At The Cash: At The Cash: Investing in Freedom (March 25, 2026)
The freest nations generate one of the best returns for buyers. That’s the thesis underlying the Freedom 100 EM Index ETF, and its confirmed itself over the previous 1, 3, and 5 years. Perth Toll is the founding father of the Life and Liberty indexes and the creator of the Freedom 100 EM Index (image FRDM). She was named one in every of 10 to look at in 2020 by Wealth Administration Journal and one of many 100 folks reworking Enterprise by Enterprise Insider in 2021.
Full transcript under.
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About this week’s visitor:
Perth Toll is the founding father of the Life and Liberty indexes and the creator of the Freedom 100 EM Index (image FRDM). She was named one in every of 10 to look at in 2020 by Wealth Administration Journal and one of many 100 folks reworking Enterprise by Enterprise Insider in 2021.
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TRANSCRIPT:
Barry Ritholtz: On in the present day’s version of At The Cash, we’re going to debate learn how to keep away from these nations which are geopolitically harmful to your wealth: China, Russia, Saudi Arabia, Egypt, and Turkey.
To assist us unpack all of this and what it means to your portfolio, let’s usher in Perth Tolle. She’s the founding father of Life and Liberty Indexes and creator of the Freedom 100 Rising Markets ETF, inventory image FRDM. She was named one in every of 10 folks to look at by Wealth Administration Journal, and one in every of 100 folks reworking enterprise by Enterprise Insider. Her ETF, the Freedom 100 EM Index, manages over 2 billion {dollars} and has overwhelmed the S&P 500 over one, two, and three years. In 2025, FRDM was up 67%. That’s double the MSCI Rising Markets Index, which was up about 33–34%, which itself was double the S&P 500, which was up 17.9%.
Perth, earlier than we get into the main points, remind us concerning the Freedom Index—what will get excluded and why?
Perth Tolle: The Freedom Index is principally a freedom-weighted rising markets technique that makes use of third-party quantitative freedom metrics to weight nations as an alternative of utilizing market cap. With market-capitalization-weighted indices, you get a excessive weighting to autocracies, and among the world’s largest autocracies have a really concentrated weight. With freedom-weighting as an alternative, you get the next focus within the freest nations on this planet, as a result of we imagine that’s the place we’re going to seek out one of the best progress tales going ahead.
Barry Ritholtz: Is smart. I do know the index seems to be at three broad classes to display screen out totally different nations: civil, political, and financial issues. Clarify the way you ended up on these three gadgets.
Perth Tolle: We felt it was extraordinarily vital to embody all totally different sorts of freedoms, not simply private freedoms and never simply financial freedoms, as a result of all freedoms work collectively. One of many authors of the info set that we use has stated that freedoms work collectively like elements of an car. You may’t have the steering wheel with out the transmission—the automotive nonetheless gained’t run. So you must have each private freedoms, like civil and political freedoms, encompassing issues like terrorism, torture, trafficking, ladies’s rights, freedom of speech, media expression, meeting, faith, civil process, felony process, judiciary independence and issues like that.
You additionally want the financial freedoms that we’re all extra conversant in as buyers—issues like taxation, rule of legislation, personal property rights, enterprise laws, soundness of financial coverage, and freedom to commerce internationally.
All of this stuff added collectively give us a composite nation rating from our information assume tanks, the Cato Institute and the Fraser Institute, and we use that composite rating on the nation stage to derive our nation weights.
Barry Ritholtz: I wish to dig deeper into these three broad topics, however earlier than we do, there’s been a variety of pushback on ESG-type investing and morality-based investing. Once I hear names just like the Cato Institute and the Fraser Institute, these are very conservative entities, not the form of teams you consider as, “Oh, that is simply one other woke means of shifting cash round.” Investing in freedom actually is a reasonably well-defined strategy to display screen out threat, dangerous gamers, and elevated threat, isn’t it?
Perth Tolle: The Cato Institute and the Fraser Institute—I’m undecided what you imply by “very conservative.”
The Fraser Institute is understood for its financial freedom information, whereas the Cato Institute is extra centered on the non-public freedom aspect of it—extra political and civil freedoms. Each are entities that take no authorities grants, in order that they don’t take any grants from even the U.S. or Canadian governments, the place they’re primarily based.
