Quarterly redemption windows of mortgage funds are likely to become a permanent feature, according to Challenger Howard Mortgage Fund head Rob Stewart.

"The longer we stay in lock up, the more you will see a change in the profile going forward. It may well be that the quarterly redemption process will become a permanent feature," Stewart said at the Morningstar Investment Conference on Friday.

The daily redemption windows offered on platforms in the past are certainly not coming back, Stewart said.

"We just can't do that," he said.

The Challenger Howard Mortgage Fund was one of the first to freeze funds after redemption requests spiked late last year. It froze $2.8 billion of funds in October 2008.

It was quickly followed by other mortgage funds as investors withdrew their money en masse to put it into bank deposit accounts.

Stewart has been meeting with planners and rating agencies to get the mortgage funds back on approved lists and platforms, in order to attract money back into the funds.

"Right now the fundamentals for mortgage funds are very good. In this phase of the cycle mortgage funds should really start to outperform," he said.

"The problem is we are in lock up. People have asked for their money back, so there is an obligation to raise cash as fast as possible."

A plausible scenario for existing mortgage funds would be that fund managers will let them run off with quarterly redemption windows, while at the same time they will look to start new products that have a better balance between asset type and liabilities.