<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=4496002&amp;fmt=gif">

Marijuana for fools

Another marijuana ETF 

AdvisorShares is listing an actively managed marijuana ETF that aims to give exposure to the recreational drug. The AdvisorShares Pure Cannabis ETF (YOLO). The fund will invest in companies that make more than 50% of their revenue is marijuana and hemp. It will also invest in plain old companies that AdvisorShares believes may make money out of marijuana one day.

The fund will invest 25% or more in pharmaceuticals, biotech and life sciences industry group within the health care sector. This makes part of the fund not too different from healthcare biotech ETFs like iShares IBB and State Street’s XBI. 

The fund will charge 0.74%, making it one basis point cheaper than its competitor MJ.

Analysis – How foolish is retail money?

A general rule in finance is that retail money is often foolish money. It was retail investors that drove the ICO scams. It is retail money that brokers hope to fleece with pump and dump IPOs (Lyft tried but appears to have mostly failed). It’s retail money that drives spread betting and its kissing cousin contracts for difference (which are just gambling by another name).

One imagines it is retail money that AdvisorShares hopes to hoe in with this product.

There’s a few ways of detecting AdvisorShares’ slant. The first is the ticker: YOLO, which means “you only live once”. It’s the type of language – called “memeing” – used by under-40s that spend too much time on the internet. Using YOLO as a ticker gives us an idea as to where they see the target market. 

The second is the fact it targets marijuana. Neither Bernie nor I have met a finance professional that believes marijuana exposure is a source of alpha. From the looks of things, it seems as though no-one in the marijuana “industry” thinks so either. This from The Guardian: 

“Presently, no one in legalized marijuana is getting rich,” Steve Schain, a senior attorney with the cannabis-focused Hoban Law Group, said. In Schain’s view, even the largest and most professionally run companies are being built to be acquired when major agriculture, alcohol and pharmaceutical companies consider it safe to profit.

But retail investors aren’t always fools. Much of the passive revolution has been driven by retail investors fed up with professionals ripping them off. And many of the successful thematics ETFs – like robotics – have been boosted by retail. The question for this fund is: how foolish is retail money likely to be?

• Contact us

Have questions about this?

Speak to one of our ETF data specialists about how this applies to your fund range.

Get in touch

Bernie Thurston

Bernie Thurston is the founder and CEO of Ultumus, a leading provider of ETF and index data, calculation, and workflow solutions. With over 20 years of experience in financial technology, Bernie has been at the forefront of index and ETF innovation since 2003.

His finance career began at Markit, where as Managing Director for Equities he designed and developed products for index and ETF composition and dividend forecasting from 2003 to 2011. He then founded and led DeltaOne Solutions as Managing Director, building it into a global provider of index and ETF trading data and technology services. The company managed over 100,000 multi-asset class products before being acquired by Markit in 2015.

Following the acquisition, while working for an ETF issuer, Bernie identified fundamental issues in how index and ETF data was represented across the industry. This led him to found Ultumus in 2016, building solutions for ETF primary market operations. Under his leadership, Ultumus has grown into a market leader serving major financial institutions globally, with its ETF Order Management System (OMS) supporting create and redeem workflows worldwide and its PCF platform calculating and distributing portfolio composition files for ETF issuers across every major market.

Bernie sold Ultumus to SIX Group in 2021, where it continues to expand across Europe, North America, and Asia-Pacific. Known for building lasting teams and leveraging cutting-edge technology, Bernie is focused on establishing Ultumus as the backbone of the global index and ETF industry through standardisation and automation.

Related posts

Search Australian Multi Factor
Ultra Short Duration Search