WEBVTT - Perth Tolle on ETF Freedom Metrics 0:00:02.000 --> 0:00:06.760 This is Mesters in Business with Very Results on Bloomberg 0:00:06.880 --> 0:00:12.080 Radio this weekend. On the podcast, I have an extra 0:00:12.119 --> 0:00:15.240 special guest somebody I know for a long time. Perth 0:00:15.320 --> 0:00:19.680 Toll is the founder of the Freedom et F, based 0:00:19.760 --> 0:00:24.600 on an index that she helped to create, using metrics 0:00:24.960 --> 0:00:30.640 designed to emphasize the economic and personal freedoms of different countries. 0:00:31.240 --> 0:00:33.760 She'll tell us how she starts with a data set 0:00:34.200 --> 0:00:37.839 up from various think tanks like Frasier and Cato that 0:00:38.040 --> 0:00:43.920 rank countries based on their freedom indexes, and then proceeds 0:00:44.000 --> 0:00:47.280 to put them through an algorithm that she helped to create. 0:00:47.840 --> 0:00:51.239 And what you end up with is a list of 0:00:51.360 --> 0:00:55.600 some of the most innovative free emerging market countries in 0:00:55.640 --> 0:00:59.720 the world that also end up doing really well and 0:01:00.000 --> 0:01:02.160 acted over the past couple of years. When you see 0:01:02.160 --> 0:01:05.920 how poorly China has done, and obviously Russia's have seen 0:01:05.959 --> 0:01:08.560 all its stocks go to zero. Uh, those have not 0:01:08.680 --> 0:01:11.840 been in her funds, and so on a relative basis, 0:01:11.840 --> 0:01:15.360 her fund has done really quite splendidly. You avoid some 0:01:15.440 --> 0:01:17.040 of the worst countries in the world in a n 0:01:17.040 --> 0:01:19.840 e M index, obviously you're gonna do well on an 0:01:19.880 --> 0:01:22.800 absolute basis. They've done well. Also, just go punch in 0:01:22.920 --> 0:01:24.759 f R d M and you can see how all 0:01:24.760 --> 0:01:26.360 the fund has done over the past couple of years. 0:01:26.440 --> 0:01:29.560 It's about two hundred million dollars in assets. It's just 0:01:29.760 --> 0:01:33.560 turned three years old and just became a five star 0:01:34.080 --> 0:01:37.280 Morning Star rank Mutual Funds. So really quite fascinating. If 0:01:37.319 --> 0:01:42.240 you're at all interested in ETFs, emerging markets, or innovative 0:01:42.240 --> 0:01:45.560 new ways to slicenseise the world of assets, I think 0:01:45.560 --> 0:01:48.760 you're gonna find this to be a fascinating conversation. So, 0:01:48.800 --> 0:01:55.000 with no further ado, my interview with Perth Toll. This 0:01:55.480 --> 0:01:59.880 is Masters in Business with Very Results on Bluebird Radio. 0:02:01.560 --> 0:02:05.000 I'm Barry Retults. You're listening to Masters in Business on 0:02:05.000 --> 0:02:08.440 Bloomberg Radio. My extra special guest this week is so 0:02:08.480 --> 0:02:11.360 what I've known for a long time. Perth Toll is 0:02:11.400 --> 0:02:15.400 the founder of the Life and Liberty Indexes. She is 0:02:15.440 --> 0:02:19.080 also the sponsor of the Freedom one hundred Emerging Markets 0:02:19.080 --> 0:02:22.320 et F. It's a first of its kind strategy using 0:02:22.440 --> 0:02:26.800 personal and economic freedom metrics as key factors in driving 0:02:26.800 --> 0:02:31.760 the investing process. Perth has lived in Beijing and Hong Kong. 0:02:31.840 --> 0:02:35.960 She currently lives in Texas. Uh and her experiences overseas 0:02:36.040 --> 0:02:40.799 is what helped lead to the Freedom and Liberty Indexes. 0:02:41.080 --> 0:02:44.760 Perth Toll, Welcome to Bloomberg. Thank you for having me, Barry. 0:02:44.800 --> 0:02:47.079 I've been waiting to do your podcast for a very 0:02:47.120 --> 0:02:49.600 long time and I honored to be here. I'm thrilled. 0:02:49.639 --> 0:02:52.160 I'm thrilled to have you. So let's start with the 0:02:52.200 --> 0:02:56.200 basic inspiration. I love the concept and it's amazing nobody 0:02:56.240 --> 0:02:59.240 thought of this. But previous to you, what was the 0:02:59.320 --> 0:03:03.400 inspiration shin for the Life and Liberty indexes? So the 0:03:03.560 --> 0:03:06.800 seed for the idea was planted when I went back 0:03:06.880 --> 0:03:09.120 and lived in Hong Kong after college. I was born 0:03:09.160 --> 0:03:11.880 in Beijing, and I grew up in both China and 0:03:11.919 --> 0:03:14.920 the US, um going back and forth between the two countries. 