ETF Managers Group has launched a new ETF in the US providing leveraged inverse exposure to the global cannabis investment theme.
ETFMG now offers a full suite of regular and inverse/leveraged cannabis-related ETFs.
The ETFMG 2x Daily Inverse Alternative Harvest ETF (MJIN US) has been listed on NYSE Arca with an expense ratio of 0.95%.
The fund delivers twice the inverse daily performance of the Prime Alternative Harvest Index, which is the underlying reference for the $1 billion ETFMG Alternative Harvest ETF (MJ US), the first US-listed and world’s largest marijuana-focused ETF.
ETFMG also offers the ETFMG 2x Daily Alternative Harvest ETF (MJXL US) which delivers twice the daily performance of the Prime Alternative Harvest Index.
Collectively, the three funds represent a complete toolkit for investors seeking long-term exposure to the global cannabis sector as well as tactical traders that may want to enact shorter-term hedges or high-conviction directional views on the cannabis theme.
Sam Masucci, CEO and Founder of ETFMG, commented: “The launch of MJIN marks another first-to-market for ETFMG and rounds out our full suite of cannabis investment offerings. We are a one-stop shop for investors looking to capitalize on the global and US cannabis sectors.”
Kris Monaco, Managing Partner and co-Founder of Prime Indexes, added: “We are proud to expand our relationship with ETFMG as it launches yet another essential investment product for the cannabis industry. ETFMG’s new fund reinforces the Prime Alternative Harvest Index as the key benchmark for investors in an industry that is still in its infancy.”
Jason Wilson, ETFMG’s cannabis research specialist, said: “Investor interest in the cannabis sector has continued to increase as the industry has expanded on the back of strong fundamentals and the growing prospect of legislative reform. While most investors are primarily focused on capturing the long-term potential of the cannabis industry, many have been seeking a short-term trading vehicle to help hedge, from time to time, the downside volatility that can come along with investing in an emerging sector. As the cannabis industry continues to expand and diversify, so should its related investment options. It’s a privilege to be able to provide cannabis investors with a full suite of investment options, including the ability to achieve either long or short exposure to the sector.”
Volatility in cannabis stocks is generally higher than the broader market – 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.
Index methodology
The Prime Alternative Harvest 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.