19/11/2013 - 11:47

Super funds’ risky media move

19/11/2013 - 11:47

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Rated as the world’s fourth biggest pool of contestable cash, Australia’s $1.4 trillion superannuation sector was eventually going to struggle to find viable investments for its members, though not many people expected it take a risk with a plunge into publishing.

Rated as the world’s fourth biggest pool of contestable cash, Australia’s $1.4 trillion superannuation sector was eventually going to struggle to find viable investments for its members, though not many people expected it take a risk with a plunge into publishing.

At a time when all forms of media are fighting for advertising revenue, and some of the best-known families in the business are selling out, three Australian industry superannuation funds are buying in.

There are arguments for and against what Industry Super Holdings, Cbus and Australian Super are doing with their collective $6 million investment in a web-only product called The New Daily.

On the plus side, there is evidence that news outlets starting from scratch as pure internet products have the benefit of lower costs than old media with its legacy costs of paper, printing and physical distribution.

There is also the example of clever businessmen such as Jeff Bezos, founder of Amazon, and Warren Buffett, the world’s richest investor, buying into the media industry because asset values are low and they believe it is an industry primed for a rebound.

On the negative side there is the risk factor, which is what some members of the superannuation funds are questioning, because the team behind The New Daily openly admit that it could be years before the free publication earns a profit, if ever.

So far, unfortunately, most of the criticism has been carried in The Australian newspaper, which obviously does not welcome a new kid on its block.

Strident attacks on The New Daily over the weekend and again yesterday did make some telling points, but were tarnished by the fact that they were carried in a rival media outlet and fell into the category of ‘they would say that, wouldn’t they’.

If you can look beyond the media versus media war of opinions, there is an issue at the heart of The New Daily which should be capturing the attention of every Australian with savings in an industry-run superannuation fund – the questions of risk and why?

The risk issue is obvious, because all superannuation funds have a duty of care to their members, with the critical test being whether an investment makes financial sense.

The New Daily is a marginal proposition but it does have the backing of skilled media industry professionals and should not simply become some sort of sheltered workshop for unemployed journalists.

Eric Beecher, publisher of the website, has made several fortunes from media ventures and can obviously sniff another opportunity to show his rivals in the traditional publishing world how it is done.

But watching Mr Beecher and his hand-picked editor and former editor of Melbourne’s The Age newspaper, Bruce Guthrie, go about the business of starting a new website is not the problem.

The problem lies in the $6 million of superannuation funds going into a high-risk adventure in an industry already oversupplied with news, and a somewhat cavalier attitude of the management teams at the funds.

One comment underlines the naivety of the people with access to the cash socked away in the industry funds. An Australian Super spokeswoman told The Australian that: “We have explained to them (fund members) this is not a private equity investment, but a marketing expense”.

Oh yeah. And where, it must be asked, does the marketing cash come from? Member contributions, obviously.

Worse still, what return will the “marketing expense” generate and how? From advertising on The New Daily website, or from the occasional positive story about the benefits of industry superannuation funds?

Sliced anyway you like, the big issue here is the fact that a team of astute media executives has created a vehicle that has attracted the eye (and the ego) of industry superannuation fund managers.

It will now be interesting to see whether The New Daily is a one-off adventure or whether other shrewd businesspeople with a bright idea can also find a way to prise free a little bit of the $1.4 trillion of member funds for their projects.

The game, as they say, is afoot, and there’s a chance that you’re paying for it with what you thought were your retirement savings.

If anyone needed another reason to consider a self-managed superannuation fund The New Daily, and future adventures like it, offers a compelling case for managing your own retirement.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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