0:03:15.040 --> 0:03:17.760 After college, I went and lived in Hong Kong for 0:03:17.760 --> 0:03:20.480 about a year, reconnecting with my dad's side of the family. 0:03:21.080 --> 0:03:24.200 And while I was there, I traveled to the mainland 0:03:24.440 --> 0:03:28.919 to Beijing, Shanghai, shen Jin, um and I saw things 0:03:28.960 --> 0:03:31.640 that um as a person who grew up in a 0:03:31.680 --> 0:03:35.360 free society, mostly in my formative years, that shocked me 0:03:35.440 --> 0:03:38.360 and I realized that my life would have been very 0:03:38.400 --> 0:03:41.640 different had I stayed in China for my entire childhood 0:03:41.760 --> 0:03:45.520 and as opposed to having come to the United States. UM. 0:03:45.680 --> 0:03:47.960 So it made a difference in my life, and I 0:03:47.960 --> 0:03:50.840 realized that it was freedom that made that difference. So 0:03:50.960 --> 0:03:54.360 let's let's talk a little bit about both UM personal 0:03:54.400 --> 0:03:58.080 and economic freedom. How do you use these metrics as 0:03:58.240 --> 0:04:01.600 creating an index which the e t F is based on. 0:04:01.920 --> 0:04:04.400 So the metrics that we use come from third party 0:04:04.440 --> 0:04:07.240 think tanks, the Cato Institute and the Fraser Institute. And 0:04:07.320 --> 0:04:11.360 this keeps all the all the metrics completely quantitative and independent. 0:04:11.600 --> 0:04:14.000 So we think it's very important to have metrics that 0:04:14.000 --> 0:04:18.159 are robust, that are independent, and that are quantitative. And 0:04:18.200 --> 0:04:22.120 so the Cato and Fraser data set that has the 0:04:22.200 --> 0:04:26.400 human Freedom metrics encompasses both personal and economic freedoms and 0:04:26.400 --> 0:04:29.240 they rank a hundred and sixty five countries in the 0:04:29.240 --> 0:04:32.919 world on these seventy nine different metrics. UM. We take 0:04:33.000 --> 0:04:38.200 the twenty seven country Emerging Markets UM universe and just 0:04:38.200 --> 0:04:41.880 look at those countries and those scores for those countries 0:04:41.920 --> 0:04:45.000 based on the seventy nine metrics. Is the primary factor 0:04:45.040 --> 0:04:47.479 that goes into our country waiting. All right, So you 0:04:47.480 --> 0:04:51.000 have twenty seven E m countries. Uh, you're looking at 0:04:51.040 --> 0:04:55.520 the freest ones in terms of economic freedom and personal liberty. 0:04:55.920 --> 0:04:58.080 And then from that list, how do you go about 0:04:58.080 --> 0:05:02.440 selecting the comp nice from within each country. Yeah, so 0:05:02.520 --> 0:05:05.360 let me just run down the whole process just quickly 0:05:05.360 --> 0:05:07.119 for you here. So, so, first we had those twenty 0:05:07.120 --> 0:05:10.160 seven countries, and currently we're using the same country set 0:05:10.240 --> 0:05:12.360 as m c I because most of our clients to 0:05:12.560 --> 0:05:15.000 benchmark to M s I. Now we're not bound by 0:05:15.000 --> 0:05:17.360 that though, so in the future we may add or 0:05:17.400 --> 0:05:20.920 subtract certain countries from that universe right now is the 0:05:20.960 --> 0:05:23.680 same as M s I. Uh. First, after we have 0:05:23.800 --> 0:05:27.080 that universe, we look at which countries are actually big 0:05:27.200 --> 0:05:30.000 enough and tradeable enough to be in an e t 0:05:30.160 --> 0:05:32.599 F because this was always designed to be an ETF. 0:05:32.760 --> 0:05:36.479 So you need liquidity and volume and the ability to 0:05:36.480 --> 0:05:38.719 get money in and out of the country. Yes, so, 0:05:38.760 --> 0:05:40.919 but mostly we're looking at the market cap of the 0:05:40.920 --> 0:05:44.200 country here as a as a ratio to world market cap. 0:05:44.440 --> 0:05:47.120 If you don't meet our