Long-term mutual funds had a second consecutive month of net redemptions, with outflows of $9.8 billion in December, mainly led by withdrawals from U.S. stock funds, Morningstar reported today.

The funds have posted outflows in five of the last seven months, marking their worst stretch since the late 2008 financial crisis, according to the report. Including funds that merged or liquidated during the year, long-term funds collected inflows of just $67.1 billion in 2011.

"Long-term mutual fund flows overall were quite weak in 2011,'' said Kevin McDevitt, editorial director for fund research at Morningstar. "You saw a lot of money leaving both long term funds as well as money market funds. It was a tough year overall.''  He described December's mutual fund numbers as "more of what we expected.''

"We've been seeing this trend, especially with U.S. stock funds, for quite some time, but with more of just a risk adverse mentality over the last six months at least," McDevitt said.

McDevitt predicted the trend would continue through the first half of 2012.

"It certainly will on the equity side,'' McDevitt said. "When it comes to U.S. stock funds, the outflows could slow down, but it's hard to imagine it reversing.''

Additional highlights from Morningstar's reported included the following:

U.S. stock funds were the primary driver of outflows, shedding $17.7 billion in December and about $84.7 billion for the year. 2011 was the sixth consecutive year of U.S. stock fund outflows and the worst year for the asset class since $121.2 billion fled in 2008, according to the report.

December also saw international stock fund outflows of $6.6 billion, representing the group's highest monthly figure since March 2009. Outflows for the asset class were roughly flat for the year, leaving them about $85.2 billion ahead of U.S. stock funds in 2011.

* Municipal-bond fund flows steadily improved during 2011, with the trend turning positive after outflows peaked at $13.3 billion in December 2010. The asset class finished strong with inflows of $4.8 billion in December, its strongest month since August 2010. Investors added $4.8 billion to municipal-bond funds last month. Municipal-bond flows steadily improved during 2011 after outflows peaked in December 2010.

Across all asset classes, passively managed long-term funds had inflows of $76.4 billion in 2011, just short of the $68.8 billion collected in 2010. The bulk of inflows went into international-stock and taxable-bond funds. Meanwhile, actively managed funds shed approximately $9.4 billion in 2011.

-Jim McConville