Investors pulled £705m from the Investment Association (IA) Targeted Absolute Return sector in October, despite the recent surge in market volatility, which seemed to create the conditions best suited for those products.
The sector was the absolute worst performer among all IA sectors during the month, despite such funds typically emphasising their ability to deliver low volatility in "all market conditions".
The average fund in the IA Absolute Return sector lost 2 per cent over the past year to December 6, and also lost money over the past three months when volatility has been intense.
Over a three year time horizon the sector returned less than one per cent, less than a tenth of the return of the MSCI All Country World Index in the same time period.
But Charles Hovenden, a portfolio manager at Square Mile, said: "Although the performance of many such funds has been weak, there will be a time, when market conditions are such that investors are happy to own them."
The Investment Association's data showed a fog of caution had descended on markets, with investors withdrawing £1.6bn in October.
That figure matched the outflows from the various bond sectors.
Meanwhile, the continued negativity towards UK equities resulted in £214m out of outflows, though this was much lower than the monthly average for the past year, of £425m.
Jason Hollands, managing director for business development and communications at wealth manager Tilney, said: "The data shows that it has been fixed income that has borne the brunt of this as far as UK retail investors are concerned, with equity inflows actually picking up on the prior month, [which] perhaps suggests some bargain hunting in the sell-off."
"UK funds continued to endure another month of net outflows, making this the 18th month on the trot of outflows from UK equity funds by retail investors.
"This is perhaps understandable given current political uncertainties but arguably unwarranted given the very international nature of companies listed on the UK markets."
He added: "Such negativity means UK shares are trading at a notable discount to other developed markets, creating opportunities for investors prepared to go against the herd."
Simon Edelsten, who runs the £111m Artemis Global Select fund, recently purchased his first UK stock for a while across his funds.
He said: "The UK market had been abandoned by international investors who may fund Brexit more puzzling than we do. So when the mist clears it will probably attract some interest and the best companies preferred I hope."
The best performing equity sector was the IA North America, which attracted net inflows of £116m, though this was also below the monthly average of inflows for the sector over the past year, of £122m.
The US inflows came despite the sharp sell off in technology stocks during October. The sector lost 4.8 per cent in three months.