Autocracy risk in institutional equity portfolios

Democracy has been receding in parts of the world, and that is not only a political story — it is a portfolio story. Authoritarian regimes can reprice suddenly through sanctions, supply-chain breaks, expropriation, and governance failure.

Many institutional portfolios respond with country exclusion lists. Necessary, often — but incomplete. Companies listed in open markets can still derive material revenue, assets, or supply dependence from authoritarian economies.

TOBAM’s LBRTY® framework operates on two levels: exclude ineligible countries, then favour stocks with lower authoritarian exposure inside eligible markets, under tracking-error constraints. The aim is a material reduction in autocracy exposure versus exclusion alone, while remaining a long-only equity strategy (SFDR Article 9).

For consultants and CIOs, the practical question is simple: what residual autocracy risk remains after your current exclusions?