Our Very First Actively Managed Marijuana ETF May Be On Its Way

Cannabis Investment

US SEC CLEARS WAY FOR CANNABIS EFTs

On Friday, May 5th, Cambria Investment Management filed an N-1A form with the US Securities and Exchange Commission (SEC) for not just one, but five new ETFs. The diverse basket of proposed funds cover a wide range of industries (real estate, cannabis, robotics and AI), and also include two tax optimized funds – one domestic and one foreign.

The stand-out of the bunch – and the one that is perhaps kicking up the most attention – is the Cambria Marijuana Industry ETF. The proposed fund, if successfully launched by Cambria, will be given the ticker “TOKE.”

Cambria’s Marijuana ETF will track publicly traded companies that support or directly work in the legal production of cannabis, including: companies that legally produce marijuana, those that conduct legal research into its medical or pharmaceutical use, and those that design and manufacture equipment used in the marijuana sector.

While it may be the first cleverly-named marijuana ETF, TOKE is not the first ETF to deal in cannabis-related stocks. The proposed fund will follow on the heels of the first-ever marijuana ETF, the Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) – which launched at $10.00 per share last month and is now sitting at $9.59. While the fund trades in Canada, American investors have been able to get in on the action via its listing on the OTC.

Horizon’s ETF isn’t alone, either. In February, a filing popped up for a fund called the Emerging AgroSphere ETF. The proposed fund, which comes from New Jersey-based ETF Managers Group, will include companies exclusively in the medical marijuana space and – if approved – will list on the NYSE Arca.

Both HMMJ and the Emerging AgroSphere ETF are passively managed, meaning the indexes they are based on dictate their performance. This means that TOKE has the potential to be the first actively managed ETF in North America. At the time of writing, there is no indication yet as to when the two remaining ETFs might launch.

There is still no telling how well these (hopefully) soon-to-be-launched ETFs will perform in the market, especially considering the fact that HMMJ has declined by about four percent since it began trading. But, at the same time more and more states are legalizing medical cannabis, and – according to Arcview Market Research – sales in the marijuana sector as a whole grew 30 percent in 2016 alone. The industry is also projected to triple in size over the next four years.

Investing in The Marijuana Industry Promises Huge Returns

Investing in the marijuana industry has never looked more lucrative.

investing in the marijuana industry yields big returns

Earlier this year, Forbes astounded its audience by noting that 2016 marijuana sales in the US states where it’s legal outmatched the Dot-Com boom of the early 2000s.

They based this on a report by Arcview Market Research, which is the market leader in data research for legal marijuana market in the United States. According to Arcview, legal marijuana sales in North America grew to $6.7 billion in 2016.

As Forbes Magazine observed, by comparison the entire US GDP during the Dot-Com era grew at 22% versus the 30% growth we’ve seen in the marijuana market to achieve those kind of number sin 2016. And remember that at the time, the dot-com expansion was considered unparalleled in its scope and magnitude.

Arcview’s editor, Tom Adams wrote:

“The only consumer industry categories I’ve seen reach $5 billion in annual spending and then post anything like 25% compound annual growth in the next five years are cable television (19%) in the 1990’s and the broadband internet (29%) in the 2000’s.”

At the rate the marijuana industry is growing, we can reasonably project legal cannabis sales north of $20 billion by the year 2021 just five years from now.

Consumers clearly value marijuana for its psychoactive effects, the characteristic “high” caused by the THC in its leaves, rewarding consumers with relaxation, greater enjoyment of their company and surroundings, increased insight, and greater creativity.

Many consumers use marijuana the way American workers have used alcoholic beverages since this country was founded, as a way to unwind after a hard day’s work. The demand for legal marijuana is undoubtedly robust and hardly flinching at federal prohibition of cannabis and cannabis products.

Investing directly in marijuana dispensaries themselves or cannabis farms is just one way of investing in the marijuana industry. Another is to invest in the various auxiliary businesses the provide support and business infrastructure to this multi-billion dollar boom industry.