minimum ratio, then you're out, 0:05:47.200 --> 0:05:50.400 even if you're very free. So this actually eliminates very 0:05:50.480 --> 0:05:54.480 free markets like Czech Republic, which is too small, um Peru, 0:05:54.560 --> 0:05:56.760 which is not liquid enough, and it also eliminates some 0:05:56.880 --> 0:06:00.279 very unfree markets like Egypt because of size. So we 0:06:00.360 --> 0:06:04.840 have those eliminations based on market cap ratios UH. And 0:06:04.920 --> 0:06:07.120 just to clarify, when you say size, you mean size 0:06:07.120 --> 0:06:09.760 of the country, you mean size of the companies. The 0:06:09.760 --> 0:06:12.760 market cap real the market cap, so you don't want 0:06:12.800 --> 0:06:16.640 micro caps. So we want to keep it very liquid 0:06:16.680 --> 0:06:19.760 and very tradable. So once we have those countries eliminated, 0:06:19.800 --> 0:06:23.040 then we have about eighteen countries left in the eligible universe, 0:06:23.400 --> 0:06:26.360 and these are the countries on which we apply the 0:06:26.440 --> 0:06:29.920 freedom weights. It's a hundred percent freedom weighted. It's not 0:06:30.480 --> 0:06:33.600 a it's not a tilt, and it's not in an overlay. 0:06:33.760 --> 0:06:35.680 And the reason why we do that is because with 0:06:35.880 --> 0:06:39.479 market capitalization waiting, which is the standard for most indexes, 0:06:39.520 --> 0:06:43.000 including Emerging Markets UM, you end up with a lot 0:06:43.120 --> 0:06:46.640 of autocracies with this universe. So the emerging markets universe 0:06:46.760 --> 0:06:49.719 is filled with autocracies and countries just coming out of autocracy, 0:06:49.839 --> 0:06:54.760 such as give us some examples like China, Russia, Saudi Arabia, Turkey, Egypt, 0:06:54.800 --> 0:06:58.680 and so forth. So by freedom waiting instead of market 0:06:58.680 --> 0:07:02.520 cap waiting, we're seeking to solve that problem of these 0:07:02.520 --> 0:07:06.200 autocracy heavy concentrations in the emerging market space. And so 0:07:06.240 --> 0:07:09.039 we created this for people who want to have that 0:07:09.160 --> 0:07:12.800 exposure to emerging markets, people who always have either strategic 0:07:12.840 --> 0:07:16.720 allocation or just always want that emerging markets exposure. UM, 0:07:16.720 --> 0:07:20.400 but without funding autocracies. So there's no we've never had 0:07:20.440 --> 0:07:24.600 any China, Russia, Saudi Arabia, Turkey and so forth because 0:07:24.680 --> 0:07:27.960 of freedom waiting, not because we you know, arbitrarily excluded 0:07:28.120 --> 0:07:30.480 in any country, but it's just a natural result of 0:07:30.520 --> 0:07:33.160 that freedom waiting. So you have the set of twenty 0:07:33.200 --> 0:07:37.880 seven countries in MSCI that gets reduced to eighteen by size, 0:07:37.920 --> 0:07:40.560 and there's got to be thousands of potential companies win 0:07:40.600 --> 0:07:43.480 those eighteen countries. But do you select and how do 0:07:43.520 --> 0:07:45.960 you get there? So the most important part once we 0:07:46.000 --> 0:07:49.280 have those eighteen, we do freedom weight those eighteen countries. 0:07:49.480 --> 0:07:52.880 As part of that process, the worst offenders are excluded, 0:07:52.920 --> 0:07:55.120 so the lowest scores are excluded out of this in 0:07:55.160 --> 0:07:58.560 this process and the best of those eighteen and typically 0:07:58.600 --> 0:08:02.200 it's between ten and eleven country are included in the index. 0:08:02.240 --> 0:08:06.800 And that is a completely objective process. UM. That's rule space. 0:08:06.880 --> 0:08:10.040 And I you know, my subject of opinion doesn't factor 0:08:10.080 --> 0:08:11.720 into that at all. So now you're down to ten 0:08:11.800 --> 0:08:15.680 or eleven countries, how do you take? How many companies 0:08:15.720 --> 0:08:18.520 do you take from each of those countries? Yeah, so 0:08:18.560 --> 0:08:21.920 we take the top ten largest most liquid companies in 0:08:21.960 --> 0:08:25.560 each country that is not a state owned enterprise. And 0:08:25.600 --> 0:08:28.560 that's the only thing that we do on the security level. 