It sounds counterintuitive, but the severe global recession which began in 2008 and deepened throughout 2009 and 2010 actually pushed more money into mutual funds than recent non-recessionary periods. At least that’s the finding from Strategic Insight, which found in a new report that mutual funds from around the world added more than $900 billion in long-term net gains in 2010.

Specifically, the report said long-term fund flows for the last decade stood at $5.2 trillion, which amounted to about $520 billion a year, compared to over $900 billion in annualized net flows this past year in the aftermath of the financial crisis.

The report didn’t offer any reasons for the dramatic shift, but it’s clear that the recent recession has shown that global investments now move more quickly and into new assets classes than before.

However, the report also left a key question unanswered: Where did the money come from? Here are five possibilities to explain why more money has entered the global markets worldwide:

More investing alternatives in a global recession

The recession which began in 2008 was global.  It hit the housing and banking sectors first.  It also involved developed nations in Western Europe and the U.S. more than emerging market nations.  As a result, investors who were most affected by the recession and the resulting banking and housing problems were hit hardest financially, but they also had easier access to mutual funds and electronic trading to adopt protective investment strategies.

A growing middle class in emerging market nations

SI’s report on fund flows overseas includes investments from an expanding middle class in emerging nations.  That’s no surprise, since the best stock picks these days are often in emerging markets.  Within the next 50 years, there will be a rise in the middle class in the key economies which once comprised the Third World.

A study by Goldman Sachs finds that the economies of Brazil, Russia, China and India alone will become greater than the seven industrialized countries in the G7 by 2040.  If the next 11 major emerging markets are included in this projection, they will be larger than the G7 by 2030, with a combined grow national product of $41 trillion. This will be accompanied by an increase in new fund investors.

Money market funds pay almost nothing

All bond funds (taxable, corporate and munis) had positive flows throughout 2010 until about December, when this category saw an outflow of $14 billion for the month.  Starting in late November, investors began withdrawing money from muni, corporate and Treasury bond funds for the first time in two years.  Observers said the reason investors were fleeing bond funds was because money market funds were paying 0% and short-term bond funds were paying about 1%.  They also cautioned that outflows from bond funds don’t necessarily mean a migration into stocks.  If anything, gun-shy investors would prefer interest-paying money market funds over stocks if given the opportunity.

A house is just a house

As the U.S. recession deepened and housing prices declined nationwide, more Americans may have realized that their house was no longer an appreciating asset.  According to Alan Levenson, chief economist for T. Rowe Price, “If there are any people thinking like that after what we have been through in the past couple of years, they shouldn’t. You buy a house because you want to live in it. It is not an investment.”  Many people may know this intuitively.  As a result, they may be diverting home improvement money back into the markets, where they can see more immediate potential gains and still have greater liquidity than trying to sell a house.

The lesser of all evils

While the large inflows into the markets can be considered positive, it doesn’t mean the public has restored its faith in Wall Street and the markets.  Instead, the few wealth-building engines which exist for most individuals — home equity increases, housing price appreciation, increases in personal savings, pensions and 401(k)s — have either been seriously stressed, depleted or are not producing sufficient returns to make a meaningful contribution to providing for a secure retirement.  This may help explain why investors are seeking to replace investment losses by moving into more risky investments, including the stock market.