Tech Funds Still Unloved

Tech stocks are making a comeback, but mutual fund investors don't appear to have noticed.

Microsoft(MSFT Quote), which soared Friday after beating expectations with a 23% surge in quarterly earnings, isn't an anomaly. The truth is the technology sector has been back for a while.

Year-to-date through Thursday, the average technology stock fund tracked by Morningstar is up 20.1%. Depending on how you look at it, tech is either the best-performing fund category holding U.S. stocks, or the third-best, behind natural resources and precious metals, two categories that are chock full of international equities.

It's easy to see why: These companies have strong balance sheets, little debt, and sustained growth in a softening economic climate. Yet, not only are investors not adding to their holdings of tech funds; they've been actively pulling their money out. In the first nine months this year, investors pulled a net $2.9 billion out of tech funds, according to Morningstar.

It's a measure of how far out of favor tech funds have fallen since the Internet bubble burst in 2000. Only two other categories of funds, large-cap growth and health care, saw bigger outflows this year. In fact tech funds are so unloved that money has been walking out the door for each of the past three calendar years, for a cumulative total of $19.6 billion.