The mutual fund industry has never seen these kinds of losses before;, in additiion, the marketplace has never offered so many popular, transprent, and low-cost alternatives to mutual funds. These two novel factors make it reasonable to suppose that a good portion of this capital may never come back.

After seeming to weather the worst of the credit storm, the mutual-fund industry has been getting walloped, losing more than 20% of assets under management in just five months.

Data from research firm Lipper show that as of Oct. 31, mutual funds of all types — stock funds, bond funds and money market funds — had $9.5 trillion in assets. That’s a 20.8% drop from where the industry stood on May 31 when it sported a record $12 trillion under management.

Mutual funds have lost 19.3% of their assets in the first 10 months of the year after closing 2007 with $11.7 trillion under wraps. This puts the industry on pace for one of the worst years in its history.

According to Lipper, since 1959 — the first year for which it has data — the largest year-on-year asset declines came in 1973, when assets dropped 20.4% to $3.4 billion, and 1974, when assets fell by 21.4% to $2.7 billion.