Cannabis investors have a new exchange-traded fund (ETF) to invest in. The AdvisorShares Poseidon Dynamic Cannabis ETF (NYSE Arca: PSDN) began trading this month. Its aim is to invest in the global pot market. It also, at management’s discretion, plans to “apply moderate levels of leverage (up to 150% of portfolio assets) to increase the portfolio’s exposure to specific high conviction cannabis companies.” The fund is actively managed and that, it believes, can make the ETF more attractive than similar funds because of its ability to keep up with the fast-changing cannabis industry.
However, because the fund is actively managed, it also charges a higher fee than passive ETFs. The Dynamic Cannabis ETF has a net expense ratio of 0.92%, which certainly isn't cheap.
Currently, the company's holdings are mainly focused on three countries -- Canada, the U.S., and Israel. Poseidon’s top two holdings as of Nov. 25 were Green Thumb Industries (OTC:GTBIF) and WM Technology (NASDAQ:MAPS), each at more than 7% of the portfolio’s total weight. The bulk of its holdings are small caps, which provide significant potential, but they can also be riskier investments than more established companies.
With the cannabis industry still being in its early growth stages, this fund can give growth investors an opportunity to tap into some exciting long-term opportunities. While there is some short-term risk, the potential for long-term rewards could be too tempting to pass up, especially given the diversity of the fund's holdings; it's not focused on just one part of the world or on just one type of cannabis business.
