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Freedom Has Paid Off For this Indie ETF · Trillions

• 0:05
  Speaker 1: Welcome and Trallians.
• 0:06
  Speaker 2: I'm Joe Webber and I'm Eric Valcunas.
• 0:11
  Speaker 3: Eric.
• 0:11
  Speaker 1: For the third time, we're having Perth Toll on the podcast.
• 0:17
  Speaker 1: She's the founder of the Life and Liberty Indexes and
• 0:20
  Speaker 1: specifically the Freedom one hundred Emerging Markets ETF. She was
• 0:24
  Speaker 1: on the first time in twenty nineteen when the ETF
• 0:27
  Speaker 1: was new, and she came back in twenty twenty two
• 0:29
  Speaker 1: to do a debate with Jeremy Schwartz Wisdom Try about
• 0:32
  Speaker 1: emerging markets. And since either of those appearances she has
• 0:36
  Speaker 1: been crushing it. Her ticker FRDM has been absolutely crushing it.
• 0:42
  Speaker 1: What do you want to know about this ETF now
• 0:46
  Speaker 1: that you didn't know before?
• 0:47
  Speaker 4: Perth has been interesting to me because a it's indy.
• 0:50
  Speaker 4: I like indie stories. She lived it. You know, a
• 0:53
  Speaker 4: lot of this is about, you know, eliminating countries that
• 0:55
  Speaker 4: are not free and buying the ones that are more free.
• 0:59
  Speaker 4: And her experience as a young person in China affected
• 1:03
  Speaker 4: all this. So the story is really great and the
• 1:06
  Speaker 4: indie it's hard to get assets as an indie. You
• 1:08
  Speaker 4: kind of need a shiny object moment, as we say
• 1:11
  Speaker 4: all the time. Well, FRDM has got that moment right now.
• 1:15
  Speaker 4: I mean I was on a podcast with Dave Nady
• 1:17
  Speaker 4: called etf Zoo, which is pretty good. It's a bunch
• 1:19
  Speaker 4: of analysts to arguing over stuff, and so FRDM came
• 1:23
  Speaker 4: up and I didn't realize how good.
• 1:25
  Speaker 2: It was doing.
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  Speaker 4: Joel, here's the numbers. It's up one hundred and three
• 1:28
  Speaker 4: percent in the past five years. Emerging markets, we'll say,
• 1:33
  Speaker 4: measured by EEM.
• 1:35
  Speaker 2: Is up twenty percent. So think about it.
• 1:37
  Speaker 4: You're five xing the thing that you're also investing within.
• 1:41
  Speaker 4: It's not like I don't know some random crypto five
• 1:43
  Speaker 4: xing the S and P or something. Her stocks and
• 1:47
  Speaker 4: her countries are within EEM. So in other words, she
• 1:50
  Speaker 4: picked the right ones or the freedom story has just
• 1:53
  Speaker 4: really played out in an intense way right now. And
• 1:56
  Speaker 4: that one hundred percent, by the way, is even better
• 1:58
  Speaker 4: than the queues, which is a ninety two percent, And
• 2:01
  Speaker 4: it's a double EMC, which is I shares this emerging
• 2:05
  Speaker 4: markets x China, which actually had a nice run a
• 2:07
  Speaker 4: couple of years ago. So you're even because sometimes people
• 2:10
  Speaker 4: are like, well, FRDM is just x China, but not really.
• 2:12
  Speaker 4: It's actually done much greater than even EMXC. So I
• 2:17
  Speaker 4: was like, damn this, this is time to basically let
• 2:20
  Speaker 4: her maybe do a little victory lap and ask some
• 2:23
  Speaker 4: questions like.
• 2:24
  Speaker 2: The football, and you know what what happened? You know,
• 2:27
  Speaker 2: how how did this work out so perfectly.
• 2:32
  Speaker 1: This time on Trillions The Future of Freedom Perth, Welcome
• 2:37
  Speaker 1: back to Trillions.
• 2:39
  Speaker 3: Thanks so much for having me.
• 2:40
  Speaker 1: So we gave you kind of a long setup in
• 2:42
  Speaker 1: our intro there. Why why has this thesis worked so well?
• 2:49
  Speaker 3: Yeah? You know, I am so pleased with the way
• 2:51
  Speaker 3: that thesis has played out in this time period. I mean,
• 2:54
  Speaker 3: five years is not super short. It's not super long.
• 2:58
  Speaker 3: We've been around for all seven years. So the first
• 3:02
  Speaker 3: you know, first year and a half or so, it
• 3:03
  Speaker 3: was like COVID times coming out of COVID, and then
• 3:06
  Speaker 3: this five year run. So it has been an amazing run.
• 3:10
  Speaker 3: And you know, as as the you know, creator of
• 3:14
  Speaker 3: the of the strategy, I couldn't be happier for our
• 3:16
  Speaker 3: clients and just for the way that it's played out. So,
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  Speaker 3: I mean, I think it's a confluence of many factors.
• 3:23
  Speaker 3: I cannot take credit for the market, but the strategy
• 3:26
  Speaker 3: did deliver the you know, the exposures to the freest
• 3:32
  Speaker 3: countries in the emerging market space, and that freedom story
• 3:36
  Speaker 3: has truly played out very well. You know, it's not
• 3:40
  Speaker 3: just one country. This past year twenty twenty five, South
• 3:44
  Speaker 3: Korea was the top performer. The year before that, Taiwan
• 3:47
  Speaker 3: was the top performer, the year before that it was Poland,
• 3:50
  Speaker 3: the year before that it was Chile. So it's been
• 3:53
  Speaker 3: a diversified kind of kind of outperformance in the country.
