Investors have flocked to emerging-markets mutual funds and ETFs this year, but when the Dubai's credit crisis hit, around November 25, many funds also took a hit and have since recovered the Wall Street Journal writes Tuesday.

In 2009, diversified emerging market exchange-traded funds saw a boost of $13.2 billion from hungry investors, with year to date inflows nearing $60 billion. Emerging market stock funds also saw a rise, gaining more than 70 percent through December 1.

However, when Dubai announced its massive debt, many funds were injured. The iShares MSCI Emerging Markets Index Fund, one of the largest ETFs, dropped 4 percent on Friday, the 27th.

Other ETFs with U.A.E. exposer include the Market Vectors Gulf States Index ETF, the PowerShares MENA Frontier Countries Portfolio and theWisdomTree Middle East Dividend Fund.

"The Dubai situation is a signal that investors can't blindly rely on governments to bail out troubled companies," Alec Young, international equity strategist at Standard & Poor's Equity Research, told the Journal.

Many of the funds effected are already beginning to recover assets. 

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