Wherever the money’s going, it’s not going to municipal bond mutual funds.

Even as cash continues to flood various other mutual fund sectors at a robust pace, the trend of cash flowing into the municipal fund industry remains on a clear downward trajectory.

Heartier risk appetites and strengthening hunger for yield appear to be driving more money into riskier assets, such as stocks and emerging market debt.

Municipal funds reported $118.4 million in new money from investors last week, according to Lipper FMI — very light by recent standards.

Funds have commanded an average of $297.6 million a week for the past four weeks, the ­slowest pace since January 2009.

Often seen as a proxy for retail demand, muni mutual fund flows are now a fraction of what they were six months ago.

The curious thing is the wellspring that was seen as the source of much of the money last year and early this year — the money market fund industry — is still coughing up cash at a remarkable rate.

Last year, tax-free money funds bled $93.3 billion, while municipal bond mutual funds accumulated $90.1 billion, according to the Federal Reserve.

Many analysts believed the nearly symmetrical numbers pointed to a trend: investors growing intolerant of the puny yields offered on money funds and reaching for better returns with short-term municipal funds.

According to iMoneyNet, the yield on a tax-free money fund is just 0.04%. Investors can earn substantially more than that by extending to municipals with slightly longer maturities. The $3 billion Wells Fargo Advantage Short-Term Municipal Bond Fund, for instance, holds bonds with an average maturity of 2.6 years and yields 1.83% — 179 basis points more than the average tax-free money fund.

Tax-free money funds have now bled $131.73 billion — 27% of their assets — since the Fed cut its target for short-term interest rates to essentially zero in December 2008.

The municipal fund industry’s assets, meanwhile, have swelled 42% since the end of 2008, bringing the total to a record $483.4 billion. The exodus of cash from the money market is showing no sign of fatigue. Last week, investors ferried nearly $5 billion out of tax-free money funds, according to the Investment Company Institute.

However, the trend has shifted and that money is not going to municipal funds anymore.

Christian Hviid, chief market strategist at Genworth Financial Asset Management, said short-term muni funds were a primary beneficiary of the initial wave of yield-craving.

For much of last year, investors wanted to earn some return but were still hesitant to take too much risk. That led them in droves to municipal funds, he said.

Now, with the drumbeat of bad economic news ebbing and the thirst for yield growing, investors are showing greater preference for higher rungs of risk and return — stocks and emerging market debt, he said.

The Dow Jones industrial average has surged 6.8% this year and last week touched its highest level since just after the Lehman bankruptcy.

EPFR Global, a fund-tracking firm, said emerging market bond funds last week notched their second-best week ever with $1.28 billion in flows. The best week ever was the one before.

Funds investing in stocks from such places as Russia, China, and Africa continue to garner new money, EPFR said, while technology, real estate, and commodity funds all continue to take in cash.

To further illustrate risk appetites: last week Russia tapped the bond market for the first time since the country defaulted on its debt in 1998. It paid 125 basis points over the Treasury yield for five-year ­maturities.

“We’ve seen quite a bit of momentum in riskier types of assets,” Hviid said. “It’s sort of been this slow migration and outflow from safer vehicles into riskier ­vehicles.”

Phil Condon, head of municipal portfolio management at DWS Investments, is not panicking yet. The tone of retail demand for municipals remains decent, he said. While the exodus from short-term muni funds is undeniable, municipals offer other products with fatter yields, such as longer-term or high-yield funds.

“We’re seeing more interest in everything that’s a little extra-yieldy,” Condon said. “That’s not inappropriate. ... The Fed keeps it that unattractive to stay in cash so it kind of forces people out.”

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