Innovation Shares Launches New Legalized Marijuana ETF as Lowest-Cost Option

Investing

Published: July 9, 2019 10:10 am

Last Updated: January 16, 2020 7:32 am

The current market for legalized marijuana already has grown into the billions, and many sources are calling for exponential growth in the coming decade. With the rise of so many speculative companies in the marijuana and cannabis markets, some investors have voiced a preference to have an exchange-traded fund (ETF) full of the top stocks with exposure to the sector rather than taking on the risks of a single company or a single geography. A group called Innovation Shares is launching the Cannabis ETF (THCX) as the first passively managed pure-play ETF that targets investing in cannabis. The ETF’s launch date is Tuesday, July 9.

According to the company’s press release, this ETF will seek to track a 35 stock portfolio that makes up the Innovation Labs Cannabis Index. These companies are expected to benefit from current and coming growth of the hemp and legal marijuana industries.

This new marijuana ETF tracks the Innovation Labs Cannabis Index. It is said to be a rules-based constructed portfolio that rebalances on a monthly basis. It is also said to have the lowest management cost of U.S.-listed cannabis ETFs, with a 70 basis point management fee.

A visit to the THC Index website shows that there are currently 36 members in the index with a modified market cap weighting, with 19 U.S.-listed stocks and a combined market cap of over $80 billion. It also noted that there are 19 Canadian licensed producers.

Companies included in the index are shown to be Arena Pharma, Aurora Cannabis, Canopy Growth, Cronos, Hexo, Organigram, PerkinsElmer, PharmaCielo, Scotts MiracleGro, Tilray, Village Farms and others.

Matt Markiewicz, managing director of Innovation Shares, said of the ETF launch:

Our goal in launching THCX is to provide a low-cost and diversified vehicle to meet increasing investor appetite for cannabis-connected stocks. With the global cannabis market estimated to reach $630 billion by 2040 up from $12 billion today*, there is an exciting opportunity for investors to participate in this multi-decade growth story through the tax efficient structure of an ETF.

Elsewhere in cannabis-related ETFs, the ETFdb.com shows that the AdvisorShares Pure Cannabis ETF (YOLO) has roughly $60 million in assets under management and a 0.74% expense ratio. The ETFMG Alternative Harvest ETF (MJX) is listed as having $386 million in assets under management and a 0.75% expense ratio.

One other ETF that overlaps with the cannabis ETFs is the AdvisorShares Vice ETF (ACT) but ETFdb.com showed that it had only $14 million in assets under management, and it comes with a 0.75% expense ratio.

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