• 4:00
  Speaker 3: So those four that I just named are always in
• 4:02
  Speaker 3: the top four, have always been in the last of.
• 4:05
  Speaker 1: Those were the top four. So I'm curious, what, if anything,
• 4:10
  Speaker 1: have you changed along the way during those five years
• 4:14
  Speaker 1: of the ETF or the seven years of the index.
• 4:16
  Speaker 1: What what do you feel like have been the most
• 4:18
  Speaker 1: substantial tweaks you've made as you've gone.
• 4:23
  Speaker 3: So this is something I'm actually quite proud of. We've
• 4:26
  Speaker 3: made substantially no changes to the index methodology since the beginning,
• 4:31
  Speaker 3: and that is the idea of the index. Right. So
• 4:34
  Speaker 3: when I started this, as Eric mentioned, I am a
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  Speaker 3: complete indie and total unknown, and I you know, did
• 4:41
  Speaker 3: not have the pedigree of a PM or fund manager
• 4:45
  Speaker 3: in the in the traditional sense, right. So I came
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  Speaker 3: from Fidelity, where you know, we have the likes of
• 4:51
  Speaker 3: Will Danoff, you know, Peter Lynch. These guys are who
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  Speaker 3: I imagine if they wanted to start something like this,
• 4:56
  Speaker 3: would do it actively, and it would be fine because
• 4:59
  Speaker 3: they have the name. I didn't have that. So the
• 5:01
  Speaker 3: only thing I could do is a systematic, rules based strategy.
• 5:05
  Speaker 3: And also that's what I wanted for this, because I
• 5:08
  Speaker 3: didn't want to be responsible for what countries were in,
• 5:11
  Speaker 3: what countries were out, what countries were you know, weighted higher.
• 5:14
  Speaker 3: We actually use only third party quantitative metrics from the
• 5:18
  Speaker 3: Cato Institute and the Fraser Institute. They you know, measure
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  Speaker 3: freedom on eighty seven different variables, and we use the
• 5:24
  Speaker 3: composite free, you know, the composite equal weight of all
• 5:27
  Speaker 3: those variables. We don't even know weight any particular variable higher.
• 5:30
  Speaker 3: So we take no subjective stance and it's as objective
• 5:34
  Speaker 3: as possible. And so I think one thing that I'm
• 5:38
  Speaker 3: very proud of is we always rebalance on time. We
• 5:41
  Speaker 3: always stick to the methodology, and you know, our partners
• 5:45
  Speaker 3: at ETF architect also want to make sure that we
• 5:48
  Speaker 3: do that. So there's a layer of kind of compliance
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  Speaker 3: there that says, okay, it's a passive strategy, it's going
• 5:53
  Speaker 3: to stay that way. And then our index committee also
• 5:56
  Speaker 3: access to checks and balances on you know, myself and
• 5:59
  Speaker 3: the indexes.
• 6:00
  Speaker 4: When I look at this fund and I compared to
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  Speaker 4: EEM or the Emerging Markets benchmark, which is what a
• 6:05
  Speaker 4: lot of people own, So this is what a lot
• 6:07
  Speaker 4: of people own, it looks like there's about forty forty
• 6:10
  Speaker 4: five percent difference. It looks like, for example, if you
• 6:13
  Speaker 4: screen out China already, you just take twenty five percent
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  Speaker 4: out of your portfolio. Then you've got Russia you screen out,
• 6:20
  Speaker 4: Then you've got a couple of Middle East countries like
• 6:22
  Speaker 4: Saudi Arabia and a handful of others. So I get
• 6:25
  Speaker 4: to around forty percent, So that gives you forty percent
• 6:27
  Speaker 4: budget to spend on these other countries which you overweight,
• 6:31
  Speaker 4: as you said earlier, Taiwan, South Korea, Chile, Poland. What
• 6:36
  Speaker 4: is driving the performance here is that those countries they're
• 6:41
  Speaker 4: more free and that has actually caught the investors' attention
• 6:45
  Speaker 4: and the outperformance of those countries. Or is it that
• 6:48
  Speaker 4: investors look at these less free countries and are turned off.
• 6:53
  Speaker 3: So yeah, it's both, And you know, a country attribution
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  Speaker 3: would account for countries what account for about eighty three
• 7:01
  Speaker 3: to eighty four percent of the outperformance attribution in the
• 7:06
  Speaker 3: strategy in the past several years. Not having exposure to
• 7:10
  Speaker 3: Russia when Russia went into a war, not having exposure
• 7:13
  Speaker 3: to China when it all melted down, that really helped.
