As Paula says, it's all about picking a number, whether it's $A5 million or $10 million and the bite size they would like to allocate into each deal. Of course there is customer choice too - they can pick what they like or can go agnostic and ask to invest in everything, like half a million dollars into the next thirty deals.
So there's one solution to the selection and portfolio challenges. But I think part of the problem is if we want to unleash superannuation we have had this massive fee pressure on superannuation over the last two decades.
AD: But then the problem is VC is the most expensive asset class to run. So the average venture fund in the US charges 2 per cent plus 20 per cent upside; no one wants to pay that much for superannuation because it comes out of the kind of headline fees members pay.
It's not economically sustainable for a fund to pay such large fees when they could go into another asset class with much lower fees.
Aussie VC funds are all too small. You might say there are all these great guys raising $A200 million dollar funds but that's far too small by global standards and if you are running a $A200 million fund on a 2/20 fee structure you have $A4 million a year in operating costs.
You can't really do due diligence on that budget and you can't employ a big enough team. The minimum viable size for a VC fund is probably a billion dollars and no one has ever raised a fund of that magnitude in this country.
DB: Even then if you are going to raise a billion dollar fund the super funds are going to squeeze you for a much lower fee structure. So on the VC side you won't have the resources to properly take all the activities necessary to run a good fund.
CD: I want something like an audacious dream of what the allocation of Australia's super funds could look like in 10 or 20 years' time. What is our national versus international spread? What's the level of liquidity needed?
Let's just get thinking of a blueprint or a national benchmark because as time passes more and more is getting kicked into the bowl but every decision is basically made at such a micro level it doesn't really allow a good decision at a holistic level.
PA: If we look at what is doable it really plays to highlighting the hero stories in the media. If you want success in this market it's good to get the stories out in the public arena about super funds putting away amounts of money in VC and PE.
Now we all know those amounts aren't honestly going to be sufficiently significant but they play well in the media, which will breed more success and will mean more people tipping money in.
This document is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. The views expressed in this document are the views of the individual author and are not to be seen as the views of PwC.