ETFMG launches leveraged cannabis ETF

Jul 9th, 2021 | By | Category: Alternatives / Multi-Asset

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.


ETF Managers Group has launched a new ETF in the US providing leveraged exposure to the global cannabis investment theme.

ETFMG launches leveraged cannabis ETF

Cannabis stocks are again enjoying a bullish run.

The ETFMG 2x Daily Alternative Harvest ETF (MJXL US) has listed on NYSE Arca and comes with an expense ratio of 0.95%.

The fund delivers twice the daily performance of the Prime Alternative Harvest Index which is the underlying reference for the $1.5 billion ETFMG Alternative Harvest ETF (MJ US), the first US-listed and world’s largest marijuana-focused ETF.

The index consists of companies worldwide that maintain operations linked to the legal production of cannabis or industrial hemp, the creation of prescription drugs that utilize cannabinoids as an active ingredient, the trading of tobacco and tobacco products, or the manufacture of fertilizers, pesticides, and growing equipment used in the cultivation of cannabis or tobacco.

Eligible constituents must have market capitalizations above $200 million and average daily trading volumes greater than $500,000.

Stocks selected for index inclusion are divided into two groups: ‘Primary Beneficiaries’, those that derive at least 50% of their revenue from the above activities, and ‘Secondary Beneficiaries’, which account for the remaining companies.

The aggregate percentage weight of the Primary Beneficiaries group is determined by the number of components in the group multiplied by four percentage points per component. The remaining index weight is allocated to the Secondary Beneficiaries group. For example, if there are 25 eligible Primary Beneficiary components, then the aggregate weighting of this portion of the index will be 100% (25 x 4% per component) with no weight given to the Secondary Beneficiary group.

Constituents within the Primary Beneficiaries group are weighted by market capitalization subject to a cap of 5%, while constituents within the Secondary Beneficiaries group are equally weighted.

Stocks from the US, Canada, and the UK make up the vast majority of the index allocation with weights of 42.6%, 37.2%, and 16.9% respectively. Pharmaceuticals account for over half (51.4%) of the industry exposure with significant weight also dedicated to tobacco stocks at 27.5%. Notable positions include GW Pharmaceuticals (10.3%), Aphria (10.0%), Tilray (6.5%), Grow Generation (5.7%), and Canopy Growth (5.6%).

Following a couple of years of lackluster performance, cannabis stocks are again enjoying a bullish run with investors getting fired up about the sector’s potential as the legalization trend gains momentum. The Prime Alternative Harvest Index has risen 65.0% in the year ending 30 June 2021, compared to returns of approximately 40% for both the S&P 500 and MSCI World over the same period.

Volatility in cannabis stocks is generally higher than the broader market, however, a fact that investors seeking leveraged exposure to the sector should bear in mind. Inverse and leveraged ETPs provide an efficient means for sophisticated traders to obtain tactical exposures; however, they tend to decay in value if held for an extended period of time, potentially leading to significant losses, especially in volatile but range-bound markets.

In addition to MJ and MJXL, ETFMG offers a third cannabis product – the ETFMG US Alternative Harvest ETF (MJUS US) – which debuted in May of this year. This fund focuses specifically on the US cannabis market by tracking the Prime US Alternative Harvest Index. It also comes with an expense ratio of 0.75%.

Sam Masucci, CEO and Founder of ETFMG, said: “We’re proud to be adding yet another cannabis and leveraged ETF to our fund line-up. MJXL is a direct answer to increased investor demand for amplified exposure to global cannabis. ETFMG has become a one-stop-shop for those interested in investing in cannabis.”

Jason Wilson, Cannabis Research and Banking Expert at ETFMG, added: “With cannabis sales on track to exceed last year’s historic levels, and several catalysts in place to drive future growth globally, it is exciting to launch an investment product that provides 2x exposure to this rapidly expanding industry.”

Tags: , , , , , , ,

Leave a Comment