You only live once, but when it comes to cannabis, your investment options are seemingly endless.
Example: last week the debut took place of a new marijuana fund fund traded called the AdvisorShares Pure Cannabis ETF, an actively managed fund with nearly $ 2,5 million in assets under management. The ETF is traded under the YOLO ticker and is supported by BNY Mellon and owns shares of major Canadian growers such as Aurora Cannabis and Canopy Growth.
Distinguished from its counterpart ETFMG (MJ)
A few things about this specific fund distinguish it from its 3-year-old counterpart, the ETFMG Alternative Harvest ETF, ticker MJ. First, it is actively managed, which means that it performs better than the wider cannabis funds with the help of professional fund managers. Secondly, it is supported by banks, which benefits credibility.
“The previous fund here, MJ, had to sort of do an end-round” with his backing, ETF.com Managing Director Dave Nadig told CNBC's “ETF Edge” Monday. “They turned some kind of Latin American real estate fund into a marijuana fund. … They had to get Wedbush, a broker-dealer, to hold the assets. And that's fine, but the difference is it's not a bank. It's not regulated like a bank, and many institutional investors really care about these things. “
“AdvisorShares has overcome those hurdles by compiling a pre-approved list of positions at BNY Mellon,” said Nadig.
“Obviously, because it is actively managed, they need to know what's OK and what's not OK” to act, he said. "So they're working through their 'OK' list and they've put together a portfolio that, when you look at it, looks like a pretty good, pure, pure cannabis ETF."
YOLO is purely focused on cannabis related companies
Another important distinction is YOLO's list of companies, which includes 20 stocks directly or tangentially involved in the marijuana trade. Nadig pointed out how 'pure' it looks compared to MJ, which invests in companies like Scotts Miracle-Gro, horticultural producer and tobacco giant Philip Morris, in the hope that they will also move into the cannabis industry.
“The new fund, YOLO, really looks like a pure bet on cannabis,” he said. “This is a case where active management can make sense. This is a fast moving world of cannabis… Being able to move well on the edges of this sector seems very important to me to be successful. “
Reggie Brown, senior managing director of the ETF group of Cantor Fitzgerald, said the real success of these investments comes down to weed politics.
"With cannabis, it really comes down to regulatory results," said Brown in the same "ETF Edge" interview. “It depends on how the regulators and governments look at it, and then how the banks can assume to be broad as custodians of the money. So it seems that cannabis is in high demand. Since it is an emerging new trading area, all I see is that this is best traded with ETFs. “
The Pure Cannabis ETF from AdvisorShares climbed more than 2% on Monday and largely traded in the $ 25 range. The ETFMG Alternative Harvest ETF increased by 3% and has risen almost 40% from year to year.
View the full article and video clip on CNBC (EN, source)