On Wednesday, April 5th the Horizons Medical Marijuana Life Sciences ETF began trading on the TSX. HMMJ is the first ever ETF offing investors direct exposure to a basket of cannabis related companies in Canada and the United States. According to its website, its stake didn't exceed 10 percent in any individual company.
The Horizons Medical Marijuana Life Sciences ETF seeks to track the Solactive North American Medical Marijuana Index and it offers a way to invest without taking on individual company risk. However, the ETF only holds a total of 14 stocks, and while billed as a global fund, 10 holdings are Canadian-based. The medical marijuana industry is more developed in Canada than in other nations, and cannabis could soon become legal for all Canadian adults.
The fund has seen immediate popularity, with an average daily trading volume of over a million shares. In the first four sessions since its launch, the fund rose a total of 17.8% in value, and has now amassed over $28 million in assets. This degree of success for a brand new fund is rare, and shows that there is a strong demand for investments in medical marijuana. The Horizons fund has occupied an unusual niche in the ETF market, as it tracks an industry that has seen heavy demand but did not previously have a publicly-traded fund due to the federal prohibition of marijuana.
The Medical Marijuana fund has amassed more than $28.2 million in assets, according to Horizons, making it the most popular fund launched this month by that metric. It’s closest competitor is the JPMorgan Global Bond Opportunities ETF JPGB which has $25.1 million in assets — as well as the backing and distribution capabilities of one of the world’s largest investment banks.
Still, the marijuana industry has seen surging growth of late. Sales grew 30% in 2016, according to Arcview Market Research, and they are seen tripling in four years.The growth comes as more and more people approve of legalizing marijuana, including for recreational purposes. In 2016, roughly 60% of Americans said they favored the legalization of recreational marijuana, as the industry gained support in invalidating the war on drugs and seven states voted to legalize pot for recreational or medical use.
With the launch of the marijuana ETF, one of the few “white spaces” — an industry without a dedicated fund — left for the industry is bitcoin. Last month, the Securities and Exchange Commission rejected a proposed rule change that would’ve allowed for the creation of the first such product, saying it was unnerved by the lack of regulation in the bitcoin market.
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