0:08:28.600 --> 0:08:31.360 So we're just taking the largest most liquid companies that 0:08:31.400 --> 0:08:33.880 are non state owned UM. And the reason why we 0:08:33.880 --> 0:08:36.400 didn't add any additional factors so that obviously I work 0:08:36.440 --> 0:08:39.240 with a lot of UM factor people UM, and the 0:08:39.280 --> 0:08:41.560 reason why we didn't add factors to that is because 0:08:41.679 --> 0:08:45.240 we wanted to isolate the freedom factor for this product. 0:08:45.440 --> 0:08:48.360 It's our first e t F. It's the first Emerging 0:08:48.400 --> 0:08:51.080 Markets e t F in the world that uses freedom waiting, 0:08:51.360 --> 0:08:52.920 and so we wanted to see if there was a 0:08:52.960 --> 0:08:55.040 market for this type of product and see how I 0:08:55.080 --> 0:08:57.840 would go UM and we're very happy with the results. Yes, 0:08:57.920 --> 0:09:01.880 so you end up with companies more or less, and 0:09:02.040 --> 0:09:04.360 that's that's what's in the t F. Yes. So currently 0:09:04.400 --> 0:09:07.760 there's eleven countries and there's a hundred and ten securities 0:09:07.880 --> 0:09:09.920 in the e t F. In the previous two years, 0:09:09.960 --> 0:09:12.679 there's been a hundred securities and ten countries, and that's 0:09:12.679 --> 0:09:14.960 why it was called the Freedom one hundred. And the 0:09:15.000 --> 0:09:19.400 index has been outperforming pretty dramatically over the past a 0:09:19.559 --> 0:09:23.280 couple of years, in part because China seemed to have 0:09:23.360 --> 0:09:26.720 imployed itself going after their own their own senior tech 0:09:26.760 --> 0:09:30.440 people will talk about that later. And obviously Russia was 0:09:30.520 --> 0:09:33.880 just a debacle. You sidestepped all of those because none 0:09:33.920 --> 0:09:36.760 of those countries are in the index. Yes, and again 0:09:36.800 --> 0:09:40.000 we don't arbitrarily exclude China or Russia. We didn't have 0:09:40.080 --> 0:09:42.440 them in there any of this time because of the 0:09:42.559 --> 0:09:45.680 it's a natural result of that freedom waiting. So freedom 0:09:45.679 --> 0:09:48.800 waiting in this case worked very well and it was 0:09:48.880 --> 0:09:52.160 a very effective leading indicator of some of these tail 0:09:52.280 --> 0:09:55.760 risks that investors in these cap weighted index has experienced. 0:09:55.880 --> 0:09:58.360 And if I recall, the E t F symbol is 0:09:58.520 --> 0:10:00.600 f R d M for freedom. Is that right? Yes? 0:10:01.120 --> 0:10:03.600 Very interesting. So let's let's talk a little bit about 0:10:03.600 --> 0:10:06.640 the world of ETFs. First, Y and E t F 0:10:06.760 --> 0:10:09.520 instead of a mutual fund. What was behind the thinking 0:10:10.080 --> 0:10:14.080 of going that way, especially given your background. You were 0:10:14.120 --> 0:10:16.319 a fidelity for a long time, and they have been 0:10:16.840 --> 0:10:21.360 giant in mutual funds for forever. Yeah. So so once 0:10:21.360 --> 0:10:23.400 I came back from Hong Kong, I worked at Fidelity 0:10:23.440 --> 0:10:26.719 Investments in the l A and Houston markets. UM, and 0:10:26.840 --> 0:10:28.800 I was at Fidelity for about ten years as a 0:10:28.840 --> 0:10:33.120 financial advisor, And you know, that's when I started noticing 0:10:33.160 --> 0:10:38.160 the trend of the rise of indexing and the rise 0:10:38.200 --> 0:10:41.400 of E t s and how beneficial the E t 0:10:41.520 --> 0:10:44.720 F structure was for clients. I don't know of any 0:10:44.760 --> 0:10:50.360 other investment vehicle or structure that is as beneficial tax 0:10:50.400 --> 0:10:55.280 wise for clients, and so um and trade ability and everything. 