Morningstar reported Wednesday that long-term mutual funds saw inflows of $14.3 billion in September, while U.S. equity outflows continued, reaching $16.3 billion despite experiencing the best month for stocks in 71 years.

In the past five months, investors have redeemed $65.1 billion from domestic-equity funds.

The divergence in flows between international-stock and domestic-equity funds also continued to grow, the research firm says.

International-stock funds saw modest inflows of $600 million in the third quarter, but U.S. stock funds lost roughly $42.7 billion. In the past 12 months, investors have pulled $80.9 billion from U.S. stock funds and contributed nearly $34.3 billion to international-stock funds — a difference of $115.2 billion.

“Since the market rebounded in early 2009, investors' have simultaneously embraced some of the most- and least-volatile categories, while forsaking the middle,” said Kevin McDevitt, CFA, Morningstar’s editorial director and author of the September report.

“For instance, diversified emerging-markets equity funds have taken in a robust $18.2 billion so far in 2010,” McDevitt explained. “Conversely, more mild world stock offerings have seen $9.6 billion in outflows. This apparent paradox is playing out among allocation (that is, balanced) funds as well.”

In the commodities arena, precious-metals equity flows pulled slightly ahead of broad-basket funds in September, with $692 million in inflows versus $654 million.

U.S. ETFs saw inflows of roughly $25.4 billion in September, boosting year-to-date inflows to $64.9 billion, notes Morningstar.

Fund Families

PIMCO and Vanguard continue to dominate inflows, due to their broad fixed-income lineups, Morningstar reports. They took in $6.4 billion and $3.1 billion, respectively, in September.

Franklin Templeton attracted $2.6 billion in inflows, with the Templeton Global Bond accounting for $1.6 billion of that total. The Franklin Gold and Precious Metals absorbed an additional $224 million.

Matthews Asia funds attracted assets of nearly $800 million during the month. “Reflecting investor preference for non-U.S. equity exposure, the firm has absorbed $2.9 billion in 2010,” the research firm noted.

U.S.-stock ETFs were popular in September, thanks to more than $10.2 billion in net inflows into SPDR S&P 500 SPY, a sharp reversal from July and August. PowerShares QQQ experienced $4.3 billion in net inflows, following steep outflows of $2.1 billion in August.