Mutual funds and exchange traded funds tracking the so-called BRIC countries of Brazil, Russia, India and China have been a popular investment fad over the past several years. However, BRIC funds have badly lagged U.S. stocks this year and Goldman Sachs (NYSE: GS), which coined the acronym, thinks 2012 could be another tough year for emerging markets as the Europe debt crisis rages, according to a report Wednesday.

Unleveraged BRIC ETFs are down as much as 24% year-to-date, whereas the S&P 500 has gained 2.7% year-to-date.

Over the year, BRIC funds have bled $15 billion in assets, the largest on an annual basis since 1996, while the MSCI BRIC Index dropped 24%, report Michael Patterson and Shiyin Chen for Bloomberg. The index has outperformed the S&P 500 by 390% between Nov. 2001 and Sept. 2010, but it has fallen behind over five consecutive quarters.

In China, a drop in exports to Europe and greater regulatory scrutiny over real-estate investments are dragging on the economy. Inflation and a drop in foreign investment have hampered India’s growth as the country hiked interest rates at the highest pace since 1935. Brazil and Russia are also seeing a lower demand for raw materials and commodities, especially from China.

According to a recent Goldman Sachs report, long-term growth in BRIC countries will begin to drop as the population of average working-age citizens begins to decline.

“We have likely seen the peak in potential growth for the BRICs as a group,” Dominic Wilson, an economist at Goldman Sachs, said in the report.

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