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Vice ETFs primarily target companies dealing in products seen as vices, such as alcohol, tobacco or marijuana. These ETFs are attractive options for those seeking some diversification in their portfolio by investing in the so-called sin stocks.
The need to form such a category was primarily because of some investors’ inclination toward sustainable investing, which mainly seeks to avoid sin stocks. However, some investors choose such stocks for their attractive return potential.
How to Add Sin Stocks to Your Portfolio?
Investors have multiple ways to gain exposure to the space. Depending on their preference, investors can choose pure play alcohol stocks, tobacco, marijuana stocks or form a diversified portfolio of the entire space. However, owing to high volatility in this space and stringent regulations, it is advisable to go the ETF way to gain exposure to the sector.
With experienced managers handling money, investors will be in a good spot when the sector performs well. When AdvisorShares Vice ETF was launched last September, the fund’s portfolio manager Dan Ahrens said, “We’re not making any kind of moral judgment or statement about what people want to consume with this focus; there’s a strong economic argument for looking at these sectors."
Another positive for this segment’s investors is that these products are somewhat staples. Even when the economy is not performing well, people drink and smoke. As a result, even if the sector takes a beating at the time of a recession, it will outperform other segments of the markets, owing to its demand interdependency.
The alcohol industry has been looking up, with growth surpassing expectations. Volumes for spirits grew 2.6% last year, according to data provided by the Distilled Spirits Council, while supplier revenue was up 4.0% to $26.2 billion. Moreover, the cannabis and legal marijuana industry is seeing strong growth although tobacco sales are seeing a slight decline.
Let us now discuss a few ETFs providing exposure to the space.
Spirited Funds/ETFMG Whiskey & Spirits ETF
This fund focuses on providing exposure to companies across the world involved in the production and sale of whiskey and spirits. It has AUM of $15.0 million and charges a fee of 60 basis points a year. From a geographical perspective, the fund has high allocation to the United Kingdom, France and United States, with 25.9%, 25.0% and 13.5% exposure, respectively. It has an allocation of 16.9% to Diageo, 9.0% to Pernod Ricard and 5.6% to Radico Khaitan. This fund has garnered $3.3 million in inflows so far this year. It has returned 28.7% in a year.
This fund seeks to provide exposure to companies involved in the cannabis business.
It has AUM of $371.9 million and charges a fee of 75 basis points a year. The fund’s top three holdings are GW Pharmaceuticals Plc , Hydropothecary Corp and Medreleaf Corp, with 6.3%, 6.0% and 5.9% allocation, respectively. This fund has garnered $405.6 million in inflows so far this year. It has returned 3.0% in a year.
This fund is a popular ETF focused on providing exposure to companies involved in the alcohol, tobacco or cannabis business.
It has AUM of $15.0 million and charges a fee of 75 basis points a year. From a sector perspective, the fund has 53.0% allocation to alcohol businesses, 26.0% to tobacco businesses and 21.0% to Cannabis businesses. The fund’s top three holdings are AbbVie Inc (ABBV - Free Report) , Constellation Brands Inc A (STZ - Free Report) and MGP Ingredients Inc (MGPI - Free Report) , with 1.1%, 0.9% and 0.8% allocation, respectively. This fund has garnered $5.4 million in inflows so far this year. It has lost 0.6% in a year.
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What Lies Ahead for Vice ETFs?
Vice ETFs primarily target companies dealing in products seen as vices, such as alcohol, tobacco or marijuana. These ETFs are attractive options for those seeking some diversification in their portfolio by investing in the so-called sin stocks.
The need to form such a category was primarily because of some investors’ inclination toward sustainable investing, which mainly seeks to avoid sin stocks. However, some investors choose such stocks for their attractive return potential.
How to Add Sin Stocks to Your Portfolio?
Investors have multiple ways to gain exposure to the space. Depending on their preference, investors can choose pure play alcohol stocks, tobacco, marijuana stocks or form a diversified portfolio of the entire space. However, owing to high volatility in this space and stringent regulations, it is advisable to go the ETF way to gain exposure to the sector.
With experienced managers handling money, investors will be in a good spot when the sector performs well. When AdvisorShares Vice ETF was launched last September, the fund’s portfolio manager Dan Ahrens said, “We’re not making any kind of moral judgment or statement about what people want to consume with this focus; there’s a strong economic argument for looking at these sectors."
Another positive for this segment’s investors is that these products are somewhat staples. Even when the economy is not performing well, people drink and smoke. As a result, even if the sector takes a beating at the time of a recession, it will outperform other segments of the markets, owing to its demand interdependency.
The alcohol industry has been looking up, with growth surpassing expectations. Volumes for spirits grew 2.6% last year, according to data provided by the Distilled Spirits Council, while supplier revenue was up 4.0% to $26.2 billion. Moreover, the cannabis and legal marijuana industry is seeing strong growth although tobacco sales are seeing a slight decline.
Let us now discuss a few ETFs providing exposure to the space.
Spirited Funds/ETFMG Whiskey & Spirits ETF
This fund focuses on providing exposure to companies across the world involved in the production and sale of whiskey and spirits. It has AUM of $15.0 million and charges a fee of 60 basis points a year. From a geographical perspective, the fund has high allocation to the United Kingdom, France and United States, with 25.9%, 25.0% and 13.5% exposure, respectively. It has an allocation of 16.9% to Diageo, 9.0% to Pernod Ricard and 5.6% to Radico Khaitan. This fund has garnered $3.3 million in inflows so far this year. It has returned 28.7% in a year.
ETFMG Alternative Harvest ETF (MJ - Free Report)
This fund seeks to provide exposure to companies involved in the cannabis business.
It has AUM of $371.9 million and charges a fee of 75 basis points a year. The fund’s top three holdings are GW Pharmaceuticals Plc , Hydropothecary Corp and Medreleaf Corp, with 6.3%, 6.0% and 5.9% allocation, respectively. This fund has garnered $405.6 million in inflows so far this year. It has returned 3.0% in a year.
AdvisorShares Vice ETF (ACT - Free Report)
This fund is a popular ETF focused on providing exposure to companies involved in the alcohol, tobacco or cannabis business.
It has AUM of $15.0 million and charges a fee of 75 basis points a year. From a sector perspective, the fund has 53.0% allocation to alcohol businesses, 26.0% to tobacco businesses and 21.0% to Cannabis businesses. The fund’s top three holdings are AbbVie Inc (ABBV - Free Report) , Constellation Brands Inc A (STZ - Free Report) and MGP Ingredients Inc (MGPI - Free Report) , with 1.1%, 0.9% and 0.8% allocation, respectively. This fund has garnered $5.4 million in inflows so far this year. It has lost 0.6% in a year.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>