• 7:17
  Speaker 3: But it's really these out you know, out performing smaller
• 7:21
  Speaker 3: countries that are not very high weights in the other
• 7:24
  Speaker 3: indices that have really helped as well. And you know,
• 7:27
  Speaker 3: we do do that kind of country screening before the
• 7:29
  Speaker 3: freedom screening, where we look at a country market cap
• 7:34
  Speaker 3: as in relation to world market caps. So these are
• 7:36
  Speaker 3: countries that we have deemed to be large enough and
• 7:39
  Speaker 3: liquid enough to be included in a you know, exchange
• 7:43
  Speaker 3: traded product, but they are you know, less than one
• 7:46
  Speaker 3: percent in the cap weighted induses like the MESI in
• 7:50
  Speaker 3: footzy industy. So for example Chile and Poland, they're both
• 7:52
  Speaker 3: less than one percent in the other induses. So you know,
• 7:56
  Speaker 3: investors have in those in the cap weighted strategies have
• 7:59
  Speaker 3: really missed out on some of these higher growth, smaller
• 8:04
  Speaker 3: countries that are actually big enough to trade, it's just
• 8:07
  Speaker 3: not big enough for maybe their product, but or in
• 8:10
  Speaker 3: the cap waight at strategies are some much bigger countries.
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  Speaker 3: So I'd say there's just been so much opportunity to
• 8:16
  Speaker 3: be captured in the freer emerging markets, and so happy
• 8:19
  Speaker 3: that we were able to capture some of that.
• 8:22
  Speaker 1: So do you think it's more because of what you
• 8:24
  Speaker 1: own or what you don't own?
• 8:27
  Speaker 3: It's more what we own, but what we don't own
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  Speaker 3: definitely helped as well. Eighty three to eighty four percent
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  Speaker 3: of the attributable outperformance is country selection.
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  Speaker 4: So when you were starting off, I remember, I think
• 8:49
  Speaker 4: you were literally knocking on doors, like I think you
• 8:51
  Speaker 4: said you were going around the neighborhoods in Houston knocking
• 8:54
  Speaker 4: on doors and talking about your fund, and you probably
• 8:57
  Speaker 4: knew the investors in the fund at first. Then you
• 9:01
  Speaker 4: get this shiny object moment, and now this thing is
• 9:03
  Speaker 4: taken in money, hand over fist.
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  Speaker 2: I think it's up to almost three billion dollars.
• 9:07
  Speaker 4: It's taken in like weekly flows for the past six
• 9:09
  Speaker 4: weeks something like that, and the flows are getting thicker.
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  Speaker 4: We're talking like one hundred and fifty two million, three
• 9:14
  Speaker 4: hundred million a week. So the fish are jumping in
• 9:17
  Speaker 4: the boat, so to speak. Are you interacting with these
• 9:21
  Speaker 4: people or are you just sitting there going like wow, like,
• 9:24
  Speaker 4: where's all this money coming from? How does that work?
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  Speaker 4: From knowing the investors in an intimate way to sort
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  Speaker 4: of I guess blowing up is the right word here.
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  Speaker 4: And then all of a sudden, you've got way more investors.
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  Speaker 2: Do you know who they are? Do they talk to you?
• 9:39
  Speaker 2: Has your life changed?
• 9:40
  Speaker 4: Have you, you know, splurged on any nice cars or anything?
• 9:47
  Speaker 3: Yeah? I mean you gave me this, this super lay
• 9:49
  Speaker 3: up question chrying to get me to be happy and
• 9:51
  Speaker 3: in the moment when we were on ETFIQ the other day,
• 9:54
  Speaker 3: and I totally blew it by instead highlighting all our
• 9:57
  Speaker 3: periods of underperformance because I just refused to be in
• 10:00
  Speaker 3: the moment, And so I will I will re answer
• 10:04
  Speaker 3: that question now. Yes, my life is is different, but
• 10:08
  Speaker 3: it's not that different, you know. We I do have
• 10:11
  Speaker 3: a slightly nicer card. I literally traded it, you know,
• 10:15
  Speaker 3: X one for an xtram is literally like not a
• 10:17
  Speaker 3: huge difference, just because I drive around a bunch of teenagers.
• 10:21
  Speaker 3: I don't you know. My house is the same. I
• 10:23
  Speaker 3: haven't changed things that much. This is something that happened
• 10:26
  Speaker 3: very quickly over the last year. We like tripled our assets.
• 10:32
  Speaker 3: And yes, I do remember those early days. And I
• 10:35
  Speaker 3: actually missed those early days. And I was knocking on doors,
• 10:37
  Speaker 3: not you know, in Houston, because you know I was,
• 10:40
  Speaker 3: I was. I didn't know a lot of finance people
• 10:43
  Speaker 3: here except the Fidelity guys, which you know, they couldn't
• 10:46
  Speaker 3: do something like this at the time. I was knocking
• 10:49
  Speaker 3: on doors at ETF conferences. I don't know if you remember,
• 10:52
  Speaker 3: you know, meeting you at like ETF dot com inside
• 10:55
  Speaker 3: ECF twenty eighteen, getting you to you know, sign your
• 10:58
  Speaker 3: book or maybe that was twenty fifteen, I don't know,
• 11:00
  Speaker 3: and just you know, saying hello to all the like
• 11:03
  Speaker 3: networking with all the issuers, trying to get somebody to
• 11:06
  Speaker 3: launch the thing, and then nobody would do it, and
• 11:09
  Speaker 3: then finally somebody said they would do it, and then
• 11:11
  Speaker 3: after a conference at inside ETS they backed out. It
• 11:15
  Speaker 3: was the most you know, the worst into a conference ever,
• 11:19
  Speaker 3: you know, So it was a lot of that and
• 11:21
  Speaker 3: I remember those days, and I actually missed the time
• 11:24
  Speaker 3: when I had to struggle to get assets, when I
• 11:26
  Speaker 3: had to you know, convince people that it's not crazy
• 11:29
  Speaker 3: to not have China, not crazy to have a bunch
• 11:32
  Speaker 3: of Chilian, Poland in a fund for emerging markets. I
• 11:36
  Speaker 3: like being the contrarian and like the only voice in
• 11:39
  Speaker 3: the room saying something. So now it feels a little
• 11:42
  Speaker 3: less original and I feel like I'm saying the same
• 11:45
  Speaker 3: thing over and over. But I'm but I have no
• 11:48
  Speaker 3: complaints that absolutely, I'm thrilled with how this has turned out.
