We examine how global institutional funds respond to news-based economic policy uncertainty (EPU) in their investment destinations. On average, we find a negative flow-EPU relationship for global funds, with that negative response being weaker for destinations which are more familiar, share similar legal and cultural origins, have strong democratic government and legal rights, and are more informationally transparent. We document a significant transmission of EPU shocks internationally via multi-country presence of the global institutional funds. We provide novel evidence as to how local EPU shock in one geography alters the investment decisions of the global funds in unaffected geographies. Next, we conduct granular stock level tests to document that the US stocks are exposed to the external EPU shocks via common ownership by global funds of foreign and the US stocks. We document negative risk-adjusted returns and heightened illiquidity for the US stocks held by the funds exposed to external EPU shocks. We highlight the role of fund’s internal reallocation of assets in explaining these spillovers on the US stocks. These depressed risk-adjusted returns revert in the near future pointing to the fire sale mechanism in explaining the spillovers. Lastly, we show that the ex-ante EPU level determines the level of capital retrenchment from emerging markets after a global liquidity event, such as taper tantrum. Overall, ours is the first study to shed light on the importance of local EPU shocks for the equity allocations of global funds across countries.