Redwood launches world’s first active marijuana ETF

Feb 1st, 2018 | By | Category: Equities

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Redwood Asset Management has launched the Marijuana Opportunities Fund (MJJ CN) on Canada’s NEO ExchangeThe fund is a world first as it is currently the only actively managed ETF to focus exclusively on equities tied to the marijuana or marijuana-related industries.

Peter Shippen, president and chief executive officer of Redwood Asset Management.

Peter Shippen, president and chief executive officer of Redwood Asset Management.

“The marijuana market is growing quickly, particularly with the expected legalisation of recreational use in Canada this year,” said Peter Shippen, president and chief executive officer of Redwood Asset Management. “While passive funds to date have provided investors with broad access to the market, the significant volatility of the sector and the ongoing evolution of the regulatory environment in the cannabis space have made active management the preferable way to invest.”

“MJJ represents another important new frontier for investors,” added Greg Taylor, the fund’s portfolio manager. “We strongly believe the fund’s institutional-style active approach – which will include fundamental and technical analysis, the ability to sell short, and tactical management of cash to take advantage of volatility in valuations – offers a better way to participate in the significant growth potential of the cannabis market.

According to the fund’s prospectus, the manager will invest primarily in Canadian companies, with a view to expand the universe globally as clarity around legislation improves. The ETF is currently relatively undiversified with just 12 holdings and a 31% position in cash.

The fund’s management expense ratio (MER) is 0.75%.

In the US, ETF Managers Group offers a passively managed ETF with exposure to the marijuana industry. The Alternative Harvest ETF (MJX US) tracks a market-cap-weighted index of global firms engaged in the legal cultivation, production, marketing or distribution of cannabis, cannabinoids or tobacco products. This fund was launched in 2015 and now has $387 million assets under management. This tracker has the same expense ratio as its actively managed marijuana-focused counterpart at 0.75%.

A relatively recent introduction, the AdvisorShares Vice ETF (ACT US) is an actively managed fund that invests in US companies involved in alcohol, cannabis, or tobacco-related activities. It was launched at the end of last year and also has an expense ratio of 0.75%.

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