Colonial winds up mortgage fund

Colonial yesterday said that it decided to wind down the Colonial First State Mortgage Income Fund. The fund will return capital to investors over several years. The fund has about $850 million in funds under management.

A second and much smaller fund, the Wholesale Guaranteed Mortgage Fund, will also wind down.

Both funds have frozen redemptions since late 2008 when they, and many other managed mortgage funds, faced a surge in withdrawals amid a flight to bank deposits brought about by the financial crisis and compounded by the guarantee on bank deposits.