0:10:55.320 --> 0:10:58.079 So so I was always a fan of the E 0:10:58.160 --> 0:11:01.360 t F structure. And when I created this, I always 0:11:01.440 --> 0:11:03.320 intended for it to be an E t F. We 0:11:03.360 --> 0:11:05.720 created the index before there was an E t F, 0:11:05.840 --> 0:11:08.440 but I always intended, you know, it was always designed 0:11:08.440 --> 0:11:10.400 to be an E t F R. The old joke 0:11:10.559 --> 0:11:13.079 was of mutual funds were invented today, they wouldn't be 0:11:13.120 --> 0:11:16.360 able to get approved because they're so inefficient. They trade 0:11:16.400 --> 0:11:18.520 at the end of the day and you end up 0:11:18.720 --> 0:11:23.000 paying taxes on other people who sold, as opposed to 0:11:23.040 --> 0:11:26.080 you paying taxes when you sell the holdings. I mean 0:11:26.120 --> 0:11:27.400 the trading at the end of the day is not 0:11:27.440 --> 0:11:29.480 as big of a problem because most of our investors 0:11:29.480 --> 0:11:33.720 are long term. But UM, that tax efficiency is just 0:11:33.800 --> 0:11:36.160 so hard to beat in any other type of vehicle. 0:11:36.320 --> 0:11:38.199 So who are your investors? Do you have any idea 0:11:38.280 --> 0:11:41.520 who owns cts? So right now, UM, we have about 0:11:41.520 --> 0:11:46.000 two million under assets and so it's just beginning to 0:11:46.040 --> 0:11:48.640 be big enough to get noticed by institutions. We're getting 0:11:48.640 --> 0:11:52.520 more institutional request at this time. We just had UM 0:11:52.559 --> 0:11:56.079 a family office demand that we get approved on Morgan 0:11:56.160 --> 0:11:59.080 Stanley and they just approved us. UM. So we've been 0:11:59.080 --> 0:12:01.720 approved on a lot more platforms lately because of the 0:12:01.760 --> 0:12:04.240 size UM and also the three year track record and 0:12:04.280 --> 0:12:07.040 the five star morning Star rating. Now, also that's one 0:12:07.040 --> 0:12:10.000 of my questions for later. But since you brought it up, 0:12:10.600 --> 0:12:13.600 you just got a five star rating on I mean, 0:12:13.640 --> 0:12:16.800 this was last month. I shouldn't let you bring that up. Yeah, 0:12:17.040 --> 0:12:19.200 well it's I was. It's coming up later, but since 0:12:19.200 --> 0:12:21.600 you mentioned it, we might as well talking about now. Yeah, no, 0:12:21.800 --> 0:12:24.240 and you know what Morning Star ratings come and go, 0:12:24.480 --> 0:12:27.960 and I, UM, that was a surprise to me because 0:12:28.320 --> 0:12:31.120 well I guess it wasn't a surprise because it right, 0:12:31.200 --> 0:12:34.840 So it just happens at three years thirty six full months, 0:12:35.000 --> 0:12:37.200 and it's based on performance, So I guess it wasn't 0:12:37.200 --> 0:12:40.000 that much of a surprise. But um, you know what 0:12:40.080 --> 0:12:43.960 I really appreciate about that is that I didn't expect this, 0:12:43.960 --> 0:12:47.959 this uh strategy to play out, um the thesis to 0:12:48.000 --> 0:12:51.120 play out this well, this quickly, and for it to 0:12:51.160 --> 0:12:54.400 have done that in this exact three year period of 0:12:54.400 --> 0:12:57.199 time when the morning Stars come out, Um, just all 0:12:57.200 --> 0:13:00.480 the stars had to align for that to happen. We yeah, 0:13:00.600 --> 0:13:03.200 and we all know how hard it is to get 0:13:03.400 --> 0:13:05.760 five star morning Star rating, and so for us to 0:13:05.800 --> 0:13:08.720 have that right out of the gate, I'm very grateful 0:13:08.800 --> 0:13:10.839 for that. And I don't take much credit because a 0:13:10.880 --> 0:13:13.360 lot of that is stuff out of my control. You know, 0:13:13.400 --> 0:13:17.600 we can't control the market, so um, geopolitics or who's 0:13:17.600 --> 0:13:21.680 going to invade what country? All these things. Sometimes you know, 0:13:21.840 --> 0:13:24.160 it doesn't hurt to be smart, but being lucky goes 0:13:24.200 --> 0:13:26.319 a long way. Yeah, I mean, I think we were 0:13:26.360 --> 0:13:30.000 set up well just because freedom waiting. Obviously, it's the 0:13:30.040 --> 0:13:32.520 reason why we didn't have any China or any Russia, 0:13:32.559 --> 0:13:34.800 and that that helped us tremendously in our investors to 0:13:34.840 --> 0:13:38.040 avoid that risk. So so here's the question, and