In order to capitalize on the ongoing boom in
marijuana industry, Global X is looking to join this uncrowded
space. This can easily be depicted from the recent filing of the
Global X Marijuana ETF with the Securities and
Exchange Commission.
While key information, such as expense ratio, holdings breakdown,
ticker or listing exchange â was not available in the initial
release, other important points got included in the filing. If
approved, the proposed fund will provide another option to bet on
the cannabis stocks.
Hereâs an insight into the filed ETF:
An Insight Into the Proposed ETF
The projected marijuana ETF seeks to invest in the stocks and
depositary receipts of the companies that derive at least half of
their revenues, operating income or assets from the marijuana
industry, which is widely defined in the standards set forth by the
fundâs prospectus as a âvalue chainâ (read: Marijuana Stocks &
ETFs: What Investors Need to Know).
These companies include those involved in the following areas of
the marijuana industry value chain: â(i) the legal production,
growth and distribution of marijuana (including industrial hemp),
as well as extracts, derivative products or synthetic versions
thereof; (ii) financial services related to companies involved in
the production, growth and distribution of marijuana, including
insurance offerings, property leasing, and investments; (iii)
pharmaceutical applications of marijuana; (iv) cannabidiol (better
known as CBD) and cannabis oil products, edibles, topicals, drinks
and other products; and (v) products that may be used to consume,â
according to the filing.
Whatâs Driving This Move to a Niche Space?
The enthusiasm in the cannabis industry was brought in by Canadaâs
legalization of recreational marijuana that paved the way for its
widespread legality. Additionally, a number of states in the United
States have also joined the race of marijuana legalization. The
White House, Congress and U.S. regulators have also softened their
stance on the drugâs legalization. All these developments have
injected a strong wave of optimism into the emerging marijuana
industry, spurring deal activities and pushing up marijuana stocks
higher.
This tremendous success of the pot industry is showing no signs of
slowdown as several alcoholic beverage companies are creating huge
opportunities by investing or partnering with cannabis producers
(read: 5 ETFs That More Than Doubled S&P 500 This Year).
Per an analyst at Cowen, the U.S. legal cannabis industry is
expected to reach $80 billion in sales by 2030, surpassing the
carbonated soft drink market in 2017. An analyst at Haywood
Securities foresees exponential growth in the cannabis stocks with
the U.S. cannabis market envisioned to be worth between $15.9
million and $21.7 billion by 2022.
ETF Competition & Bottom Line
There is a huge appetite for this fund amid a couple of choices
available in the space. ETFMG Alternative Harvest ETF
MJ â the first ETF targeting the cannabis/marijuana
industry â has accumulated $1.2 billion in AUM and charges 75 bps
in annual fees.
Another ETF â AdvisorShares Pure Cannabis ETF YOLO
â is the actively managed fund, seeking long-term capital
appreciation by investing in both domestic and foreign cannabis
equity securities. It has garnered $57.5 million in its asset base
since its inception in April and charges 74 bps in fees per year.
Many other ETF providers including Amplify, Innovation Shares and
Cambria are also looking to launch funds (read: Marijuana ETFs
Head-to-Head).
On approval, this proposed fund could give investors another pure
play in the cannabis industry. It will not be difficult for the ETF
to buoy a sufficient investor interest in the ongoing green rush
and generate decent total returns net of expense ratio.
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ETFMG Alternative Harvest
ETF (MJ): ETF Research Reports
ADVSR-PURE CANN (YOLO): ETF
Research Reports
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