Nearly $1 Billion Pulled from EM Funds as Investors Flock to Gold, Junk Bonds with $5.6 Billion in Inflows

Amid rising geopolitical tensions and global economic uncertainty, foreign investors are pulling back from emerging market (EM) funds, leading to significant outflows from major asset managers including GQG Partners, BlackRock, and Invesco. Despite some inflows into EM ETFs, total investments in EM funds dropped sharply below recent averages, while gold and junk bond funds continued to outperform.

Major EM Fund Outflows

According to data from Elara Capital, global EM fund inflows during the past week totalled $967 million, significantly below the four-week average of $2.3 billion. Although three passive ETFs—iShares Core MSCI EM ETF ($631 million), Vanguard FTSE EM ETF ($238 million), and Xtrackers MSCI EM UCITS ETF ($230 million)—attracted the bulk of capital, major active EM funds saw steep withdrawals.

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The Invesco Developing Markets Active Fund recorded outflows of $628 million, while the BlackRock Emerging Markets Active Fund and GQG EM Active Fund saw redemptions of $268 million and $147 million, respectively.

This trend comes in the wake of U.S. President Donald Trump’s tariff announcement in April 2025, which has influenced global fund positioning towards a cautious, top-down allocation strategy. Concerns over U.S. growth and the implications of a softening dollar have further contributed to investor hesitancy in developing markets.

India-Focused Flows Mixed

India received net foreign inflows of $364 million during the week, slightly higher than the $317 million inflow recorded the week before. However, flows into India-dedicated funds fell sharply to $102 million, down from $260 million in the prior week.

Long-only active India funds continued to struggle, witnessing $17 million in outflows. This extends the sector’s losing streak to five consecutive weeks, with net redemptions now totalling $126 million.

Global Fund Trends: US, Gold, and Junk Bonds

While U.S.-based funds saw notable domestic outflows amounting to $7.8 billion—the highest in six weeks—global allocation funds that include significant U.S. exposure recorded $2.9 billion in inflows. This resulted in a net U.S. outflow of $4.8 billion.

In contrast, gold funds continued to enjoy a strong run. Last week, they attracted $3.1 billion, up from $2.4 billion the previous week, marking the ninth straight week of inflows. Junk bond funds also held their momentum, posting 13 consecutive weeks of inflows with $2.5 billion added during the week.

Conclusion

The data highlights a cautious global investment environment, with macroeconomic and geopolitical challenges disproportionately affecting emerging markets. Although foreign portfolio inflows have been steady for India, active EM strategies and specific India funds are waning.  In continuous market volatility, defensive assets like gold and high-yield bonds are becoming more popular among investors, indicating a preference for protection over risk.