The demise of the mortgage trust industry continues, with the news this week that Australian Unity Investments will close its Mortgage Income Trust and its Wholesale Mortgage Income Trust.The fund manager said in a statement that it will return all capital to investors through regular payments, and this is expected to take three or four years.Other funds that are being wound up are Balmain Mortgage, Colonial First State Income and Perpetual Mortgage.  Mortgage trusts suffered heavy outflows during the financial crisis, as investors moved their money into guaranteed deposits. A Morningstar report on the sector, published in September, suggests that things have not improved much over the past five years. Funds under management fell 24 per cent in 2010 and 19 per cent last year. The constant outflow of funds forces managers to hold more in cash than they would otherwise choose, and this reduces returns. Morningstar research analyst Alex Prineas said: "We believe that a mortgage trust is only compelling if there is sufficient premium above cash to justify the additional default risk and illiquidity of mortgages. Over most time periods, the mortgage funds we assessed either underperformed the UBS bank bill index or delivered only a miniscule premium for added risks."Australian Unity's general manager of property, mortgages and capital markets, Mark Pratt, said in a statement: "Market sentiment since the global financial crisis, [which has been] exacerbated by the introduction of the bank guarantee, meant they were unlikely to regain their former appeal."