At The Money: Better Results By NOT Investing with Dictators, with Perth Toll, (January 14, 2026)
Full transcript below.
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About this week’s guest:
Perth Toll is the founder of the Life and Liberty indexes and the creator of the Freedom 100 EM Index (symbol FRDM). She was named one of 10 to watch in 2020 by Wealth Management Magazine and one of the 100 people transforming Business by Business Insider in 2021.
For more info, see:
Professional/Personal website
Masters in Business
LinkedIn
Twitter
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TRANSCRIPT:
Intro:
Freedom (I won’t let you down)
Freedom (I will not give you up)
Freedom (gotta have some faith in the sound)
You’ve got to give what you take (it’s the one good thing that I’ve got)
Barry Ritholtz: There are many problematic countries on the world stage. Not only are their political behaviors bad, but they’re also unhealthy for your investment dollars.
Most emerging market indexes, however, invest broadly across all of these countries regardless of their political activity. If only there was a way to avoid authoritarian regimes, dictators, and other bad actors that destroy your investing capital.
As it turns out, there’s a fund to do just that, investing in emerging markets without steering money to the worst countries on the planet. I’m Barry Ritholtz, and on today’s edition of At The Money, we’re gonna discuss how to avoid those countries that are dangerous to your wealth.
To help us unpack all of this and what it means for your portfolio, let’s bring in Perth Toll. She is the founder of the Life and Liberty indexes and the creator of the Freedom 100 EM. Index (ETF, symbol FRDM). She was named one of 10 to watch in 2020 by Wealth Management Magazine and one of the 100 people transforming Business by Business Insider in 2021.
Her Freedom 100 EM Index, ETF now manages over $2 billion and has beaten the S&P 500 500 over 1, 2, and 3 years.
In 2025, freedom was up 67% versus the S&P 500 up almost 18%. Perth, let’s just start with the basic concept. Why screen emerging market companies for a concept like. Freedom. How does screening out dictators, authoritarians, and other bad actors impact market performance?
Perth Tolle: I think the, the problem we’re trying to solve here is that emerging markets investors, um, previously did not have a way to get a diversified emerging markets allocation without funneling money to autocracies.
Traditionally, the way indices are weighted is by market cap, and so the largest autocracies in the emerging market space like China, Russia and Saudi Arabia historically has gotten the, you know, biggest weights. Those three countries prior to the war were all in the top 10 of most EM indices. During the height of COVID China was, uh, 41% of the MSEI emerging markets. Index and now it is still upwards of close to 30%.
Some of these large autocracies get a very large weight in the emerging markets indices. And so that’s really the problem that we’re trying to solve by freedom weighting instead of market cap.
Barry Ritholtz: I’m really fascinated by the origin story of the Freedom Index and the ETF. What made you decide traditional emerging market benchmarks were broken? Yeah, so I grew up in both China and the US. I was born in Beijing and I came to the US when I was 9, and then I worked in Hong Kong after college for about a year. There I saw the difference between the US market, the Hong Kong market at the time, this was 2004, and, the mainland Chinese market.
I saw that policies impacted the future of a society and the future of markets. You know, one policy that really struck me was the one child policy under which I, you know, was born and grew up in, in China. That policy has caused the biggest demographic crisis in the world today, and probably we won’t recover from that in our lifetimes.
That’s one of the things that made me realize that governance, on the country level actually has an impact on society and markets.
Coming back to the us I worked at Fidelity for 10 years as a financial advisor. And I had clients in the LA and Houston markets who said, I don’t wanna, for example, I had a Russian client that said, “I don’t wanna invest in Russia because it’s like funding terrorism.” That was in 2014. So you can see how prescient that was.
I wanted to have a way for allocators to always have that emerging markets allocation without, you know, uh, funding autocracies, which is usually not the intention of most investors.
Barry Ritholtz: Really, really interesting. You created this freedom index with some of your partners. Define freedom for our audience in market terms; when we say this is a freedom weighted portfolio as opposed to a market-cap weighted portfolio, what exactly is being measured? How does that translate into an index?