• 11:51
  Speaker 2: She's like Warren Buffett.
• 11:52
  Speaker 4: She could have the same house in ten years and
• 11:54
  Speaker 4: just just to make a point and drink cherry Coke
• 11:56
  Speaker 4: like all right anyway, By the way, in my opinion,
• 12:01
  Speaker 4: is the most punk rock person in the wholegf industry.
• 12:05
  Speaker 4: I always said when she comes on stage, it should
• 12:07
  Speaker 4: be too straight out of Compton from NWA. It just
• 12:10
  Speaker 4: suit or public enemy, something like that. There's something very
• 12:13
  Speaker 4: rebellious about what she's saying. Most of these other issuers
• 12:16
  Speaker 4: won't touch China. She will criticize it, and as we
• 12:20
  Speaker 4: know from following other news events, no one does. And
• 12:23
  Speaker 4: it's risky to be out there like that, and I
• 12:27
  Speaker 4: give her credit for that. It's there's something that always
• 12:30
  Speaker 4: interested me for somebody who was willing to sort of
• 12:33
  Speaker 4: go a little further out in the branch on any
• 12:35
  Speaker 4: issue in this particular case, it was criticizing some of
• 12:38
  Speaker 4: these dictators and authoritarian countries in a way other people
• 12:44
  Speaker 4: would not. And you know, other people even have products
• 12:48
  Speaker 4: that exclude certain countries, but they won't say a word.
• 12:51
  Speaker 2: It's just very interesting. Do you have any comment on that.
• 12:54
  Speaker 3: Yeah, so it's hard to speak out against autocracies, right.
• 12:56
  Speaker 3: I think I have an easier position for that, just
• 12:59
  Speaker 3: because because I have actual experience in the country. You know,
• 13:02
  Speaker 3: I'm actually I've born there. I came here at the
• 13:05
  Speaker 3: age of nine, I went back after college, lived in
• 13:07
  Speaker 3: Hong Kong and traveled throughout mainland China. Had you know,
• 13:12
  Speaker 3: personal experience with friends under the one child policy who
• 13:14
  Speaker 3: had no name, no birth certificate, no school records, just
• 13:18
  Speaker 3: because they were born a girl, and know that they're
• 13:20
  Speaker 3: the lucky ones. You know, there's sixty million missing women
• 13:22
  Speaker 3: missing in China in my generation. That's not something that
• 13:25
  Speaker 3: you can easily replace. So I think I have a
• 13:29
  Speaker 3: lot of more front roads experience, and so that gives
• 13:32
  Speaker 3: me a little more I guess credibility on the subject
• 13:37
  Speaker 3: that if you know, let's say, head of some big
• 13:42
  Speaker 3: firm in the US said something, it might not go
• 13:45
  Speaker 3: over as well. But yeah, I think freedom of speech
• 13:49
  Speaker 3: is important, freedom of medium is important, and so I'm
• 13:51
  Speaker 3: happy to most of the times say what I think
• 13:55
  Speaker 3: is true.
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  Speaker 1: So we've actually seen off a fair amount of democratic
• 14:03
  Speaker 1: backsliding throughout the rest of the world and the rise
• 14:05
  Speaker 1: of populism and developed markets. And this is since we
• 14:09
  Speaker 1: talked to you last even I'm curious how you're looking
• 14:12
  Speaker 1: at at that and is there another opportunity for I'll
• 14:16
  Speaker 1: call it a sophomore album from Perthle that's not about
• 14:19
  Speaker 1: emerging markets but might be more about the developed world.
• 14:23
  Speaker 3: So you know, you know what's interesting. So right now
• 14:26
  Speaker 3: we are getting we are getting demand from global global
• 14:31
  Speaker 3: investors from all over the world for the emerging markets product,
• 14:35
  Speaker 3: and so there are people that are now trying to
• 14:37
  Speaker 3: package the product for their own you know, currencies and
• 14:41
  Speaker 3: in a way that their clients can invest in a
• 14:44
  Speaker 3: tax efficient manner. And then in the US we're getting
• 14:48
  Speaker 3: more requests for developed market products. So developed markets, you know,
• 14:53
  Speaker 3: there's not as much divergence and freedom levels. It's more
• 14:57
  Speaker 3: homogeneous and they're all relative high in freedom levels. So
• 15:02
  Speaker 3: the thing that I've noticed with the with the rise
• 15:05
  Speaker 3: of populism around the world is that in some of
• 15:08
  Speaker 3: these emerging markets, which is what I've been watching. When
• 15:11
  Speaker 3: we see that happening, the checks and balances and the
• 15:14
  Speaker 3: institutions in the freer ones do prove to be strong.
• 15:18
  Speaker 3: You know, voters come out and drove to vote in
• 15:21
  Speaker 3: you know, more balanced government in countries like Chile and
• 15:23
  Speaker 3: poland recently South Korea just jailed their you know, ex
• 15:28
  Speaker 3: president for life for unilaterally declaring martial law one day.
