Investors are being advised to reconsider their exposure to China, the world’s largest emerging market. Perth Tolle, founder of Life + Liberty Indexes, has raised concerns about the sustainability of China’s capitalist model. According to Tolle, there was a belief that China’s embrace of capitalism would eventually lead to democracy. However, she argues that economic freedom alone is not enough to guarantee personal freedom.
Tolle manages the Freedom 100 Emerging Markets ETF, which has outperformed the iShares China Large-Cap ETF since its inception in May 2019. The fund, which has never invested in China, has seen a 43% increase since its first day of trading. Tolle’s ETF has also performed well this year, with a 9% increase compared to the 19% increase of the iShares China Large-Cap ETF.
Having spent part of her childhood in Beijing, Tolle’s personal experiences have influenced her investment strategy. She recalls how all her clients at Fidelity Investments in 2004 were eager to invest in China, despite her reservations. This led her to focus on emerging economies that prioritize freedom, believing that without it, economic growth will be limited.
ETF investor Tom Lydon shares Tolle’s concerns about investing in China, pointing out that staying away from the country has resulted in lower volatility and better performance in emerging markets. By avoiding exposure to China, investors may be able to mitigate risks and achieve more stable returns.
Overall, the advice from Tolle and Lydon suggests that investors should carefully consider their exposure to China and explore alternative investment options in emerging markets that prioritize economic and personal freedom.
