In a further sign that marijuana is no longer publicly taboo, another pot-focused exchange-traded fund—the second this month—launched on Tuesday with the debut of the Amplify Seymour Cannabis ETF (CNBS), a collaboration between Amplify ETFs and Tim Seymour, founder and chief investment officer of Seymour Asset Management and a co-host of CNBC’s Fast Money show.

Seymour will call the shots at this actively managed fund.

“For us, active is about being very plugged into an industry that’s evolving rapidly,” says Seymour, who has been an early-stage investor and advisor for various private cannabis companies. “That means not just the legislative and M&A climates because there’s a lot of capital markets activity in the sector, but also the evolution of the business where today’s leaders might not be tomorrow’s leaders. We plan to be actively engaging with management and making changes to the portfolio based upon our understanding of the sub-sectors within the industry.”

The CNBS fund invests at least 80% of its assets in companies that get at least 50% of their revenue from cannabis and hemp operations across three categories: cannabis/hemp plant (pharma and biotech, cultivation and retail, hemp products and cannabis-infused products); support (agricultural tech, real estate and commercial services) and ancillary (consumption devices, investing and finance, and tech and media).

Cultivation and retail comprises three-fifths of the portfolio. And like most of the other four U.S.-listed ETFs with a significant focus on cannabis, there’s a diverse capitalization exposure with a preponderance of small-cap and microcap companies. That’s not surprising, given the early-stage nature of this industry.

Cannabis Is Booming

In the U.S., medical marijuana is legal in 33 states and the District of Columbia, and recreational weed is legal in 11 states and in D.C.

Canada and Uruguay are the only countries with full federal legalization, while several other countries have legalized medicinal marijuana and other nations are exploring how they can hop on the legalization bandwagon.

According to Seaport Global Securities, today’s roughly $12 billion global cannabis industry could grow to $630 billion by 2040.

That said, marijuana in the U.S. remains a tricky business because it’s not federally sanctioned. As a result, many federally charted U.S. banks—including those serving as custodians that handle money and perform various back office chores for ETFs—were reticent to get involved in the marijuana sector.

But recent changes have helped grease the skids for three cannabis ETFs this year. Christian Magoon, founder and CEO of Amplify ETFs, says the Securities and Exchange Commission facilitated the flow when it said it would start approving cannabis ETFs that get a third-party legal opinion that clearly says the fund won’t own anything that’s operating against state or federal laws.

“With that, the custodians have started to ease up and are now willing to be custodians for cannabis ETFs,” says Magoon, adding that investment bank Cowen Inc. is the custodian for the CNBS fund. 

“We wanted to work with Cowen because it’s the first Wall Street firm to have a cannabis research effort,” he says. “And they’ve been heavily involved in cannabis-related investment banking activity.”

Crowded Trade

Is the ETF marijuana trade getting crowded? Think about that for a moment . . . the fact this question is legitimate indicates how much the times are a-changin’.

As mentioned, there are now five U.S.-listed ETFs with a focus on cannabis. All of them invest primarily in Canada and the U.S., and all of them charge a net expense ratio ranging from 0.70% to 0.75% (the new CNBS fund is at 0.75%). 

First « 1 2 » Next