• 15:33
  Speaker 3: You know, these types of checks and balances and stronger
• 15:36
  Speaker 3: institutions in civil society is what I'm what I'm seeing
• 15:40
  Speaker 3: happening in the freer EMS and then d MS, Yes
• 15:44
  Speaker 3: there is. I do see that there's a little more
• 15:46
  Speaker 3: opportunity than the before, as there is a little more
• 15:49
  Speaker 3: divergence than before with the rise of populism, But a
• 15:52
  Speaker 3: lot of that rise of populism is also happening in
• 15:54
  Speaker 3: the smaller d ms or in the in the larger EMS.
• 15:59
  Speaker 4: Let me this real quick, because I think people in
• 16:02
  Speaker 4: the US were so spoiled with all our freedom that
• 16:05
  Speaker 4: like the tiniest little thing which is like no big deal.
• 16:08
  Speaker 4: People like freedom of speech is dead and it's like okay, relax,
• 16:14
  Speaker 4: can you help I guess give context or perspective to
• 16:17
  Speaker 4: people who might think, oh my god, the US probably
• 16:21
  Speaker 4: it would wouldn't make her screening process. Now that's absurd, right.
• 16:27
  Speaker 3: It is. I'm gonna I'm gonna push back on that,
• 16:30
  Speaker 3: little Eric, So, yes, that is absolutely absurd. US is,
• 16:34
  Speaker 3: you know, number fifteen out of one hundred and sixty
• 16:36
  Speaker 3: five countries on the you know, Human Freedom Index by
• 16:40
  Speaker 3: Cato and Fraser, So you know, are that's on par
• 16:44
  Speaker 3: with our top ems that are included in the fund.
• 16:47
  Speaker 3: So yeah, it's it definitely would not be an exclusion
• 16:50
  Speaker 3: if we did something right. So that's not even a possibility.
• 16:53
  Speaker 3: And it's just so far from you know, the lower
• 16:56
  Speaker 3: scoring countries like like you know, China, Saudi Arabia and
• 16:59
  Speaker 3: so forth, where you say something and you can literally
• 17:02
  Speaker 3: be disappeared for it, or your famili's disappeared, you know overnight,
• 17:05
  Speaker 3: or your IPO is scrapped or you know, you're now
• 17:08
  Speaker 3: a nonprofit you know. So that's that's completely like a
• 17:12
  Speaker 3: different universe. But the latest report from Cato and Fraser
• 17:18
  Speaker 3: did come out and say that the US's score is
• 17:21
  Speaker 3: expected to decline because of things like government interference in
• 17:25
  Speaker 3: private market activity, so like government taking stakes in private
• 17:28
  Speaker 3: companies and things like the tariffs. Now I don't know
• 17:31
  Speaker 3: if that's going to be different now that the terrors
• 17:33
  Speaker 3: have been shot down, which does show some checks and balances,
• 17:37
  Speaker 3: and whether that will last. So that that is, you know,
• 17:41
  Speaker 3: some of the more protectionists policies on trade and the
• 17:45
  Speaker 3: interference the size of government in private markets. The score
• 17:52
  Speaker 3: for the US is expected to decrease, but you know,
• 17:54
  Speaker 3: the the decrease in score doesn't mean it's not it's
• 17:57
  Speaker 3: not like a drastic situation. It's just, hey, work's affecting
• 18:00
  Speaker 3: something here. And those are two variables that I mentioned
• 18:03
  Speaker 3: out of eighty seven. So yeah, there are some concerns,
• 18:08
  Speaker 3: and I think it's good for people in a freer
• 18:11
  Speaker 3: market to be very vigilant, maybe hypervigilant, because you know, yeah,
• 18:17
  Speaker 3: freedom is it's a very uh, it's a fragile thing.
• 18:29
  Speaker 1: Because you're watching the Cato and the Fraser indexes so closely.
• 18:33
  Speaker 1: I'm wondering if you think there's another emerging market that
• 18:38
  Speaker 1: might be approaching something of a breakout moment. Since we've
• 18:41
  Speaker 1: talked about South Korea and Taiwan and Chile and Poland,
• 18:45
  Speaker 1: like those are some somewhat expected, I guess, are there anybody?
• 18:49
  Speaker 1: Is there anybody who's unexpected that you're you know, got
• 18:52
  Speaker 1: your eye trained on.
• 18:55
  Speaker 3: So a lot of these countries that are geographically close
• 18:59
  Speaker 3: to very on free markets are getting an influx of
• 19:03
  Speaker 3: human capital. So countries like Colombia getting a lot of
• 19:08
  Speaker 3: immigrants from Venezuela for example, a lot of migration there.
• 19:13
  Speaker 3: Countries like Poland getting a lot of migration from Ukraine.
• 19:18
  Speaker 3: So these are countries that are benefiting from this kind
• 19:20
  Speaker 3: of freedom of movement that is coming into their country
• 19:24
  Speaker 3: from very unfree markets that will show up in the
• 19:27
  Speaker 3: long run. In the short run, actually, India, their population
• 19:32
  Speaker 3: just surpassed China's. India is a country that in our
• 19:36
  Speaker 3: index goes in and out from year to year quite
• 19:38
  Speaker 3: often just because they're right at the average of the
• 19:41
  Speaker 3: emerging market eligible Universe peers. And so they are out
• 19:46
  Speaker 3: this year, they were in last year. And they've historically,
• 19:49
  Speaker 3: as we mentioned, had very high trade protections tariffs and
• 19:53
  Speaker 3: non tariff trade barriers that has weighed on their economic
• 19:56
  Speaker 3: freedom score and had some other issues on the personal
• 20:00
  Speaker 3: freedom side as well, like freedom of media, like they
• 20:02
  Speaker 3: you know rated Modi's when they did VBC did the
• 20:06
  Speaker 3: story on MODI, they rated their offices, you know, things
• 20:08
  Speaker 3: like that. So there's issues and they come in and out.
