Freedom indexing and marching for the fallen

Jeremy Schwartz, CFA, Executive Vice President, Global Head of Research

In a recent episode of the “Behind the Markets” podcast, Liqian Ren and I were joined by Perth Tolle of Life + Liberty Indexes and Wes Gray, CEO of Alpha Architect, to discuss a new index inspired by “freedom” that Tolle created.

During the latter portion of the podcast, we discussed the March for the Fallen, a 28-mile hike to honor fallen soldiers from Pennsylvania.

Alpha Architect has rallied a tremendous turnout from the finance community to march alongside army veterans, and this year we want to assemble the biggest finance group yet (here’s an extra nudge to my WisdomTree colleagues).

A “Freedom”-Weighted Index Results in No China Exposure

Tolle has two interesting factors in the construction of the Freedom 100 Emerging Markets Index. 

First, there is a 79-factor freedom score that serves as the dominant factor in determining country selection, which results in a very different country exposure profile than traditional emerging market indexes. Whereas traditional market cap indexes have around 30% exposure to China, Tolle’s index has no weight in China whatsoever.

From a pure tracking error perspective, Tolle sees high exposure to Korea and Taiwan, two proxies for the Asian market, as mitigators of China’s absence.

Some other notable exclusions from the Freedom 100 are Brazil and Russia, which are often critical pieces of emerging markets. 

Two countries the Freedom 100 includes more significantly are Poland and Chile. 

To embody the freedom of corporate governance, Tolle is the only other index provider that we know of outside WisdomTree that utilizes an ex-state-owned enterprises methodology in establishing which companies to own.

Tolle discussed trying to lower government influence in the index by not screening at just the country level but also the constituent level, and that is what led her to ex-state-owned companies.

These tilts result in more technology and consumer stocks and fewer energy, materials and financials companies, which is something we find in our indexes as well. 

Free Trade Is an Important Factor

With trade discussions dominating headlines in the markets, it was timely for Tolle to describe how countries that place trade barriers and tax imports receive lower scores than countries that don’t place trade barriers. 

In Tolle’s freedom concept, she is looking at freedom of life, liberty and property, with a big emphasis on economic and personal freedom. 

March for the Fallen 

In addition to recruiting for a bigger overall turnout, Tolle wants to recruit more women for the March for the Fallen, which is the weekend of September 28. Not everyone has to finish the 28 miles, either—Tolle did 14 miles last year. 

We discussed different training regimens, including my wife Bonnie’s complete lack of training. While the trail is vigorous, with the right mindset and being generally physically fit, many people are able to complete most (if not all) of the course with minimal preparation. 

Others, like Gray, will carry a 35-pound rucksack and run the event, while some participants, including Corey Hoffstein, will carry 75 pounds. I will be there just trying to make it through the event. A recap of my first time marching in the event can be found here

Why Should You Attend?

  • To honor the fallen
  • To challenge yourself both mentally and physically (28 miles on rugged terrain)
  • To network with interesting and honorable people

To register for the event, you can visit this link

Please listen to our podcast with Gray and Tolle below.

Versions of this article first appeared on the WisdomTree blog on July 2. 

Photo Credit: Josef Grunig via Flickr Creative Commons

Disclosure: Certain of the information contained in this article is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. WisdomTree believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.

About the Author: Jeremy Schwartz, CFA, Director of Research, WisdomTree Asset Management is responsible for the WisdomTree equity index construction process and oversees research across the WisdomTree family. Prior to joining WisdomTree, Jeremy was Professor Jeremy Siegel’s head research assistant and helped with the research and writing of Stocks for the Long Run and The Future for Investors. He is also co-author of the Financial Analysts Journal paper “What Happened to the Original Stocks in the S&P 500?” Jeremy is a graduate of The Wharton School of the University of Pennsylvania and currently stays involved with Wharton by hosting the Wharton Business Radio program “Behind the Markets” on SiriusXM 111.