Embattled Australian mortgage fund manager LM Investment Management has gone into voluntary administration.

That might mean a longer wait for payment by investors, including New Zealanders, whose money in the fund created by Kiwi-born Peter Drake has been frozen since 2009.

In an unsigned note sent to financial advisers last night the company stresses it is not in liquidation or receivership but it has brought in administrators FTI Consulting "in the best interests of investors".

The administrator assumes responsibility for decision-making on LM's various funds, and will continue to sell properties and eventually wind up the fund.

The note attempted to reassure investors the appointment of administrators brings "independent, arms-length, specialist financial expertise" and its creditor issues are "quarantined from the fund".

However, NBR ONLINE understands at least one LM senior manager resigned yesterday.

Gold Coast-based LM did not respond to NBR ONLINE's questions yesterday about its financial state or senior manager resignations.

Messy fight 
LM has been locked in a messy fight with rival fund manager Trilogy Funds Management for control of its mortgage funds, with activist investors voting to displace LM in favour of Trilogy for one fund.

Its first mortgage fund is worth about $A418 million, although the unit value has dropped to A59 cents after LM posted a 2012 loss of $A88.6 million.

Last night's statement to advisers says its funds needed to be "shielded from any ensuing reputational damage" after Trilogy's publicity campaign against it.

But critics expressed doubts about the company's asset valuations, which were based on their finished value, while they were trying to raise further money to complete the developments.

Investors, including New Zealanders, pumped millions of dollars into its mortgage funds, which was lent to Australian property developers before the global financial crisis.

LM was on a fundraising drive in Europe and had opened an office in London, but last month it was criticised for allegedly selling itself overseas as "bank-like".

Ernst & Young, the auditors of its mortgage fund, said last year there was "significant uncertainty" LM's first mortgage fund could continue as a going concern, as the expiry of its financing facility with Deutsche Bank loomed in June.

dwilliams@nbr.co.nz