• 20:12
  Speaker 3: But the population growth is undeniable, and you know, demographics
• 20:16
  Speaker 3: our destiny, so especially in emerging markets. So I'm very
• 20:18
  Speaker 3: bullish on them. Now, my opinion does not factor into
• 20:23
  Speaker 3: the methodology whatsoever. So that's just my opinion.
• 20:26
  Speaker 1: On that, Okay. And what about the Middle East, because
• 20:28
  Speaker 1: there's been so much kind of deal making over there,
• 20:32
  Speaker 1: and we're talking like, you know, big, big, big numbers.
• 20:37
  Speaker 1: Is there anything there that feels like it's something to
• 20:40
  Speaker 1: watch or or do? The rules just simply mean there's
• 20:44
  Speaker 1: few and far between as opportunities to go.
• 20:48
  Speaker 3: Yeah. So the Middle East is interesting because if I
• 20:50
  Speaker 3: did only economic freedom, they would score actually quite high.
• 20:55
  Speaker 3: Countries like Saudi Arabia, cutter UAE. These are countries that
• 20:58
  Speaker 3: score very high on eco nomic freedom. But because our
• 21:02
  Speaker 3: data set uses both personal and economic freedoms, so civil,
• 21:05
  Speaker 3: political and economic, and the personal freedom is half of
• 21:08
  Speaker 3: the overall you know score, they are actually scoring quite
• 21:13
  Speaker 3: low just because the majority of that being there very
• 21:18
  Speaker 3: bad women's rights in these countries and freedom of women's speech, expression, etc.
• 21:24
  Speaker 3: So in these these countries are also very oil rich,
• 21:27
  Speaker 3: They're very resource rich, but without the diversification of industries
• 21:34
  Speaker 3: that you see in some of the freer markets.
• 21:36
  Speaker 1: Eric brought up your the tremendous inflows that you've you've
• 21:40
  Speaker 1: seen over the last You've made it sound like it's
• 21:43
  Speaker 1: really been within the last year or so. I'm curious
• 21:47
  Speaker 1: what what do you feel like you can attribute that to.
• 21:50
  Speaker 1: Has it really been about American investors looking for international opportunities?
• 21:56
  Speaker 1: Is it the sell America idea? Is it is it
• 22:00
  Speaker 1: just a reaction to Trump or or is it is
• 22:02
  Speaker 1: it performance chasing or something else.
• 22:06
  Speaker 3: Yeah, I think it's a confluence of factors. I agree
• 22:09
  Speaker 3: with Eric that I don't think sell America is like sustainable,
• 22:13
  Speaker 3: but I think that there is a higher you know,
• 22:16
  Speaker 3: there has been a performance rotation between the US and
• 22:20
  Speaker 3: developed markets and emerging markets, so you know, both developed
• 22:24
  Speaker 3: and emerging markets outperformed the US last year for the
• 22:26
  Speaker 3: first time in forever. So I think there's been some
• 22:29
  Speaker 3: attention to diversification. And if emerging markets, for example, were
• 22:36
  Speaker 3: to have a breakout again like in the you know,
• 22:38
  Speaker 3: early like two thousands, then then yeah, I think there
• 22:42
  Speaker 3: would be a lot more diversifying into the emerging markets,
• 22:46
  Speaker 3: and I think that's ultimately it's good because you don't
• 22:49
  Speaker 3: know what's going to go up, you don't know what's
• 22:50
  Speaker 3: going to go down. That's why we we diversify. So
• 22:54
  Speaker 3: it's never too late to do that. And I think
• 22:57
  Speaker 3: in the US, because the US market is so strong,
• 23:00
  Speaker 3: there is a lot of home country bias. And you know,
• 23:02
  Speaker 3: I was an advisor. I know this, and I had
• 23:04
  Speaker 3: a lot of home country bias. I still do so,
• 23:07
  Speaker 3: so I do think that this sell America is not
• 23:12
  Speaker 3: the trade, but diversification is always helpful.
• 23:15
  Speaker 2: Yeah, we looked at it.
• 23:16
  Speaker 4: We thought the cellomrapy, the way they started sell America
• 23:19
  Speaker 4: and the tariffs last year when the market was down
• 23:22
  Speaker 4: like twenty percent. Now they use it every day when
• 23:24
  Speaker 4: the market has like a down day. They're like, sol
• 23:27
  Speaker 4: America is back. I'm like, DALs off like one hundred points.
• 23:30
  Speaker 4: I'm like, all right, relax, you're gonna cry wolf here.
• 23:33
  Speaker 4: Won't mean anything. But anyway, we haven't noticed sell America.
• 23:36
  Speaker 4: But we have noticed is people buying some of the things,
• 23:39
  Speaker 4: and that could be gold to gold.
• 23:40
  Speaker 2: Had a nice run international.
