On April 18, investors will have the opportunity to invest in a new marijuana ETF, the first that focuses on U.S. pot stocks. It wasn’t too long ago that we learned about Horizons’ interest in launching such a fund. However, it won’t be on the Canadian Securities Exchange as expected. Instead, it will be listed on the NEO exchange and will trade under the symbol HMUS for Canadian dollar units and HMUS.U for U.S. dollar units.
It’s big news for investors as it’s a great opportunity to take advantage of significant growth in the U.S. where 10 States have legalized cannabis and the industry has been taking off. Horizons believes (and correctly, in my view) that there is going to be a lot of interest from investors
HMUS will be the first index ETF solution to focus solely on identifying, and investing directly in, U.S. marijuana and hemp companies. As the U.S. continues to further liberalize its marijuana regulations, we anticipate that more investors will be looking to invest in companies with significant business operations in the U.S. market and HMUS will provide a diversified and liquid way to gain that exposure in one ETF
– Steve Hawkins, President and CEO of Horizons ETFs
The fund is going to focus on many of the big name U.S. pot stocks that investors will undoubtedly be familiar with, including Curaleaf Holdings Inc (CSE:CURA), Cresco Labs, Inc. (CSE:CL), Charlotte’s Webb Holdings, Inc. (CSE:CWEB) , MedMen Enterprises Inc (CSE:MMEN) and many others. However, in order to be considered for inclusion in the ETF, stocks will have to meet liquidity requirements and have a market cap of over $75 million. As more U.S. companies list in Canada, this list will likely change over time.
The fund charges a management fee of 0.85% which is very competitive and shouldn’t take much away from what could be significant returns from the opportunity that it provides investors with. Horizons is the company that also launched the first marijuana ETF with the Horizons Marijuana Life Sciences Index ETF (TSX:HMMJ).
Horizons CEO Steve Hawkins is optimistic about the potential that exists for this new ETF:
We see a lot of similarities with the regulatory environment in the U.S. to what we saw in Canada, three years ago. If the U.S. were to enact any type of federal legalization, either medical or recreational, that would immediately make the U.S. the largest federally approved cannabis market in the world. HMUS will give investors direct diversified access to this early stage sector which has the potential of future U.S. regulatory change
The opportunities in the U.S. are significant and there’s no denying that. Although we don’t know how well the index will due, it’ll give investors a more balanced investing option that will minimize the big swings that sometimes come with marijuana stocks. The Marijuana Life Sciences ETF, HMMJ, for instance, has produced returns of over 18% over the past 12 months. If we stretch that out to two years, then the ETF is up 90%.
While some marijuana stocks will likely outperform these ETFs, many will also underperform as well. By using an ETF, investors don’t have to guess or spend a significant amount of time analyzing and trying to determine which ones might be the best buys.