The Freedom 100 Emerging Markets ETF, created by Perth Tolle, is designed to protect investors from the capricious actions of autocrats.
The lofty goal was seen as a statement against the non-democratic forces that can affect countries, as well as a hedge against forces within some countries that cannot be controlled, Tolle said in an interview.
Tolle is the founder of Life + Liberty Indexes, created in 2017, and the Freedom 100 Emerging Markets ETF (FRDM), launched in 2019, long before Russia’s invasion of Ukraine. Now the focus of the funds are of prime concern to investors.
Prior to creating the Life + Liberty Indexes, Tolle was a private wealth advisor at Fidelity Investments in Los Angeles and Houston. Before that, Tolle lived and worked in Beijing and Hong Kong, which she said sparked her interest in the relationship between freedom and markets. She is a frequent speaker at investment industry events and provides commentary for various financial media.
“Freer markets do better,” Tolle said. “Investors in autocratic states are completely at the whim of the dictator. Companies are required to put the interests of the state above their own.”
The Freedom 100 Emerging Markets ETF seems to be confirming Tolle’s beliefs. Over the past 12 months, the fund’s AUM grew from $42 million to $167 million, a 300% increase. During the last 30 days as the awful crisis broke out in Eastern Europe, FRDM’s AUM grew from $126 million to $167 million, a 32% increase.
Performance-wise, FRDM is currently up 0.9% over the past 12 months, while the iShares MSCI Emerging Markets ETF (FEM), which tracks the MSCI Emerging Markets Index, is down 17.49% over that time. Since launching less than three years ago, FRDM has produced total returns of 34.89%.
The fund draws from the entire universe of emerging markets, but it is freedom weighted, excluding companies in Russia, China and Saudi Arabia because of the countries’ perpetually poor human rights, individual liberty and economic freedom records.
“We weight countries based on a composite of the measurements of such things as free speech, economic freedom and human rights protections,” Tolle said. “We exclude the worst countries and weight others. There is a big gap between the worst and the best countries in the emerging market space.”
The arbitrariness of actions in autocracies is illustrated by such things as China last year declaring that all private education companies could no longer make a profit. In addition, several autocratic states have cracked down on what technology companies are allowed to do, she said. “If you have a concentration [of investments] in these countries, you are exposing yourself to a huge risk. We want companies in countries where the public controls what happens.
“Advisors have come to us and said this is a great option to offer their clients,” Tolle said. “We are here for those clients who care about human rights and freedom. I hope there will be even more countries to invest in in the future.”