Still reeling from the bear market of 2008, investors were inclined to head for safety even before the sharp declines suffered by the equity markets last month.

A survey from MFS Investments found investors, driven by fear, voicing a strong inclination to protect their assets. Their preferred hiding place? Cold, hard cash.

But with a pack of new defensive products on the market to pander to the fearful, there are other options in the offing (besides a good old-fashioned rebalancing, of course.)

A crop of products, many of which came on the scene at the start of the bear market in 2008, have found new popularity as investors again search for safety. Top havens include absolute return funds that aim to keep investors' heads above water, and bond funds that allow their managers to go anywhere in search of better performance.

In the MFS survey, nearly three in five investors cited fear, either of volatility or of needing money, as their reason for holding increasing amounts of cash.

The 1,000 investors surveyed (with at least $100,000 in investable assets) had on average 26% of their portfolio in cash. And twice as many investors (24%) were increasing that allocation, compared to those who were decreasing it (12%). A whopping 62% declared cash to be an important part of their investment strategy.

Perhaps most surprisingly, even Generation Y, with the most time to ride out the current bear market, had the highest cash position at 30%. "Investors, especially younger ones, would rather keep cash in the bank than chance the stock market," says William Finnegan, senior managing director of U.S. retail marketing for MFS.

But this hunger for safety has taken two forms, which can be seen in mutual fund flows.

One is the flight to cash and fixed income. Finnegan notes that earlier in the summer, top cash grabbers in the industry were fixed-income funds, and bank loan funds for those chasing yield.

The other form is an increasing willingness to trust asset allocation to fund managers. "We're at one of those inflection points where people are saying, 'I want to ride with a manager who had products that are more flexible,'" Finnegan says.

Asset allocation funds come in a variety of flavors, including target risk funds, world allocation funds and absolute return funds, all of which allow fund managers to "go anywhere," investing in securities from anywhere in the world and using any kind of tool, including derivatives, to reach their goals.

Absolute return funds, which started hitting the market in droves in late 2008 and winning lots of investor cash, also allow portfolio managers a lot of scope in meeting their goals. As the name suggests, these funds are designed to post positive returns over a certain period of time in any kind of market environment.

They tend to own fixed income, but can own a wider variety of securities to meet their goals, including commodities, derivatives and sometimes equity.

This trend for allowing fund managers lots of freedom and the passion for fixed income has culminated in another big winner, unconstrained bond funds. "Much like a typical portfolio, where somebody has stocks, bonds and cash, this runs the gamut of fixed-income securities to bring as much securities diversification as possible," says Jeff Tjornehoj, senior research analyst at Lipper. "You get a great deal of diversification."

They hold higher-yielding paper, but will also have things that will resist volatility, such as Treasuries. They will have foreign securities, corporates, agencies, typically a lot of variety in these portfolios. These funds offer a better yield than some of the safest products out there, but not the same volatility as those products. They have as much of a sweet spot as investors will typically find."

Unconstrained bond funds have about $33.6 billion in assets, a figure similar to absolute return funds, which hold $33.8 billion.

The two products account for a relatively small 3% of taxable bond fund assets, but have claimed 10% of new cash flows over the last two years, according to Lipper.

Their performance indicates that the jury is still out on their usefulness. Last year the S&P 500 racked up 15.06% returns, while the Barclays Aggregate Bond Index gained 6.54%. Absolute Return funds, meanwhile, averaged gains of just 3.43%, while Unconfined Bond funds climbed 4.97%, according to Lipper.

This year through July 31, the S&P 500 rose 3.86%, Barclays Bond Index climbed 4.35% and absolute return funds eked out gains of 0.30% and unconstrained bond funds gained 1.41%.

It should be noted that because absolute return funds invest in so many securities to meet their goals, the fund trackers classify them differently—some are grouped with fixed-income funds, some with commodities—so it is difficult to make broad statements about them as a group.

Rival fund tracker Morningstar reckons absolute return funds hold $55 billion.

Smelling a hit, the industry keeps offering new versions.

Putnam Investments was one of the leaders on the absolute return trend, rolling out its series of Absolute Return Funds, numbered 100, 300, 500 and 700, in December 2008. Each fund aims to give investors a return above three-month Treasuries. Absolute 100's goal is to return 1% per year over three-month Treasuries; 300's goal is 3% a year over three-month Treasuries and so on.

But advisors should keep in mind what the fund is designed to do. The funds do not promise to return 5%-plus Treasuries every single year over three to five years. It's aiming to return that on average over the time period. That means these are buy-and-hold funds, not to be used tactically.

There is certainly a market for that, because for a while, each month seemed to bring a new entrant to the field. MFS Investment Management introduced one in March; Palmer Square Capital Management and Janus rolled out their offerings in May.

Three of the biggest are the Permanent Portfolio, with $13.4 billion in assets, PIMCO's All Asset, with $23 billion, and PIMCO's All Asset All Authority, with $12 billion.

With some absolute return funds charging as much as 2%—most charge between 100 and 150 basis points—"the relatively costly nature of this strategy leaves me skeptical about its long-term success," said Tjornehoj.

However, he added that it is too simplistic to write them off as expensive ways to own bonds with a bit of extra flair. They add non-correlation. "It might deliver some 3%, 4%, 5% returns—which a lot of people might equate with bond-like performance—and that's one of the aspects people have to understand. The other is not performing over time like a bond or like an equity. It's doing something different. That's part of the value they add to one's portfolio, more steady deliberate returns over time. It's important to look at it in the context of overall portfolio. You might have a nice car, but if don't have right shock absorbers, you will have an uncomfortable ride. An absolute return fund might be the shocks and springs that enable a smoother ride."