Perth Tolle01 July 2022

Perth Tolle on ETF Freedom Metrics

1Frameworks

13Insights

Listen

Frameworks in this episode

Finance7 steps

Freedom-Weighted Emerging Markets Index

Build an investable emerging-markets portfolio by weighting institutional freedom

Read →

Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 2

Myth Buster34:28

Why Headline Reforms Do Not Necessarily Mean More Freedom

Saudi Arabia allowing women to drive appeared to be a liberalizing reform, but women who had campaigned for that right were imprisoned. Tolle uses the contradiction to warn investors to compare government publicity with measurable conditions on the ground.

Highly publicized reforms may coexist with continued repression
Several women who campaigned for driving rights were jailed
Public-relations narratives should not substitute for institutional evidence
Actual treatment of reform advocates reveals the government's tolerance for dissent

“at the same time that the women were allowed to drive, they put four women who had campaign for women to drive in jail.”
Perth Tolle · 34:45

“There's always rhetoric and there's always a big pr push to make them seem like they're reforming when actually perhaps on the ground, there's less…”
Perth Tolle · 35:18

#saudi arabia#women's rights#reform#political risk

Myth Buster43:21

China's Historic Growth Did Not Translate Into Historic Stock Returns

The interview highlights the disconnect between China's extraordinary economic expansion and returns from a broad MSCI China index. Tolle attributes the weak shareholder outcome to dilution, expropriation, poor transparency, and governance systems that permit the state to seize or redirect business value.

A country's GDP growth does not guarantee shareholder returns
Broad Chinese equity returns reportedly lagged Treasury-like returns over decades
Dilution and expropriation can absorb economic gains before they reach investors
Weak rule of law makes ownership claims less dependable

“for thirty years of the biggest growth spirit of any country on a on an extended basis, and it didn't be treasuries.”
Barry Ritholtz · 43:46

“There's a lot of dilusion, there's expropriation”
Perth Tolle · 43:57

#china#stock returns#expropriation#shareholder rights

Hot Take· 2

Hot Take39:16

How Wall Street's BRICS Acronym Took on a Geopolitical Life

Tolle argues that BRICS began as a marketing-friendly Wall Street grouping whose members shared little beyond emerging-market status. The label later helped those governments organize summits and frame an alliance positioned against the free world, showing that financial categories can produce unintended political consequences.

BRICS originally grouped Brazil, Russia, India, and China, with South Africa added later
The countries lacked a coherent shared investment characteristic beyond emerging-market status
The acronym became the basis for recurring political summits
Financial labels can influence capital flows and geopolitical identity

“there's nothing in common among these countries except they're all emerging markets, so they're all coming from a low base.”
Perth Tolle · 40:02

“And then the acronym gets hijacked by autocrats to create alliances against the free world.”
Perth Tolle · 40:47

#brics#wall street#geopolitics#emerging markets

Hot Take41:03

Why Emerging-Market Capital Allocation Is Never Neutral

Tolle contends that investing in opaque, state-directed companies lowers their cost of capital and subsidizes systems in which government interests outrank shareholders and customers. Because ownership and accounting can be unclear, investors may also enrich autocrats or their associates without knowing it.

Capital allocation gives companies and governments cheaper access to financing
State interests can supersede shareholders, employees, and customers
Poor transparency can obscure the true beneficiaries of an investment
Asset managers exercise power through the markets they fund

“we are subsidizing that cost by investing in these places, in these in these companies.”
Perth Tolle · 41:39

“When you're in a position to direct assets, whether it's your own assets or someone else's assets, that is a position of power and privilege,…”
Perth Tolle · 42:42

#capital allocation#autocracy#investor ethics#transparency

Explainer· 4

Explainer10:03

Why Tolle Chose an ETF Instead of a Mutual Fund

Tolle explains that her decade at Fidelity coincided with the rise of indexing and ETFs. She favored the ETF structure for its tax efficiency, tradability, and suitability for long-term investors, and designed the index from the beginning with an ETF launch in mind.

ETF tax treatment can be more favorable to investors
ETF shares are tradable throughout the day
The index was designed for an ETF before the fund existed
Long-term investors particularly benefit from structural tax efficiency

“I don't know of any other investment vehicle or structure that is as beneficial tax wise for clients, and so um and trade ability and…”
Perth Tolle · 10:41

“that tax efficiency is just so hard to beat in any other type of vehicle.”
Perth Tolle · 11:29

#etfs#mutual funds#tax efficiency#indexing

Explainer30:41

Why Strong Institutions Matter More Than One Political Leader

The conversation distinguishes political noise from systems where citizens and companies cannot push back. Tolle argues that plural political parties, checks and balances, an independent judiciary, and free media constrain abuses of power even when a country's leader is erratic.

Government interference exists to varying degrees in every market
The ability to protest and challenge policy distinguishes freer systems
Independent courts and media help hold power accountable
Strong institutions limit the damage one leader can cause

“The institutions in place right are important for pushing back.”
Perth Tolle · 31:51

“So you can have a crazy person in charge, but if you have stronger institutions, if you have some checks and balances, free press, that…”
Perth Tolle · 32:20

#institutions#rule of law#democracy#governance

Explainer25:32

What Jack Ma's Disappearance Revealed About Chinese Investor Risk

Tolle describes China's treatment of Jack Ma and other technology executives as evidence that state interests can abruptly supersede founders and shareholders. Executive departures, compulsory political involvement, and payments framed as common prosperity revealed risks that conventional financial analysis had not fully priced.

