Do You Want To Be Forced To Invest Your Super In Start Up’s?

A Controversial Proposal from A Start Up Tech Founder

In a bold and contentious proposal, Ben Thompson, the CEO of HR software company Employment Hero, has called for superannuation funds to be mandated to invest in start-ups. His argument is rooted in the belief that directing even a small portion of these funds—1 per cent—into start-ups could foster innovation and support emerging businesses, even if they fail to meet traditional performance tests.

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The Hidden "Zombie" Start-Ups

Thompson's call to action comes amid warnings from leading Australian investors about the rising number of "zombie" start-ups. These are companies that are struggling to survive, often just treading water without making significant progress. The fear is that without additional investment, many of these companies will eventually fail. However, forcing super funds to invest in these potentially high-risk ventures raises several concerns.

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The Risks of Mandating Investments

1. Investment Autonomy and Choice

Superannuation funds manage the retirement savings of millions of Australians. These funds are typically invested with a focus on stability, growth, and long-term security. Forcing super funds to invest in start-ups, which are inherently risky, undermines the principle of investment autonomy and the right to choose where one’s savings are allocated.

2. Risk Versus Reward

Start-ups, while potentially lucrative, are known for their high failure rates. According to various studies, a significant percentage of start-ups fail within the first few years. Mandating investments into such volatile ventures could jeopardise the financial security of retirees who depend on the steady growth of their superannuation funds.

3. Performance and Accountability

Super funds are accountable to their members and are expected to meet certain performance benchmarks. Investing in start-ups that may not meet these benchmarks could lead to overall underperformance of the funds. This, in turn, could have serious implications for the retirement savings of millions of Australians, potentially reducing their financial security in retirement.

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Are You Looking For Choice? 

If you are worried about the possible pressure that could be placed on industry super funds, have you considered SMSF Property Investment in new house and land builds? 

Get in touch with the team today to learn more! 

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