It’s been a tough three months for mutual funds.

“Wild market swings throughout first quarter 2008 played on investors’ psyches, and as a result, equity mutual funds posted their worst three-month returns in 23 quarters,” explains Tom Roseen, a senior research analyst for Lipper in Denver. “The average equity mutual fund declined 9.74 percent for the quarter ended March 31, 2008.”

Still, gold funds tweaked out gains of better than 5 percent, and world-income funds rose nearly 4 percent in the period. Short-bias funds showed the best returns; they rose close to 12 percent on average, according to Lipper.

“After several years of international stock out-performance, some domestic issues — at least for the first three months of 2008 — slightly outpaced their overseas brethren,” shares Roseen. For instance, “The Dow Jones Industrial Average (down 7.55 percent year to date) mitigated losses better than its domestic and international counterparts,” he reports.

Though crude-oil prices were near record highs, natural-resources funds “stumbled a bit for the quarter,” he adds, and declined 4.53 percent in the three months ended March 31. Real-estate funds, however, dropped just 1.18 percent.

Fund flows, naturally, reflected the above-mentioned trends in performance, according to fund research group EPFR Global of Cambridge, Mass. This dynamic worked to the benefit of money-market funds, which took in $17.2 billion during the fourth week of March as “the pain continued for most of the other major fund groups,” EPFR Global notes.

Equity funds, which had net inflows of close to $19 billion in Q107 and $50 billion in Q106, recorded outflows of nearly $100 billion during the first 13 weeks of 2008 “as a credit squeeze linked to the U.S. sub-prime debt mess weighed on investor confidence and global growth,” explains EPFR Global.

“Based on Q1 data, we’re on pace for money-market funds tracked weekly to take in $560 billion of inflows this year,” says EPFR Managing Director Brad Durham. “I don’t think it will come to that of course, but with the $240 billion of inflows into these funds last year, most of which came in the second half of the year, it’s clear there is a huge amount of cash on the sidelines to be deployed when global markets stabilize.”

In addition, investors have sought refuge in commodities as prices continue to test previous record highs, which also has benefited emerging-market bond funds, “especially those geared to local currencies rather than the slumping U.S. dollar,” the research firm reports.

“There are a few bullish signs buried in the Q108 flow data,” notes EPFR Global senior analyst Cameron Brandt. “Investors remain willing to buy into markets and regions that they see as either under-bought last year or oversold this year. Taiwan, Russia, Africa and the Middle East and financial plays fall into this category.” Russia and Taiwan benefited from elections, the research firm says.

In other regions — namely the United States, Europe and Japan, net redemptions of equity funds tracked weekly for these areas now represent 586 percent, 64 percent and 35 percent of last year’s total outflows.

In terms of fixed income, flows into high-yield bond funds have been negatively affected by credit-quality issues. Furthermore, global bond funds are smarting because of doubts that yields adequately reflect inflationary risk, pushing some recent inflows into two traditional safe havens: balanced bond funds and U.S. bond funds, according to EPFR Global. These groups had net inflows in Q1’08 of $1.1 billion and $2.7 billion respectively.

This momentum has boosted interest in Pimco Funds, which has seen net inflows of some $8.2 billion in the first two months of 2008, net of proprietary funds of funds, according to Financial Research Corporation. In the first two months of 2007, Pimco’s net inflows were $1.4 billion.

The Pimco Total Return Fund has some $122.5 billion in assets, after adding about $2 billion in February 2008 and close to $1 billion in January 2008. And the Pimco Real Return Fund has added $1.5 billion in inflows this year, giving it about $14.3 billion in total assets, FRC reports.

In its statistical breakdown of mutual fund flows by Morningstar category, FRC says that intermediate-term bonds have taken in close to $15 billion, with some $6.7 billion in flows moving in February.

Foreign large-blend funds have attracted about $4.2 billion so far this year, of which $3.7 billion came in during the second month of 2008. But large-growth funds have seen net outflows of close to $4 billion this year.

According to FRC, emerging-market funds have net inflows of $3.6 billion in 2008, and natural-resource funds have seen some $2.3 billion in net inflows.

Janet Levaux is the managing editor of Research; reach her at jlevaux@researchmag.com.