The month of April saw another strong month for flows into liquid alternative mutual funds as more than $927 million flowed into the category during the month, bringing the one-year total asset flows to nearly $39 billion, and the year-to-date flows to $11.6 billion. As investors continue to diversify their portfolios in an effort to mitigate downside risk, the assets in the alternatives category, as defined by Morningstar, has grown at 36% over the past year. By comparison, the next fastest growing categories were international equity and sector equity, which grew at 9% and 7%, respectively.

Source: Morningstar May 2014 Asset Flows Update

Long/Short Equity Tops April Flows

At a fund family level within the alternatives category, Gotham, Dreyfus and Robeco saw the largest inflows during April with net flows of $282 million, $231 million and $217 million, respectively. Gothams long/short equity fund, the Gotham Absolute Return Fund, scored big with $208 million in flows during April, bringing the total net inflows over the past year to $1.4 billion.

At the sub-category level, long/short equity dominated the flows for the month with $887 million of net inflows with the multi-alternative category trailing close behind with $620 million of net inflows. Gotham and Robeco dominated the long/short equity category inflows, while the Principal Global Multi-Strategy Fund topped the list of asset flows in the multi-alternative category. One surprising point to note in the long/short equity category is that the asset gathering machine (or, as Morningstar noted, the Red Giant ), the MainStay Marketfield Fund, broke its 31 month streak for positive asset flows as the fund suffered its first net outflow in April since August 2011. After gathering more than $12 billion in fresh assets in the past year, the fund saw outflows in April of $70 million. In the multi-strategy category, one notable fund for outflows is the Absolute Strategies Fund which had $171 million of net outflows in April. This brings the total net outflows for the fund over the past year to $1.1 billion.

At the other end of the spectrum, market neutral and multi-currency funds saw net outflows over the month of $191 million and $108 million. The market neutral category flows were dominated by outflows from the PIMCO Fundamental Advantage Absolute Return Strategy Fund that had $374 million of outflows in April despite modestly positive performance on a year-to-date basis.

Non-Traditional Bonds Also See Strong Growth

In addition to the alternatives category of funds, and considered by many to fall into the alternatives category, are the non-traditional bond funds. Morningstar classifies these funds as part of their taxable bond category, yet the category mainly contains three types of funds: unconstrained bond funds, long/short fixed income funds and strategic income funds. This category saw $2.6 billion of net inflows in April and $55.1 billion over the past year, resulting in a 1-year growth rate of an impressive 62%.

Flows into this category were dominated by the Goldman Sachs Strategic Income Fund with $1.4 billion of inflows and the BlackRock Strategic Income Opportunities Fund with $932 million of inflows. On the outflow side, PIMCO once again tops the list with $721 million of outflows from their PIMCO Unconstrained Bond Fund.

Morningstars May 2014 asset flow report can be found here: Morningstar Direct U.S. Open-End Asset Flows Update

Source for asset flow data: Morningstar