Retail investors have missed out on the record rally in U.S equity markets because they don't want to risk losing their money again as financial institutions are seen as "too big to jail," James Bianco, president of Bianco Research, told CNBC on Wednesday.
"It's very clear in the statistics that mutual fund flows to ETF flows, that there have been consistent outflows over the past years, they have not participated at all," Bianco said on CNBC Europe's "Squawk Box".
To be fair, equity mutual funds have seen significant inflows this year, but nothing compared to the outflows since the financial crisis in 2008. From the start of the year until early March, $59 billion has flowed into equity mutual funds compared to an outflow of $416 billion from 2008 to 2013.
(Read More: Are Mutual Fund Investors Really 'Dumb Money'?)
Bianco told CNBC that investors were missing out on the multi-year highs seen in the Dow, S&P and Nasdaq indexes over the past months as they feared the "unfairness" of losing their money and seeing large financial institutions bailed out, despite the VIX (volatility index) at its lowest point in almost six years.
"This is the biggest thing that has held people back – It's not that the market is hard or expensive, it's because it's unfair," Bianco said.
"I've been very skeptical about the wave of cash [entering equity markets]. The biggest thing that is holding people back is that the big players either win or get bailed out and you lose and have to pay for the bailout," Bianco added.
Two weeks ago the U.S. Attorney General Eric holder said that there were some financial institutions that were "too big to jail."