Ant Financial's offering was halted after Jack Ma criticized financial regulation
Ma's disappearance signaled that even prominent founders lacked protection
Other executives stepped down or pledged company money to state initiatives
Political control can redirect shareholder capital

“if they could disappear your founder, um, you know, you might have some risks there that we didn't account for.”
Perth Tolle · 26:24

“that money came from shareholder pockets and it's basically a bribe.”
Perth Tolle · 26:47

#china#jack ma#technology#governance risk

Explainer45:13

The Social Outcomes Associated With Freer Countries

Tolle says freedom's benefits extend beyond portfolio performance. Freer countries tend to show longer life expectancy, lower infant mortality and poverty, greater gender equality, higher incomes, and more sustainable growth because people, ideas, and capital receive stronger protection.

Freedom correlates with health and longevity outcomes
Greater freedom is associated with lower poverty and higher incomes
The poorest residents of freer countries can be better off than peers elsewhere
Institutional protections support more sustainable, transparent growth

“They have higher life expectancies, they have lower infor mortality, they have lower gender inequality or higher gender equality.”
Perth Tolle · 45:17

“The poorest people in the freer countries are much better off just by being in a freer country.”
Perth Tolle · 45:46

#freedom#economic development#public health#poverty

Story· 3

Story03:03

How Hong Kong and China Inspired Tolle's Freedom Index

Tolle traces the investment idea to her return to Hong Kong after college and visits to mainland China. Seeing how differently her life might have developed under China's institutions convinced her that freedom was not abstract but a force shaping personal and economic outcomes.

Tolle was born in Beijing and grew up between China and the United States
Her post-college travels exposed stark differences between free and unfree societies
The realization that freedom changed her own life became the seed of the index

“I realized that my life would have been very different had I stayed in China for my entire childhood and as opposed to having come…”
Perth Tolle · 03:35

“So it made a difference in my life, and I realized that it was freedom that made that difference.”
Perth Tolle · 03:45

#hong kong#china#freedom#origin story

Story17:36

She Launched the ETF Herself After Every Major Provider Said No

Tolle initially planned to license her completed index to an established provider such as iShares. After every provider declined, she raised capital and launched the fund herself with ETF Architect, accepting substantial legal, compliance, filing, and emerging-market custody costs.

The original business plan was to license the index
Large ETF providers declined the idea
Launching independently required outside capital
Emerging-market local-share custody added significant expense
ETF Architect became the operational partner

“I talked to everyone and no one wanted it. So eventually I just had to launch it on my own”
Perth Tolle · 17:47

“it's between legal and compliance and regulatory filings, and you know, it's a quarter million to a half a million dollars.”
Perth Tolle · 17:56

#entrepreneurship#etf launch#fundraising#asset management

Story27:38

The Hidden Human and Economic Costs of China's One-Child Policy

Tolle recounts meeting a same-age second child who had no official existence because her parents registered her brother instead. She connects the policy to missing women, millions of men without prospects of forming families, military expansion, and long-lasting demographic damage.

Unregistered second children lacked normal school, hospital, and state records
The policy contributed to tens of millions of missing women
The resulting sex imbalance left millions of men without likely partners
Demographic policy can shape social stability, military policy, and economic potential

“She was one of what's called black children who um I went to school under a fake surname, was a second child, and her parents…”
Perth Tolle · 28:21

“policies matter, governance matters, um, and these types of things have a huge impact on the future of a country, in a society and an…”
Perth Tolle · 29:20

#china#demographics#one-child policy#human rights

Takeaway· 2

Takeaway1:05:41

Career Advice: Get Trained, Then Risk a Meaningful Failure

Tolle advises graduates to begin at a large institution with the resources to teach foundational skills, but not to confuse training with permanent safety. Once equipped, they should pursue an ideal mission, accept the possibility of failure, and use youth as an opportunity to recover from ambitious bets.

Large firms can provide structured early-career training
Startups may lack the resources to train new graduates
Foundational experience should enable later independence
Choose an ideal direction instead of optimizing only for stability
Early failure is recoverable and can accompany meaningful work

“start at a big firm like Fidelity or you know, a company like Bloomberg where you can learn a lot um and they have the…”
Perth Tolle · 1:06:23

“go for it and try to fail as big as possible.”
Perth Tolle · 1:07:17

#career advice#training#risk-taking#failure

Takeaway1:08:48

How Index Design Can Become a Form of Creative Expression

Tolle entered art school expecting creativity to belong to advertising and design, then discovered that finance could provide a similar outlet. She views an index as a way to transform unconventional data and investor values into a new vehicle for expressing portfolio preferences.

Financial product design can be a creative discipline
An index encodes a point of view through its data and rules
New metrics can create investment choices that previously did not exist
Portfolio construction lets investors express values and preferences

“what I didn't realize that that time is that finance can be very creative and for me, indexing is a form of expression.”
Perth Tolle · 1:08:57

“finance and you know, indexing specifically could be a creative exercise.”
Perth Tolle · 1:09:41

#indexing#creativity#finance#product design