Horizons introduces world’s first inverse and leveraged marijuana ETFs

May 23rd, 2019 | By | Category: Equities

Horizons ETFs Canada has launched two new ETFs on Toronto Stock Exchange which are the world’s first to provide inverse and leveraged exposure to marijuana-related stocks.

Steve Hawkins, President and CEO of Horizons ETFs.

Steve Hawkins, President and CEO of Horizons ETFs.

They are the BetaPro Marijuana Companies 2x Daily Bull ETF (HMJU CN) and the BetaPro Marijuana Companies Inverse ETF (HMJI CN).

The funds provide twice the daily return and inverse daily return of the North American MOC Marijuana Index respectively.

Horizons has been a trailblazer in the marijuana investing space, being the first ETF provider to launch a marijuana-focused ETF – the Horizons Marijuana Life Sciences Index ETF (HMMJ CN).

This fund is also linked to the North American MOC Marijuana Index.

The index consists of North American publicly listed companies with significant business activities in the marijuana industry.

Such companies include producers and suppliers of marijuana, biotechnology companies engaged in research and development of cannabinoids, companies offering hydroponics supplies and equipment linked to the marijuana industry, and real estate companies leasing property to cannabis growers.

Horizons has launched the new funds under its ‘BetaPro’ brand which consists of 25 inverse and leveraged ETFs providing a range of equity, sector, commodity, and volatility exposures. Horizons is currently the only issuer in Canada to offer inverse and leverage ETFs.

Both new funds come with management fees of 1.45%.

Steve Hawkins, President and CEO at Horizons ETFs, commented, “Horizons ETFs has established a leadership position in the marijuana investing space. HMJU and HMJI will be the fourth and fifth ETFs we offer that provide exposure to marijuana equities. HMJU and HMJI are higher-risk ETFs that will give Canadian marijuana equity investors the opportunity to potentially generate returns in both positive and negative markets in the marijuana sector.

“Since we introduced HMMJ in 2017, thousands of Canadian investors have approached us and expressed their wish for leveraged and inverse exposure to the Canadian cannabis sector. Until now, generating leveraged and inverse exposure to marijuana equities has been difficult and typically requires using a margin account and securities lending facilities. HMJU and HMJI streamline this process and allow investors to get leverage and inverse access through diversified ETF exposure to the sector, rather than taking on individual stock risk or having to using a margin account.”

Inverse & leveraged funds provide an efficient means for sophisticated traders to obtain tactical exposures; however, they are generally considered unsuitable for retail investors who may not fully understand the risks involved.

The funds 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.

Horizons also notes that investors in the BetaPro Marijuana Companies Inverse ETF will also indirectly bear the borrowing costs of shorting marijuana equities which will be reflected in the fund’s performance. Currently, the firm anticipates that the hedging costs will be between 15% and 35% per annum of the aggregate notional exposure.

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