The last four years, emerging markets received $1.4trn in cumulative gross portfolio capital flows, but only around $200bn came from regulated funds, according to Christopher Plantier, ICI senior economist of industry and financial analysis, who authored the report.
EM capital flow was analysed to put into perspective the size of regulated fund investment into those economies.
Since huge amounts of capital fled EMs during the "taper tantrum" of 2013, there has been discussion about the impact that ETFs and mutual funds might have on the more fragile emerging market economies, possibly even posing systemic risk, Plantier told Fund Selector Asia.
"There's obviously new scrutiny as to what role funds play in financial stability, and the IMF and the Financial Stability Board are investigating risk associated with these funds."
The ICI study separated three types of EM capital inflows: foreign direct investment (FDI) such as buying a manufacturing plant; portfolio flows, such as funds buying shares of stock and debt; and banking flows.
The findings revealed that global regulated fund holdings of EM equities make up roughly 8.5% ($952bn) of total market capitalisation of the stock markets of emerging economies ($11.2trn).
They make up 4.3% ($484bn) of total foreign bond investment ($11.2trn):
Regulated fund investments in EM are largely in equities, and China, South Korea and India are the top three countries for equity exposure. But Plantier said regulated funds are geographically well-diversified.
Moreover, they tend to be comparatively stable investment vehicles.
"In general, we found that fund investors are more stable than other foreign investors. In the US and Europe, a lot of money is retirement money and the investment horizon is long term, maybe 20 years."
The study also pointed out that capital has been pouring into emerging markets, mainly from the US and Europe.
Regulated fund assets that were invested in emerging market equities grew to $1.4trn at the end of 2014 from $200bn in 2005, the report said.
From 2000 to 2013, emerging markets received $10trn in foreign capital flows, but only 17% was from portfolio capital flows, which includes regulated and non-regulated funds such as pension and insurance instruments, the report said.
The US and Europe account for about $1.3trn of regulated fund investment in EM, according to ICI Global, and the funds are diversified across geographies: