawals would usually be paid within five business days and may be suspended or delayed for longer than 21 business days.

Furthermore, ASIC considered that the distribution conditions in the TMDs for all three funds were not appropriate to ensure that the funds would likely be distributed to investors in the target market.

Background

As of 30 June 2022, Spaceship Super had 18,000 members and held approximately $550 million in assets under management (AUM),  Spaceship Earth Portfolio held $40.6 million in AUM, Spaceship Origin Portfolio held $50.8 million in AUM and Spaceship Universe Portfolio held $360.8 million in AUM.