Perth Tolle: The first thing is we’d need those quantitative metrics for freedom. And so we use a third party index and dataset called the Human Freedom Index and Dataset by the Cato Institute and the Frazier Institute. And these are two think tanks that are completely privately funded. They don’t take any government money, not even from the US or Canadian governments, um, where they’re based.
They look at 87 different variables for freedom, and that includes things like civil freedoms, includes political freedoms and economic freedoms. You’re looking at both personal and economic freedoms, which was important to me coming from a country that had issues with both.
Things like terrorism, trafficking, torture are in the civil freedoms category, freedom of speech, media expression, civil procedure, criminal procedure political freedom category. And then economic freedoms are things we’re all more familiar with, like taxation, business regulations, private property rights, rule of law, um, soundness of monetary policy, freedom to trade internationally. The higher the free trade, the better, um, and the freedom to hold, you know, uh, offshore bank accounts and so forth.
All of these things added together — the 87 different variables and sub-variables — combine into the composite country score, which we use as the main input into our methodology. With that country score that measures freedom by a third party, we turn that into country weights and allocations, and then invest accordingly.
So the higher freedom countries. Get a higher weight. The lower freedom scoring countries get a lower weight and the worst offenders are automatically excluded as part of the freedom waiting process.
Barry Ritholtz: 24 emerging market countries, how many companies do you look at? And then how many end up in the index and in the index, once it’s freedom scored, I’m assuming it’s also market cap weighted?
Perth Tolle: On the country level, it is a hundred percent freedom weighted, before we embark on freedom weighting, though, we do have a, um, a screen for market size and liquidity. So markets that are too small or too illiquid. Are not part of the eligible universe. So we do have a 24-country initial universe, and then about an 18-country eligible universe.
Because countries like Czech Republic, for example, are very free, but not big enough. Peru, very free, but not liquid enough, so those are not. Included in the freedom weighting, process. So about 18 countries are left once you have that eligibility, process down. And those are a hundred percent freedom weighted with.
So the highest freedom countries have the highest weight, and the way the methodology works is that you have to be above average among those 18 peer countries in your score to be included. We are providing, the the freest emerging market countries in the eligible universe, and there are some very borderline countries that go in and out every year.
Barry Ritholtz: Give us some examples.
Perth Tolle: India is a borderline country. That is, the score for India is just about average among all the 18 country peers. So this is including countries like Taiwan, Chile, Poland, South Korea on the freer side, and then countries like China, Saudi Arabia, Egypt, Turkey on the less free side.
India is about the middle. Sometimes it’s in, and sometimes it’s out.
Barry Ritholtz: Once you have this list of countries, how do you screen through all of those companies within the favored top nine, top 10 countries to put together the index and how many companies go into the index?
Perth Tolle: Once we have the freedom-weighted country weights within each country, we take the 10 largest, most liquid constituents, and those are market capitalization weighted within their freedom-weighted country weights. We do exclude state-owned enterprises –
that’s just to bring the economic freedom theme all the way through.
The less government interference in private markets, the better. That’s the only thing we do on the security level. So we wanted to really isolate the freedom factor. It’s mostly a top-down country-level strategy on this, on this product.
Barry Ritholtz: What first attracted me to this, uh, has been China – you grew up in China and you worked in Hong Kong. You have a whole lot of insight into this.
Whenever I discuss China with investors, they’re always shocked when I say, Hey, you know, over the past 30 years, since 1995, China’s markets essentially down a couple of digits. If you want to include total return and dividends, it’s up about about 100 percent. The total return for the S&P 500 over the same 30-year period is over 2700%.
China has turned out to be a fairly terrible investment for Western investors. Why do you think China has been such a laggard?
Perth Tolle: The main problem with investing in Chinese companies is that these are country, these are companies that have to put state interests first. They are, you know, not gonna try to succeed the most by providing the best value for their clients. They’re going to try to curry favor with the government. When your interests are divided like that, investors are subsidizing the cost of putting the state’s interests first. And as we know with China specifically, the state’s interest may be in contradiction with American interests or interests of foreign investors in general?
Some of these companies, for example, Tencent has an app called WeChat. And you know, it was well known back in the day when, all the Uyghur news was coming out that the government was using WeChat to crack down on dissidents and on the Uyghur population.
Of course, WeChat has to give all the data over to the government that they want because their in their own business interests and other interests of their stakeholders do not come first, but the government’s interests come first.
These are kinda the dangers of investing in a country where all the companies are more subject to the state’s interest than their own.
Barry Ritholtz: And when we look at an app like TikTok, the question is how involved is, uh, China’s surveillance state and security and their their version of the CIA tracking, managing, manipulating what US teenagers see.
This is really an issue with Chinese companies, isn’t it?
state It is, but TikTok is, is a whole separate issue altogether where you’re talking about, you know, interference in in foreign interest in foreign governments. And so yeah, that’s, that’s a totally different issue that we don’t even address in this, in this index, but absolutely. Um, dictatorship and authoritarianism is, um, in a globalized world is contagious, but so is freedom.
We believe that the more people invest in freedom and especially, in the finance world on Wall Street, we are in a position of Privilege and power. It’s a position of power to be able to direct assets, whether it’s your own assets or other people’s assets. And in emerging markets, investing, you know, there is no neutral. You’re either, you know, directing assets for good or in some cases for. Evil, unfortunately. And so we don’t wanna be in the position of directing assets for, um, to enable more authoritarianism.
And if we can, we want to be in the places that are promoting freedom in the world.
Barry Ritholtz: Let’s talk a little bit about, uh, another country where authoritarianism rules, Russia, I suspect a lot of people first recognized the merit of your approach to, uh, emerging market investing when Russia invaded Ukraine, and effectively their stocks plummeted to zero. If you were holding Russian stocks, they pretty much get marked down to nothing in everybody’s portfolio. Tell us a little bit about how Russia has fared in the Freedom Index and what’s been going on in that country?
Perth Tolle: Russia has never been an included country in the, FRDM index and when Russia invaded Ukraine, you know, we were the only emerging markets index that did not have Russia in it for this particular reason.
When their market went to zero, no one saw that coming. Um, so this was definitely not something that was priced in at the time as a possibility it was. Actually in the top 10 country holdings in the MSCI emerging markets indices.
Investors got hit quite hard during that time. And that was the time when, as I recall, most investors woke up to autocracy risk. So China, Russia, a lot of countries with state-run economies.
Barry Ritholtz: Walk us through your decision instead of just underweight them, just totally exclude them. What’s the thinking there?
Perth Tolle: Even if we underweight auto, see, you know, the, we would still be funneling money towards them. Our fund has $2 billion right now in it. MSCI, indices has hundreds of billions tracking them. Even a little bit in an autocracy is really not what we want. We don’t believe that’s the best place to invest.
We believe that there’s so many good opportunities in the emerging markets universe outside of autocracies; people only think of the BRICs because of the BRIC acronym, but there’s countries like Chile and Poland that get less than 1% weight in the cap-weighted indices, but that have the market size and liquidity. To have scale in a product like an ETF and investors can participate in the tremendous growth that has gone on in in those countries. And our investors have been able to benefit from that.
We believe those are the countries where you can find the places that have the best growth stories in the future – and that’s where we wanna be.
Barry Ritholtz: So to wrap up, if you’re an investor that wants exposure internationally, if you want global emerging market exposure, but you don’t wanna funnel money to countries that really engage in some of the worst behaviors there are on the international stage, and have seen their stock markets perform poorly because of it. Consider a fund that’s based on freedom on political, civil, and economic freedom. Uh, to give you that sort of exposure without all of the downsides.
Take a look. For example, at the Freedom 100 Index and the ETF FRDM, it’s really a fascinating story.
I’m Barry Ritholtz. This is Bloomberg’s at the Money.
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The post At the Money: Better Results By NOT Investing with Dictators! appeared first on The Big Picture.
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