Fledgling Hanover Funds Management has pulled the pin on its first product offering, blaming the Securities Commission for deterring potential investors.
Hanover's Global Growth Fund, launched in September, was a form of "equity-linked note" with "capital protection". Investors would have received a 50 per cent return if abasket of global equity indexes rose by 10 per cent per annum over a five-year period. If not, they would have still been repaid their principle.
Yesterday, Hanover said it would not allot the fund because the level of investment did not reach the required threshold by the offer's closing date.
"The success of the fund was clearly impacted by the intervention of the Securities Commission on our advertising part way through the acceptance period on what may have seemed a complicated product," Hanover Funds Management chief executive Perry Cornish said.
The commission last month prohibited some advertisements for the fund on the grounds investors may have been misled or confused about its features.
"Investors may think that the 10 per cent figure means that they would receive a return of 10 per cent each year. This is not the case. There is no annual return for this investment," commission chairwoman Jane Diplock said at the time.
"Investors are likely to believe from the advertisements that the return is potentially greater than is actually the case. Even if they receive the 50 per cent return at the end of five years, this equates to less than a 10 per cent annualised return on the investment. They may receive zero return."
Cornish said those who had applied to invest in the fund would receive their money back plus interest.
The withdrawal of its initial offering is an inauspicious start to Hanover Group's plans to build a funds management business with at least $1 billion under management within three years.
However, despite the shortfall, investor response to the Global Growth Fund had been positive said Cornish, "and has demonstrated that there is a definite place in the New Zealand investment scene for capital protected investment products".
The company intends to launch a new product next year "with different features and benefits". It would also introduce a portfolio of products with features more appropriate to the financial intermediary market.