Morningstar, Inc. released some sobering news about the alternative mutual fund space.

According to its fourth-annual national survey examining the perception and usage of alternative investments among institutions and financial advisors, the survey found that alternative mutual funds saw inflows of $23.2 billion in 2011($14.2 billion excluding the nontraditional bond category), while U.S. equity mutual funds bled $84.7 billion. However, inflows were lower than prior years, and alternative exchange-traded fund inflows for 2011 were only $11.6 billion, the lowest level since 2006.

Also, some 65% of advisors and 67% of institutions indicated that alternative investments are as important, or more important, than traditional investments, down slightly from the last survey. Among the institutions surveyed, 26% indicated they plan to allocate more than a quarter of their portfolios to alternative investments, down from 37% in the last survey.

Managed futures and currency mutual funds recorded inflows of $3.6 billion and $3.4 billion, respectively, in 2011, despite the fact that managed futures lost 6.9% that year, while currency funds lost money every year since 2008. For the second year in a row, advisors cited managed futures as the asset to which they were most likely to increase their exposure, while currency funds didn't make their top five.

While still positive, flows into market neutral and long/short equity funds—two more well-established categories—saw far lower inflows in 2011 than in 2010.

“Institutional investors and financial advisors have significantly expanded their alternative holdings since the 2008 crash, and continue to view alternative investments as an important part of their portfolios,” stated Scott Burns, director of ETF, closed-end fund, and alternative research for Morningstar, said.

"Growth has begun to slow, though, as investors have ramped up their allocations, and excitement may be cooling with the lackluster performance of alternatives relative to the overall market over the last few years."

Morningstar and Barron’s conducted the survey in January 2012 and received responses from 264 institutions and 365 financial advisors.