pardon 0:13:38.080 --> 0:13:41.560 my naivete, but the fund has been doing really well. 0:13:42.000 --> 0:13:47.480 Geopolitical events have worked out perfectly um for for the 0:13:47.559 --> 0:13:52.200 Freedom ETF. But go back in any decade in history 0:13:52.280 --> 0:14:00.359 and there are very similar bad actions by bad actors, autocrats, dictates, 0:14:00.720 --> 0:14:05.439 all sorts of um other folks. The question, and I 0:14:05.520 --> 0:14:07.360 don't know if there's an answer to this. The question 0:14:07.400 --> 0:14:10.120 I want to ask is how come nobody ever thought 0:14:10.160 --> 0:14:12.560 of this? I mean, it's one of those ideas that 0:14:12.600 --> 0:14:15.319 in hindsight is like, oh, of course you pull out 0:14:15.400 --> 0:14:19.080 the worst players in the geopolitical world. Of course your 0:14:19.120 --> 0:14:22.840 performance is going to be better. Has anyone ever explored 0:14:22.880 --> 0:14:26.640 this idea before? You know what I would think? So, um, actually, 0:14:26.960 --> 0:14:30.960 you know my friend Rob are not who isn't one 0:14:31.000 --> 0:14:35.080 of our investors, And I first I think I introduce you, 0:14:35.080 --> 0:14:37.760 you know what, you always say that, but on your podcast, 0:14:37.840 --> 0:14:39.800 I'm going to say I met him on the seaplane. 0:14:39.920 --> 0:14:44.240 That's right, flying into, flying into that's exactly right. So 0:14:44.280 --> 0:14:47.160 when I left Idelity, and I started doing this very slowly, 0:14:47.360 --> 0:14:49.880 I called research affiliates and I was like, hey, you know, 0:14:49.920 --> 0:14:52.240 you guys do non cap weighted indexing. We we want 0:14:52.280 --> 0:14:54.080 to do non cap weighted as indexing. Do you want 0:14:54.080 --> 0:14:56.040 to work together? And they were like, no, please go. 0:14:56.240 --> 0:14:58.840 I couldn't. I couldn't get past the first gatekeeper UM. 0:14:58.920 --> 0:15:01.880 And then when I went to to Camp Ko talk 0:15:02.000 --> 0:15:04.520 is because I was on a panel with David Kotok, 0:15:04.600 --> 0:15:08.280 Black Rock and Morning Star for a cf A Society's 0:15:08.440 --> 0:15:11.640 UM forecast panel that first year. I had no idea 0:15:11.960 --> 0:15:14.000 what I was doing at the time. And afterwards, you know, 0:15:14.080 --> 0:15:15.560 David invited me to this camp and I was like, 0:15:15.600 --> 0:15:17.920 what is this. It's like fifty economists that go fishing 0:15:17.920 --> 0:15:20.520 in the woods next to Canada for three days with 0:15:20.560 --> 0:15:24.840 no WiFi. And actually my friend said you should go 0:15:25.160 --> 0:15:28.480 because Barry rid Holes goes to that camp. Yeah, it 0:15:28.560 --> 0:15:31.520 was Christian Magoon and Amplify who said Barry rid Holes 0:15:31.600 --> 0:15:33.280 goes to that camp. You should go and you can 0:15:33.280 --> 0:15:36.280 meet Barry. And so you are partly responsible for me 0:15:36.400 --> 0:15:39.800 going that year in more than one reason. And you're 0:15:39.800 --> 0:15:44.120 also responsible for Rob going that year because he lost 0:15:44.280 --> 0:15:47.600 the bet and he had to he went to pay 0:15:47.680 --> 0:15:49.560 that bet. He doesn't go every year, you know, you know, 0:15:49.680 --> 0:15:51.840 he hasn't been back since and before that he was 0:15:51.960 --> 0:15:54.360 there maybe five to seven years prior, took advantage of me. 0:15:54.400 --> 0:15:57.760 I was very very drunk when he when he said 0:15:57.840 --> 0:16:00.600 let's make a bet, and I'm like, it was an 0:16:00.640 --> 0:16:04.240 out of body experience. I watched my right hand should 0:16:04.280 --> 0:16:06.680 go up and shake his hands and the back of 0:16:06.680 --> 0:16:09.080 my brain was, what the hell are you doing, you idiot. 