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As a way to capitalize on the booming US cannabis market, the managers for one of Canada’s top marijuana-focused exchange-traded funds (ETFs) say they want an ETF for US companies only.
On Thursday (March 21), Steve Hawkins, president and CEO of Horizons ETFs Management, told BNN Bloomberg his company is “actively pursuing” a new fund with only US-based marijuana firms.
As part of the most recent quarterly rebalancing for the Horizons Marijuana Life Sciences Index ETF (HMMJ) (TSX:HMMJ), which included the addition of 10 new stocks to the fund, Colorado-based Charlotte’s Web Holdings (CSE:CWEB,OTCQX:CWBHF) joined the ETF.
The company is only focused on the hemp industry, including the development of hemp-derived cannabidiol (CBD). Hemp operations were legalized in the US thanks to the passing of a farm bill in December 2018.
“Charlotte’s Web does not produce or sell medicinal or recreational marijuana or products derived therefrom,” the company’s listing profile on the Canadian Securities Exchange (CSE) indicates.
The ETF operators signaled to investors that the addition of Charlotte’s Web was a “major” move for the fund, as Horizons ETFs is seeking to pursue the current boom for the hemp-derived US CBD market.
“This is another exciting growth market through which HMMJ can provide exposure, given the regulatory changes in the United States,” Hawkins said in a press release.
Up to this point, the HMMJ operators have remained diligent with guidance from exchange regulators at TMX Group — meaning HMMJ has not held any US-based marijuana companies due to the continued federal illegality of the plant in the US.
Now HMMJ is officially signaling to investors that it will pursue a way to create an ETF with the US market in mind, including the latest investment trend in the marijuana space: multi-state operators (MSOs).
These MSOs operate cannabis assets across legal US markets such as growing facilities, networks of dispensaries and lines of branded products for medical and recreational uses.
Fellow funds already seeking US plays
Through a variety of other funds, cannabis investors have already been able to see the impact MSOs and other US ventures have had on the returns available.
In February, Purpose Investments announced that its Purpose Marijuana Opportunities Fund (NEO:MJJ) had secured investors a return of 53.43 percent on a one-year basis since its inception on January 31, 2018.
Greg Taylor, chief investment officer of Purpose Investments and portfolio manager of the fund, credited the results to the fund’s ability to seek “thematic opportunities, such as the rapid product innovation happening now in the US.”
Currently, the holdings of Purpose Investments’ marijuana fund are 61.55 percent from Canada and 21.11 percent from the US.
MSOs such as Green Thumb Industries (CSE:GTII,OTCQX:GTBIF), Curaleaf Holdings (CSE:CURA,OTCQX:CURLF), Harvest Health & Recreation (CSE:HARV,OTCQX:HRVSF) and Green Growth Brands (CSE:GGB,OTCQB:GGBXF) appear among the fund’s top holdings.
Additionally, Charlotte’s Web is listed as a top holding in weight for the overall fund.
“What we’ve done is become more aggressive on the US cannabis names, just over the past five to six months, rather than focus on the Canadian licensed producers,” Nawan Butt, portfolio manager with Purpose Investments, previously told the Investing News Network.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Green Growth Brands is a client of the Investing News Network. This article is not paid-for content.
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