That was vital to me as a result of everyone knows the World Financial institution debacle a number of years in the past, the place they took cash from China and, beneath Chinese language coercion, modified a few of their scoring. They needed to scrap a really helpful index, which we used, the Doing Enterprise Index. The group remains to be attempting to interchange that.
This independence was vital to me—they’re unbiased from authorities coercion. One other factor I seen working with them over time—and by the way in which, we’re fully unbiased from one another, so I’ve no affect on their nation scoring, they usually haven’t any affect on our nation allocations—is that having permission to make use of their information set has given me some perception into how they work.
One factor that actually impressed me was that going into 2016 and going into 2024, a variety of the extra conservative voices had been sort of going together with the political setting, whereas these teams by no means did. They referred to as out the hazards that they noticed within the American political state of affairs earlier than 2016.
For my part, this can be a group that’s extraordinarily unbiased towards any authorities, partly as a result of they’re fully privately funded. I’ve seen their third-party independence firsthand by means of this work and this information set, which is totally third-party for them. We’re utilizing their third-party measurements, so there are two layers of third-party objectivity. I’ve been actually impressed with how unbiased and impartial they’ve been, and I might even say centrist, on the subject of trying on the authorities and political state of affairs each within the U.S. and out of doors the U.S., and of their commentary there.
Barry Ritholtz: We’ll speak a little bit bit concerning the U.S. later. I wish to dive into these three broad topic issues that drive the index, a few of which appear a little bit apparent, a few of which not a lot. Let’s begin with the civil freedoms, the place you’re taking a look at violent battle, organized crime, disappearance, detainment, torture, and terrorism. All these issues sound like they’re not associated to economics, however in addition they appear to create a horrible setting by which to do enterprise.
Perth Tolle: If you happen to can’t stroll down the road with out caring about being shot, then you’ll be able to’t actually be doing enterprise. That’s the thought there. If you’d like a extra colloquial means of taking a look at it, it’s the correct to life, the correct to liberty, and the correct to property. If you happen to don’t have life, you don’t have the rest. That’s the foundation of all the opposite freedoms, and I put that proper to life within the civil freedoms class.
Barry Ritholtz: Now let’s discuss political freedoms. A few of these make an entire lot extra sense: rule of legislation, due course of, unbiased judiciary, a number of political events and never single-party rule, freedom of the press, freedom of expression. How do all of this stuff translate into higher funding returns?
Perth Tolle: I’m going to concentrate on freedom of the press and expression for a second. With out freedom of the press or freedom of expression, there’s no unbiased verification of any information, whether or not it comes from governments or corporations. There’s no strategy to know whether or not any of that information is correct or full. You see that in some autocratic nations—they’re not publishing a few of their financial information as a result of they don’t need third-party scrutiny from different nations, and in their very own nations they’ve already quashed it.
With out third-party verification of information—which is what buyers use to measure the influence of their investments—there’s no strategy to measure the true influence of your investments or whether or not your evaluation is even appropriate.
Barry Ritholtz: Let’s keep inside political freedoms and speak concerning the rule of legislation and an unbiased judiciary, given the sanctity of contracts and the way vital it’s to keep up that. How important is an unbiased judiciary to this index?
Perth Tolle: There are 87 variables that go into the country-level composite rating, and an unbiased judiciary is a type of. It’s simply as vital as all of the others. As I stated, all of the freedoms work collectively like elements of an car. I might say it’s of utmost significance, particularly in enterprise, as a result of in case you don’t know in case your contracts are going to be upheld, how do you even enter into contractual agreements? How do you even begin that enterprise relationship?
On the extra excessive finish of that, in rising markets the place there is no such thing as a unbiased judiciary and no actual rule of legislation, anybody might be arrested, disappeared, or detained for political causes that don’t have anything to do with their precise enterprise. We noticed this when Jack Ma disappeared—once more utilizing China as a chief instance—as a result of he stated one thing at a convention that the federal government didn’t like. His IPOs had been scrapped and plenty of different tech entrepreneurs have disappeared since then.
In nations with out rule of legislation, judicial independence, and due course of, you see issues like China’s 99% conviction fee.
Barry Ritholtz: That’s a reasonably substantial conviction fee, isn’t it?
Perth Tolle: They will need to have some nice prosecutors over there. These are very primary, elementary issues that you just want in an effort to conduct each life and enterprise, and I feel most of Wall Avenue overlooks them.
Barry Ritholtz: Let’s speak concerning the third leg of the stool: financial freedoms. These embody property rights, sound financial coverage, unbiased central banks, free commerce, enterprise, credit score and labor laws, after which the diploma of presidency interference in personal markets. All of those are clearly important to working a enterprise and investing in publicly traded corporations. Inform us about financial freedoms within the emerging-market world.
Perth Tolle: I feel financial freedoms, of all of the freedoms, get sort of a foul rap as a result of capitalism has its critics. However in case you don’t have the liberty to conduct enterprise and also you don’t have the liberty to make use of your individual assets as you see match to contribute to the world, then you definately don’t actually have freedom. If the federal government tells you what your occupation is to be or whether or not you’ll be able to promote fruit on the road—as we noticed within the Arab Spring—whether or not you’ll be able to present a dwelling for your loved ones, and also you’re depending on the federal government to present you that elementary proper, then you definately’re not likely free. With out financial freedom, you don’t have any freedom.
As for the opposite belongings you talked about within the financial freedom information set—personal property rights, free commerce, soundness of financial coverage—all of these are issues that I feel Wall Avenue has historically taken as a right as a result of we normally work in nations that have already got them. That’s how we might be myopic to the liberty premium in rising markets, as a result of in rising markets this stuff can’t be taken as a right; not all of them have these freedoms.
Barry Ritholtz: How do you concentrate on the Freedom Index—is it a values-based fund, a risk-management software, or just a pure return-seeking technique?
Perth Tolle: I might say 95-plus % of our purchasers are utilizing it as a pure “freedom premium” technique. They imagine that freer nations will outperform in the long term. We do have some buyers who got here in in the course of the early days when ESG was an enormous factor, they usually have ESG portfolios. However I feel that’s going away a bit. Most of our purchasers use this as a result of they imagine it should outperform.
In fact, now after the outperformance that we’ve had within the out-of-sample, stay efficiency of the fund, most individuals are utilizing it in that means—as their core emerging-markets technique.
Barry Ritholtz: Right here’s the pushback I’ve heard: markets are very environment friendly. In relation to issues like political threat, state possession, capital controls, and rule of legislation, folks will say, “Hey, the markets have already priced that political threat in.” How do you reply to that?
Perth Tolle: On the top of China inclusion throughout COVID, in 2020 and 2021, the MSCI Rising Markets Index had 41% allotted to China. In 2021 and 2022, the China tech inclusion occurred and a variety of buyers misplaced some huge cash. On the similar time, Russia invaded Ukraine, and Russia’s market went to zero. No one noticed any of these issues coming—the struggle, COVID—all of those occasions that exacerbated autocracy threat in lots of nations world wide.
I might say that the metrics we’re utilizing for each private and financial freedom are historically missed by buyers, and persons are solely now changing into extra conscious of them. That’s due each to the outperformance of the freer nations and the drastic declines within the unfree nations. Even now, buyers are asking, “The place can we discover pockets of worth in China?” There’s nonetheless a variety of blind investing into these nations as if all these primary foundational freedoms are in place, fully ignoring that they’re not. So I might say these dangers are removed from being priced in, and we see that within the efficiency hole as properly.
Barry Ritholtz: Actually wonderful. To wrap up: in case you’re a U.S. or Canadian-based investor and also you’re enthusiastic about getting publicity to rising markets by way of an ETF—and also you don’t wish to funnel cash to autocrats and dictators—and also you wish to spend money on the freest nations, whether or not that’s a values-based determination, a risk-management determination, or just because it has demonstrated over the previous few years to be a return-seeking technique, then check out the Freedom 100 EM Index ETF, image FRDM. I’m Barry Ritholtz. You’re listening to Bloomberg’s At The Cash.
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