• 23:43
  Speaker 4: ETFs cash, so people are kind of hedging America maybe
• 23:47
  Speaker 4: not selling it.
• 23:49
  Speaker 3: It's a diversification, right, because most people are overweight the
• 23:52
  Speaker 3: US as because of the outperformance.
• 23:54
  Speaker 4: I think what's happening in your case is you do
• 23:57
  Speaker 4: have a core base of people who believe in the strategy,
• 24:01
  Speaker 4: but now you're getting some tourists who are like, ooh, look,
• 24:04
  Speaker 4: shiny object. And it happened with ARC, happened with Bitcoin,
• 24:08
  Speaker 4: happens everybody. The good news is, let's say it goes down,
• 24:12
  Speaker 4: has a bad run, you want half of those tourists
• 24:16
  Speaker 4: will stay, and then your base will stay, and it's
• 24:19
  Speaker 4: you just need to break through one time and you
• 24:21
  Speaker 4: will just live on as a liquid known ETF that
• 24:24
  Speaker 4: does this thing.
• 24:25
  Speaker 2: So I think that's how I see it.
• 24:27
  Speaker 4: But I do see some of the flows in the
• 24:29
  Speaker 4: past six weeks because that's when it really got. I
• 24:32
  Speaker 4: think your assets probably doubled in the last month or two, right,
• 24:35
  Speaker 4: something like that. I think some of those are probably
• 24:39
  Speaker 4: just so enamored by the performance.
• 24:41
  Speaker 2: Is that fair?
• 24:41
  Speaker 3: Yeah, there's definitely probably some you know, people are screening
• 24:46
  Speaker 3: for performance in whatever screen they use and finding it
• 24:49
  Speaker 3: near the top.
• 24:50
  Speaker 4: And yeah, but Perth ontfi, Yeah, I know, and Perth
• 24:55
  Speaker 4: is smart and she hangs out with Wes Gray, who's
• 24:57
  Speaker 4: always talking about this. She was on ETFIQ and she goes, listen,
• 25:00
  Speaker 4: it won't always be like this. We're gonna have downtimes. Please,
• 25:04
  Speaker 4: first person ever PM on TV who said no, if
• 25:08
  Speaker 4: things could get bad, I appreciate that.
• 25:10
  Speaker 1: But this sounds so good. The line that she had
• 25:13
  Speaker 1: in the show on ETFIQ that I wrote down, freedom
• 25:16
  Speaker 1: is not a trade, It is an investment. I was like,
• 25:19
  Speaker 1: that is a.
• 25:19
  Speaker 2: Great, great line.
• 25:21
  Speaker 4: Did that just pop out or is that like something
• 25:23
  Speaker 4: that's in your like is that your motto?
• 25:25
  Speaker 3: That's a kind of in my notes? And that came
• 25:29
  Speaker 3: from from Mark Absy, my friend who is on the
• 25:32
  Speaker 3: Index committee as well.
• 25:33
  Speaker 2: Yeah, I know him.
• 25:34
  Speaker 3: He was like, oh, you're gonna be on IQ. Remember
• 25:36
  Speaker 3: freedom is.
• 25:37
  Speaker 4: He gives me crap on Twitter butt once a month
• 25:39
  Speaker 4: he comes in. He just comes into my replies and
• 25:42
  Speaker 4: it's great.
• 25:42
  Speaker 2: He's a great guy.
• 25:43
  Speaker 1: But the thing that if I really step back and
• 25:46
  Speaker 1: think about this, so much of what we talk about
• 25:48
  Speaker 1: with with ETFs over you know, the almost ten years
• 25:51
  Speaker 1: we've been doing this podcast is is most of it
• 25:55
  Speaker 1: is tied to an index and is passive, and yet
• 25:57
  Speaker 1: you've managed to come up with a way of not
• 25:59
  Speaker 1: only having a passive approach, but really fundamentally an engaging
• 26:05
  Speaker 1: active management argument. And I'm curious when you kind of
• 26:09
  Speaker 1: see what you've been able to find here and you
• 26:12
  Speaker 1: think about the universe of active investing and potentially the
• 26:16
  Speaker 1: future of active investing, Like, what guidance or lessons do
• 26:20
  Speaker 1: you think you and Freedom have for active investing as
• 26:24
  Speaker 1: a whole?
• 26:26
  Speaker 3: Are you looking at Freedom as active?
• 26:27
  Speaker 1: Are you looking at a Yeah, I look at it
• 26:30
  Speaker 1: as active because you have an index, but you're and
• 26:33
  Speaker 1: you have rules and methodology and you adhere to them.
• 26:36
  Speaker 1: But fundamentally, you know, there's still an active call here
• 26:40
  Speaker 1: where you have an investment thesis that you're adhering to.
• 26:45
  Speaker 3: Yeah. So I think we saw a lot of And
• 26:48
  Speaker 3: this is something that occurred to me during COVID, which
• 26:50
  Speaker 3: is and I think people pointed this out to me
• 26:52
  Speaker 3: as well, not just occurred to me, But there are
• 26:56
  Speaker 3: you know, different ways to slice and dice the market
• 26:59
  Speaker 3: and market cab waiting is often not only ineffective, but
• 27:04
  Speaker 3: it's often flawed. Now, it does work very well when
• 27:07
  Speaker 3: markets are very liquid and very large, right, so develop
• 27:11
  Speaker 3: markets US market works very well it's very hard to beat.
