The investment community is starting to redefine the traditional 60/40, stock and bond portfolio split as more financial advisors and traders pick up “alternative” mutual fund and exchange traded fund strategies.

According to Morningstar Inc. and Barron’s, mutual funds are becoming the dominant investment vehicle for both advisors and institutional investors for accessing alternative strategies, with alts mutual funds attracting $19.7 billion in inflows over 2012. Meanwhile, single-strategy hedge funds experienced $7.6 billion in outflows last year. [ETFs and Mutual Funds Embrace Alternative Strategies]

“Alternative mutual funds and ETFs have grown in breadth and quality in recent years,” Nadia Papagiannis, director of alternative funds research for Morningstar, said in the note. “Institutional investors are starting to see alternative mutual funds as substitutes for hedge funds, and more financial advisors are incorporating these liquid, transparent investments into their client portfolios.”

For example, over 45% of institutions stated that they utilized long/short strategies through mutual funds this year, compared to 38% in 2010. In comparison, 61% of institutions used long/short strategies through hedge funds in 2010 while only 26% say they are using hedg funds for this strategy this year.

Long/short strategies are still the most popular alternative asset category among institutional investors and the second most popular among financial advisors.

Over 20% of institutional “heavy users” believe alts assets will make up over 40% of their holdings in the next five years, compared to 17% of respondents last year.