Cannabis is going mainstream…
Starting next week, investors will be able to invest in a cannabis ETF after Horizons ETFs Management announced plans to launch the Horizons Medical Marijuana Life Sciences ETF(HMMJ).
The Toronto Stock Exchange (TSX) has conditionally approved the units to be listed and traded on April 5th under the ticker symbol HMMJ. The initial unit offering of units will close after the market closes on April 4th.
HMMJ will be the first ETF to offer direct exposure to North American-listed stocks levered to the medical cannabis bioengineering and production. HMMJ is an index (or passively managed) ETF, designed to provide exposure to a basket of North American publicly traded companies with significant business activities in the cannabis industry.
Levered to the World’s Fastest Growing Industry
Horizons ETFs and its affiliate AlphaPro Management are financial services companies offering the Horizons ETFs family of ETFs. The Horizons fund family includes a broadly diversified range of investment tools with solutions for investors. Horizons ETFs has more than $7 billion of assets under management.
The Medical Marijuana Life Sciences ETF is designed to be a liquid and investable index of publicly listed life sciences companies and other firms focused on the cannabis industry. The index selects from a universe of publicly-listed North American companies that have operations that may include one or more of the following: biopharmaceuticals, medical manufacturing, distribution, bio-products and other ancillary businesses to the cannabis industry.
The index only includes stocks that meet minimum asset and liquidity thresholds. The index is rebalanced quarterly on a market-capitalization basis and capped so that no single stock can exceed 10% of the portfolio’s weight when rebalanced.
A Solution to Satisfy Investor Demand
Horizons ETFs President and Co-CEO Steve Hawkins said, “The medical marijuana industry is rapidly growing in North America as legislators allow or consider allowing more legal uses of marijuana and marijuana-related products, particularly medical marijuana usage. HMMJ is a way for investors to directly access the medical marijuana and life sciences industry through a transparent, low-cost ETF that holds a diversified basket of companies.”
Hawkins added, “Given the recent high returns generated by medical marijuana companies, investors are clearly attracted to the industry. We feel that the methodology of the North American Medical Marijuana Index will maximize the risk/reward opportunity for investors by ensuring the companies in the Index meet important liquidity and asset requirements, so that the stocks in the Index are the leaders in the Medical Marijuana industry.”
An Expected Outcome
The global cannabis industry is the fastest growing industry in the world and Canada has been the country leading this charge. This announcement is not surprising especially since it comes after the Liberal government provided clarity around the opening of a recreational cannabis market.
Although this seems like an attractive opportunity due to the lower risk associated with ETFs, investors should conduct due diligence into the companies listed in this fund before investing.
The index is up 146.3% over the past year as an increasing number of states in the US legalize the possession and distribution of marijuana for medical purposes. Legal marijuana sales are projected to reach $20.6 billion by 2020, with a compound annual growth rate of 29%, according to Arcview Market Research, a San Francisco-based cannabis research firm.