• 27:14
  Speaker 3: But when you get into kind of smaller segments like
• 27:17
  Speaker 3: emerging markets, for example, maybe the other strategy or another
• 27:23
  Speaker 3: strategy is to look around the world and see what's
• 27:25
  Speaker 3: going on and then invest that way. So and that's
• 27:27
  Speaker 3: what ARC did. That's what we did, and a lot
• 27:30
  Speaker 3: of these thematics that's what they do. So I think
• 27:32
  Speaker 3: thematic is something that I've always kind of kind of liked.
• 27:37
  Speaker 3: And the other thing about that is when people invest
• 27:40
  Speaker 3: in a thematic or something that has a thing that
• 27:43
  Speaker 3: they believe in, it's easier for them to stick to
• 27:47
  Speaker 3: it in bad times. So you know, like Eric said,
• 27:49
  Speaker 3: I'm hoping that our tours coming in now are performance chasers.
• 27:54
  Speaker 3: If I could say anything to them, I would say, yes,
• 27:57
  Speaker 3: zoom in on those periods of underperformance, because we do
• 27:59
  Speaker 3: have those as well. Look at this as a long
• 28:01
  Speaker 3: term but also know that, yes, freedom is an investment,
• 28:05
  Speaker 3: is not a trade. And if you're an advisor going
• 28:09
  Speaker 3: into this for your clients, when things are bad, let's
• 28:12
  Speaker 3: say that we underperform because for example, China or Saudi
• 28:15
  Speaker 3: Arabia outperforms, tell them that's why that you were underperforming,
• 28:20
  Speaker 3: And most investors will be happy with that. I am
• 28:23
  Speaker 3: an investor in this fund, and you know, I find
• 28:27
  Speaker 3: it very easy to stick to in bad times, just
• 28:29
  Speaker 3: because I do absolutely believe in the strategy. So when
• 28:33
  Speaker 3: you're investing in a theme or a strategy that you
• 28:36
  Speaker 3: believe in, it's much easier to stick to it in
• 28:38
  Speaker 3: the bad times, and that alone will increase your chances
• 28:45
  Speaker 3: for success in a long run.
• 28:46
  Speaker 1: All right, last question, if you were launching a faradium
• 28:50
  Speaker 1: again today, what would you do differently.
• 28:54
  Speaker 3: That's a really good question. I think I would not
• 28:58
  Speaker 3: be as stressed. Yeah, I would be a little more chill.
• 29:09
  Speaker 3: So I you know, I really love the way that
• 29:12
  Speaker 3: this all turned out. You know, I work with the
• 29:13
  Speaker 3: best operating partners in the world. ETF Architect, those guys
• 29:17
  Speaker 3: Wes Gray. I have the best LPs in the world,
• 29:20
  Speaker 3: Rob are Not and my other LP over in the UK.
• 29:23
  Speaker 3: Who wants to, you know, be anonymous, but you know
• 29:26
  Speaker 3: it's it's it's you know, I I work with the
• 29:28
  Speaker 3: best people. I was able to because we went so
• 29:32
  Speaker 3: slow in the early years, because I was being you know,
• 29:35
  Speaker 3: mom to young child at the same time, I was
• 29:38
  Speaker 3: able to spend some time getting to know the industry,
• 29:40
  Speaker 3: getting to know people like Eric and just had so
• 29:44
  Speaker 3: much support. And I believe that we have support that
• 29:46
  Speaker 3: I don't even know about because we've had times like
• 29:48
  Speaker 3: in the first five years. Eric pointed this out. The
• 29:51
  Speaker 3: first like five years we had no outflows, like no
• 29:54
  Speaker 3: net redemption days. I believe that we have so many
• 29:58
  Speaker 3: supporters out there that that we're rooting for us this
• 30:02
  Speaker 3: whole time, and I just wanted to or if I
• 30:05
  Speaker 3: were to do this over, I would focus more on
• 30:07
  Speaker 3: that and stress out less. I'm very stressed because I
• 30:10
  Speaker 3: also have a teenager, so you know, and times when
• 30:16
  Speaker 3: I have an opportunity to celebrate with people who have
• 30:19
  Speaker 3: supported us since day, you know, minus three hundred, like
• 30:23
  Speaker 3: like you guys like Eric, you know, when he gives
• 30:26
  Speaker 3: me a layup question on TV, I would answer it
• 30:28
  Speaker 3: better and be happier and not be like, please see
• 30:32
  Speaker 3: our periods of underperformance. But you know, again, that's how
• 30:36
  Speaker 3: I was trained, and I work with people who make
• 30:38
  Speaker 3: sure I still do that. So It's unlikely that I'll
• 30:41
  Speaker 3: be able to relax, but that's what I would do
• 30:44
  Speaker 3: if I could do it better.
• 30:45
  Speaker 1: We'll leave it there, Pertle. Thanks for joining us on
• 30:48
  Speaker 1: trillions again. Thanks for listening to Trillions until next time.
• 30:58
  Speaker 1: You can find us on the Bloomberg Terminal, bloomberg dot com,
• 31:01
  Speaker 1: Apple Podcasts, Spotify.
• 31:03
  Speaker 2: Or wherever else you'd like to listen.
• 31:05
  Speaker 1: We'd love to hear from you. Hit us up on
• 31:06
  Speaker 1: social I'm at Joel Weber Show, He's at Eric Balcino's.
• 31:10
  Speaker 1: Trillions is produced by Magnus Hendrickson.