FMA blocks Longhorn fund from forecasting 50% return

The Financial Markets Authority (FMA) has ordered a property investment fund to stop marketing its latest offer in an urban development in Auckland, because of potential false or misleading claims.

The One Management GP Limited has been told it cannot market or raise money for its One in Longhorn Partnership Fund, which has been aimed at wholesale investors.

The FMA has issued an interim order, usually for 15 days, as it considers whether to impose a full stop.

It said the order was issued to stop or prevent advertising or disclosure that was false or misleading, or would likely confuse consumers or investors, as they made an investment decision.

"The FMA is concerned about statements by the One Management GP Limited regarding the fund's returns payable to investors and the level of risk in the investment," the authority said in a statement.

The interim stop order effectively freezes the fund, prohibiting any sale or disposal of units, banning promotion of the fund.

"The FMA said it considers that making this order is desirable in the public interest as significant financial harm to investors could result from investing in units of the fund," the official notice of order said.

In addition, the order has also been imposed on James Law Realty, which has been involved in promotion of the fund.

The One Management Group has started marketing the fund in sponsored articles under the heading of "50 percent fixed returns over three years for wholesale investors."

The company has described itself as a "senior developer in New Zealand" with projects delivered or under way worth $400 million, with a "proven track record" in residential property development.

The minimum investment in the development was $250,000 with a maximum $10m, for a maximum 36 month period, with investors to be paid a fixed 50 percent return before tax over that period, regardless of whether the development is ultimately completed or profitable.