This past year was a very successful one for cannabis investors, and those who bought shares in the sole Canadian exchange traded fund (ETF) which tracks the marijuana industry, Horizons Medical Marijuana Life Sciences ETF (TSX:HMMJ) have done very well for themselves. As cannabis valuations continue to increase, the risk level of the overall sector has increased, however this fact has simply not stopped many investors from piling into this crowded trade this year.
A new ETF has begun trading on the NEO, providing another option for investors looking to gain exposure to this sector. The Marijuana Opportunities Fund began trading on Thursday, brought to life by Redwood Asset Management, a subsidiary of Purpose Investments. This fund is actively managed, does not attempt to track the index, and is rebalanced as the portfolio manager sees fit. As with other market capitalization weighted ETFs, this fund will be top-heavy, giving investors exposure to the country's largest cannabis producers in a more significant way, while also providing exposure to various small caps that make up the entire index and provide the potential for greater growth given the very juicy premiums which have been paid for such producers of late.
In general, I am avoiding this sector altogether, however I can understand the attractiveness of this new ETF when compared to the incumbent ETF offered by Horizons. I anticipate this fund will be able to generate significant capital inflows in the days and weeks to come, given increasing investor appetites for these risky securities and the ability to gain exposure to a broader range of companies which are actively selected by managers.
Invest wisely, my friends.