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Any industry that is growing by leaps and bounds does not skip ETF issuers’ eyes. The marijuana industry is on a tear lately. As per the source, cannabis-related stocks added about 236% in 2016. Plus, marijuana sales are likely to boost government’s treasury.
As a result, usage of medical marijuana has now been approved in 18 U.S. states. Over half of the 50 states now have laws legalizing marijuana for recreational or medicinal uses, as per the source. This makes it clear why ETF Managers Trust has filed for a fund targeting the industry (read: 6 ETF Ideas Most Favored by Issuers in 2016).
Inside the Proposed Fund
The fund – Emerging AgroSphere ETF – looks to track the total return performance of the Emerging AgroSphere Index. The index looks to track the performance of the exchange-listed common stock of companies across the globe that are into legalized medical research on natural or synthetic cannabidiol CBD, which can result in government-approved prescription drugs.
The companies need to qualify the size and liquidity requirements before the inclusion into the index. The index provider will look at publicly available sources to decide which companies to add to the index.
The proposed fund will not invest in any company that belongs to the non-medical marijuana market, as of now. The expense ratio and the ticker code of the fund is yet to be disclosed.
How Does It Fit in the Portfolio?
While medical usage of marijuana is legalized in many areas, lately there has been a surge in legalization in the recreational usage of marijuana in some U.S. states.
In an election held in 2016, marijuana was declared legal for recreational and medical purposes in seven additional states. Maine, California, Massachusetts, and Nevada all approved the legalization of recreational marijuana use, while Arizona’s highly opposed Proposition 205 recreational marijuana measure failed. Florida, North Dakota, and Arkansas too went in favor of legalizes medical marijuana use and Montana expanded the state’s medical marijuana laws.
Legal marijuana sales surged 34% to $6.9 billion in 2016 according to cannabis research firm ArcView. The firm expects the sales figure to skyrocket by about 213% by 2021. Investment firm Cowen & Co. is also bullish on the space and expects legal marijuana sales to hit $50 billion by 2026. So, clearly it is a high growth industry and is an intriguing tool for money making (read: 6 Best Commodity ETFs of 2016).
ETF Competition
The road ahead for the product is almost clear. It will not face any direct competition, if at all it gets an approval, as the space is void of similar products. However, some biopharmaceutical companies may pose threats to the product as the fund mainly targets companies involved in marijuana dealings for medical purpose.
Image: Bigstock
ETF Industry to Get a Product on Marijuana?
Any industry that is growing by leaps and bounds does not skip ETF issuers’ eyes. The marijuana industry is on a tear lately. As per the source, cannabis-related stocks added about 236% in 2016. Plus, marijuana sales are likely to boost government’s treasury.
As a result, usage of medical marijuana has now been approved in 18 U.S. states. Over half of the 50 states now have laws legalizing marijuana for recreational or medicinal uses, as per the source. This makes it clear why ETF Managers Trust has filed for a fund targeting the industry (read: 6 ETF Ideas Most Favored by Issuers in 2016).
Inside the Proposed Fund
The fund – Emerging AgroSphere ETF – looks to track the total return performance of the Emerging AgroSphere Index. The index looks to track the performance of the exchange-listed common stock of companies across the globe that are into legalized medical research on natural or synthetic cannabidiol CBD, which can result in government-approved prescription drugs.
The companies need to qualify the size and liquidity requirements before the inclusion into the index. The index provider will look at publicly available sources to decide which companies to add to the index.
The proposed fund will not invest in any company that belongs to the non-medical marijuana market, as of now. The expense ratio and the ticker code of the fund is yet to be disclosed.
How Does It Fit in the Portfolio?
While medical usage of marijuana is legalized in many areas, lately there has been a surge in legalization in the recreational usage of marijuana in some U.S. states.
In an election held in 2016, marijuana was declared legal for recreational and medical purposes in seven additional states. Maine, California, Massachusetts, and Nevada all approved the legalization of recreational marijuana use, while Arizona’s highly opposed Proposition 205 recreational marijuana measure failed. Florida, North Dakota, and Arkansas too went in favor of legalizes medical marijuana use and Montana expanded the state’s medical marijuana laws.
Legal marijuana sales surged 34% to $6.9 billion in 2016 according to cannabis research firm ArcView. The firm expects the sales figure to skyrocket by about 213% by 2021. Investment firm Cowen & Co. is also bullish on the space and expects legal marijuana sales to hit $50 billion by 2026. So, clearly it is a high growth industry and is an intriguing tool for money making (read: 6 Best Commodity ETFs of 2016).
ETF Competition
The road ahead for the product is almost clear. It will not face any direct competition, if at all it gets an approval, as the space is void of similar products. However, some biopharmaceutical companies may pose threats to the product as the fund mainly targets companies involved in marijuana dealings for medical purpose.
If you consider that as a risk, keep a track on the likes of iShares Nasdaq Biotechnology ETF (IBB - Free Report) , ALPS Medical Breakthroughs ETF (SBIO - Free Report) or SPDR S&P Biotech ETF (XBI - Free Report) . All these funds charge 47 bps, 50 bps and 35 bps in fees. As a result, the proposed fund needs to be priced competitively (read: Big Changes to BioShares Biotech ETFs: Who's In, Who's Out?).
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