0:16:09.120 --> 0:16:11.800 That's a lot of money and he decides to show 0:16:11.800 --> 0:16:14.520 it with a brick of cash. It was wasn't even 0:16:14.520 --> 0:16:18.680 a check. It's like whack. It's pretty pretty hilarious. So yeah, 0:16:18.680 --> 0:16:23.720 so that's a funny coincidence. So I vaguely remember introducing 0:16:23.720 --> 0:16:27.320 you to Rob out on that deck, not realizing you 0:16:27.320 --> 0:16:29.440 guys flew in together. Yes, we flew in on the 0:16:29.520 --> 0:16:31.600 on the seaplane because I call the seaplane company the 0:16:31.680 --> 0:16:33.160 day I was coming in and I was like, I'm 0:16:33.160 --> 0:16:35.280 coming in from LaGuardia today. Is it too late to 0:16:35.280 --> 0:16:36.800 get a seaplane? And they said, no, you can share 0:16:36.800 --> 0:16:39.080 with Rob or not. Here's his flight number. Just go 0:16:39.120 --> 0:16:41.240 intercept him at the airport and I did, and I 0:16:41.320 --> 0:16:43.120 was like like that. Yeah. I was like, hey, did 0:16:43.160 --> 0:16:45.320 they tell you were gonna be writing together? And and 0:16:45.320 --> 0:16:47.960 that's how we met. He heard the idea. UM, you 0:16:48.080 --> 0:16:51.840 pitched him on the plane. Then it's loud and buzzy 0:16:51.920 --> 0:16:54.880 and you're literally you have those heads five feet over 0:16:54.960 --> 0:16:58.680 the swamp, your moose and stuff running. I believe he 0:16:58.760 --> 0:17:01.800 asked what I do? So okay? So it was an 0:17:02.000 --> 0:17:04.159 lf field, So he was. He was one of your 0:17:04.160 --> 0:17:08.600 earliest investors, the first one he invested after camping into 0:17:08.640 --> 0:17:12.680 the into the company, not as an investor investor that too. 0:17:12.720 --> 0:17:15.440 So after camp he committed to being the first investor 0:17:15.480 --> 0:17:19.080 in the at the time non existent fund. And then 0:17:19.200 --> 0:17:21.240 a while later is when I found out I would 0:17:21.240 --> 0:17:23.320 have to launch the fund myself instead of just you know, 0:17:23.400 --> 0:17:25.639 licensing the index. And that's when he became a g 0:17:25.760 --> 0:17:29.159 P LP investor. So who else when you say you 0:17:29.160 --> 0:17:31.840 have to launch the fund yourself, aren't you running this 0:17:31.960 --> 0:17:36.120 with another group that helps manage. Yes. So my initial 0:17:36.160 --> 0:17:38.280 plan after I had the index, and this is when 0:17:38.280 --> 0:17:40.840 I met him and you at camp KO talk and 0:17:40.840 --> 0:17:44.600 there wasn't a fund yet, UM was to license the index. 0:17:44.640 --> 0:17:47.320 Who like I shares or vamp or someone UM. I 0:17:47.359 --> 0:17:49.600 talked to I shares, They didn't want it. I talked 0:17:49.600 --> 0:17:52.320 to everyone and no one wanted it. So eventually I 0:17:52.359 --> 0:17:54.920 just had to launch it on my own um and 0:17:55.000 --> 0:17:56.800 that's when I said, okay, I'll need to raise funds 0:17:56.800 --> 0:17:58.639 because the operating costs for an e t f R 0:17:58.880 --> 0:18:01.399 and no, it's not in substant ential, it's it's between 0:18:01.480 --> 0:18:04.880 legal and compliance and regulatory filings, and you know, it's 0:18:04.880 --> 0:18:07.080 a quarter million to a half a million dollars. Well, 0:18:07.119 --> 0:18:10.120 in addition to that, in emerging markets, we actually give 0:18:10.160 --> 0:18:13.240 you access to local shares on local exchanges. So we 0:18:13.359 --> 0:18:17.600 paid the custody costs of giving you that access to 0:18:17.720 --> 0:18:21.639 give you that market um exposure, and that's one of 0:18:21.680 --> 0:18:23.359 the things I'm very proud of and very proud to 0:18:23.400 --> 0:18:27.160 pay on behalf of my clients. So um so that 0:18:27.160 --> 0:18:30.239 that's even more expensive for emerging markets. So we had 0:18:30.280 --> 0:18:32.639 to raise funds for that, and I ended up, you know, 0:18:32.680 --> 0:18:35.520 as you know, working with et F Architect prior they 0:18:35.520 --> 0:18:37.600 were called alf Architect at the time, and their first 0:18:37.600 --> 0:18:40.680 white label clients, West Gray and the whole crew over there, 0:18:40.680 --> 0:18:43.960 that that they're actually a really good group of guys 0:18:44.119 --> 0:18:47.200 and smartest can be. You did introduce me to West Gray, 0:18:47.240 --> 0:18:51.639 as I recall, h So, alright, listen, I'm not looking 0:18:51.640 --> 0:18:54.800 for a commission on any of this. It was just 0:18:55.480 --> 0:18:58.400 I find West of stuff to be fascinating. He's an 0:18:58.440 --> 0:19:02.959 interesting guy, a marine captain slash quant just such an 0:19:03.040 --> 0:19:06.640 unusual background, you know, and and then do really good work. 0:19:06.920 --> 0:19:09.960 I didn't realize they changed their name from Alpha Architect 0:19:10.240 --> 0:19:12.199 to EAT. No, they didn't change their name. They have 0:19:12.280 --> 0:19:14.520 they separated the entities. Oh, so you have E. T. 0:19:14.680 --> 0:19:16.600 F Architect as one group. That makes sense in an 0:19:16.640 --> 0:19:19.880 Alpha Architect as a as another group. Will say say 0:19:19.920 --> 0:19:22.480 hello to West for me. UM, I really like him 0:19:22.520 --> 0:19:25.960 and his crew. So we went over twenty seven countries 0:19:26.000 --> 0:19:30.000 down to eighteen, down to ten or eleven UM and 0:19:30.119 --> 0:19:35.640 ten most liquid companies within each UH within each country. 0:19:36.960 --> 0:19:40.159 How about rebalancing? How do you go about over the 0:19:40.200 --> 0:19:43.320 course of the year keeping things in in line with 0:19:43.359 --> 0:19:46.000 the original balancing? And then how often do you make 0:19:46.119 --> 0:19:49.879 changes in the index? Yeah, so we rebalanced once a year, 0:19:50.000 --> 0:19:52.280 because the human rights data comes out once a year, 0:19:52.440 --> 0:19:55.600 so the Personal and Economic Freedom data UM, and it 0:19:55.600 --> 0:19:57.359 comes out around the end of the year. So we 0:19:57.440 --> 0:20:01.879 rebalanced the third Friday in January UM and then we 0:20:01.960 --> 0:20:04.560 leave it until the next year. If something happens in between, 0:20:04.880 --> 0:20:08.119 we don't respond to it. Immediately and we have to 0:20:08.119 --> 0:20:12.199 wait till rebalance um. There is a rule that, uh 0:20:12.400 --> 0:20:16.119 if if if country falls more than five points on 0:20:16.119 --> 0:20:19.200 one of our skills, that we do kick it out, 0:20:19.720 --> 0:20:21.560 even if it's already in the index. But we do 0:20:21.600 --> 0:20:24.439 that a rebalance time. So there's a basically it's a 0:20:24.440 --> 0:20:27.520 freedom decline momentum role. And the reason why we do 0:20:27.640 --> 0:20:31.080 that is we found that freedom. When it increases, it 0:20:31.160 --> 0:20:34.080 does so gradually, and when it decreases, it does so 0:20:34.200 --> 0:20:36.879 very quickly, and so we don't want to be catching 0:20:36.920 --> 0:20:39.960 that falling knife, so to speak. The only country that's 0:20:39.960 --> 0:20:43.040 ever triggered that it was Turkey, and that's before the 0:20:43.040 --> 0:20:44.520 e t F existed. It was when it was just 0:20:44.600 --> 0:20:46.840 the index, and that was in two thousand eighteen rebalance 0:20:47.440 --> 0:20:49.640 um and it was because they found more than five 0:20:49.680 --> 0:20:53.120 points on the previous year's scales and they've never made 0:20:53.119 --> 0:20:56.760 it back into the index. Sense. So hypothetically, if pre 0:20:56.960 --> 0:21:01.600 ordawan Turkey is in your holding and then someone comes 0:21:01.640 --> 0:21:06.360 in who's an autocrat who removes a democratic um election 0:21:06.520 --> 0:21:10.520 rules and and imprisons his political opponents, they could end 0:21:10.600 --> 0:21:14.240 up staying in the index for the balance of the year. 0:21:14.760 --> 0:21:17.160 Or if it plummets that five percent, you kick him 0:21:17.240 --> 0:21:19.960 right out. They would end up staying in there until 0:21:20.200 --> 0:21:23.639 the rebalanced time next year. And the reason part of 0:21:23.640 --> 0:21:25.480 that is, yeah, there is a lag in there. But 0:21:26.560 --> 0:21:31.120 we found that these types of political changes do take 0:21:31.200 --> 0:21:34.560 time to show up in markets, so it doesn't happen immediately. 0:21:34.600 --> 0:21:39.840