AdvisorShares has launched the actively managed AdvisorShares Vice ETF (ACT US) on Nasdaq Exchange. While funds providing ESG-focused exposure are increasingly in vogue, ACT is the first ETF to provide concentrated exposure to companies in the alcohol, cannabis and tobacco sectors.
The AdvisorShares Vice ETF will invest in companies involved in the alcohol, tobacco, and cannabis industries.
ACT’s management team will invest primarily in US equities, including common and preferred stock, and internationally through American depositary receipts (ADRs) of companies related to alcohol, cannabis and tobacco. The fund employs a fundamental process to select equities which focus on consistent, steady growth combined with the significant potential upside of certain emerging companies.
The fund’s portfolio will typically consist of between 40 and 50 securities which must derive at least 50% of their net revenue from one of the three targeted industries.
“We’re pleased to leverage a unique area of our investment expertise and deliver a fully-transparent Vice ETF never before seen in the marketplace,” said Dan Ahrens, managing director of AdvisorShares and portfolio manager of ACT.
The fund may provide an element of defensive positioning within an investor’s portfolio – alcohol and tobacco are considered recession-resistant areas of investment as people have historically tended to spend money on their habits and vices during both flourishing and challenging economic times.
Additionally, the portfolio manager believes that companies associated with alcohol and tobacco products can carry a competitive advantage operating within heavily regulated industries, and can deliver investment growth through more predictable investment returns across all types of market environments.
“Alcohol and tobacco possess among the highest profits margins of consumer products and are among the equity market’s best dividend payers, which we feel will help enhance the total return of ACT,” noted Ahrens.
Coupled with the continuing societal acceptance and regulatory approvals of cannabis across its various formats, AdvisorShares believes a new investment avenue has emerged that provides an untapped, emerging growth opportunity to complement the historically steady returns of alcohol and tobacco equities. The cannabis-related equities in the ACT portfolio will be in compliance with US federal regulations.
“We believe cannabis-related equities – which span across multiple industries – maintain an enormous upside as both society and regulations continue to evolve,” said Ahrens. “Taking into account these evolving factors and that cannabis essentially remains in its infancy, we feel investors seeking cannabis exposure may be better served by ACT’s highly selective approach. Combine with the potential overlap of alcohol and tobacco, which may include the potential for merger and acquisition activity, we believe that ACT presents a compelling, multi-dimensional investment consideration.”
ACT has a total expense ratio of 0.75% due to a contractual fee waiver in place until at least November 2018. Its gross expense ratio is 0.91%.