We analyze flows to mutual funds investing in emerging markets during five episodes of market turmoil: the taper tantrum, the Chinese sell-off in 2015, the Trump presidential election, the 2018 emerging market sell-off, and the Covid-19 pandemic. We adopt an event-study methodology to show that investors triggered larger-than-expected negative abnormal flows in the aftermath of each event. These abnormal outflows are both statistically and economically significant, as they amount to several times the average net flows as a ratio to fund size. We find that abnormal outflows tend to be larger in the case of ETFs, funds being active for a longer period, and retail-suited funds, while funds with concentrated portfolios or with larger liquidity buffers have proved to be more resilient during a crisis.
From taper tantrum to Covid-19: Portfolio flows to emerging markets in periods of stress