Upstart exchange traded funds issuer Innovation Shares is expected to roll out The Cannabis ETF THCX today, about nine months after the issuer filed plans for the fund.
What Happened
Innovation Shares' Cannabis ETF will be the third marijuana ETF to trade in the U.S. and will compete with the ETFMG Alternative Harvest ETF MJ and the AdvisorShares Pure Cannabis ETF YOLO. YOLO is the newer of those two funds, having debuted in April. At nearly three months old, YOLO has $60.26 million in assets under management.
MJ has $1.1 billion in assets under management. While MJ is the seasoned name in the U.S. cannabis ETF patch and YOLO is off to a fast start, the asset bases of those funds, while impressive, indicate there is ample room for competition in the U.S. weed ETF arena.
Why It's Important
The new ETF from Innovation Shares will track the Innovation Labs Cannabis Index.
“The Innovation Labs Cannabis Index is a proprietary rules based equity index,” according to the index provider. “The portfolio consists of global companies that have a business interest in the legal cannabis, hemp or CBD-based pharmaceutical, consumer product & wellness markets.”
The index is home to 36 stocks, including 19 companies trading in the U.S., such as Aurora Cannabis ACB, Canopy Growth CGC and GW Pharmaceuticals GWPH. The cap-weighted benchmark is rebalanced on a monthly basis. Nineteen licensed Canadian producers are featured in the index.
“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,” said Innovation Shares Managing Director Matt Markiewicz in a statement.
What's Next
This is not Innovation Shares' first move into an exciting investment niche. The firm's existing ETF is the Innovation Shares NextGen Protocol ETF KOIN, a fund that provides exposure to blockchain investment opportunities. KOIN, which debuted in January 2018, is up 25.30% year-to-date.
The statement did not include an expense ratio for THCX, but if it undercuts the 0.75% charged by MJ and the 0.74% charged by YOLO, it could find a following among cost-conscious cannabis investors.
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