Spinnaker Trust, which made its debut in the exchange traded funds space last year with two actively managed products, has filed plans with the Securities and Exchange Commission for a new marijuana ETF.
The name of the proposed ETF is the Innovation Shares Cannabis ETF. The filing was made on Nov. 21, 2018. If it comes to market, the fund will track the Innovation Labs Cannabis Index.
“The Fund will invest at least 80% of its total assets in the component securities of the Index (the “80% Policy). The Fund uses a ‘passive’ or indexing approach to try to achieve its investment objective. Unlike many investment companies, the Fund does not try to ‘beat’ the Index and does not seek temporary defensive positions when markets decline or appear overvalued,” according to the SEC filing.
Competition for MJ ETF?
Currently, the ETFMG Alternative Harvest ETF (NYSEArca: MJ) is the only dedicated marijuana ETF listed in the U.S. As highlighted by MJ, marijuana ETFs still face regulatory hurdles because the drug is still illegal at the federal level.
Earlier this year, U.S. Bancorp. replaced as MJ’s custodian, administrator and transfer agent. In performing those duties for MJ, U.S. Bancorp held shares of publicly traded cannabis companies, which presented some risks to the bank because marijuana is not legal at the federal level.
Earlier this year, it was reported that U.S. Bancorp was reviewing its custodial relationship with MJ’s issuer. Potential investors should be aware that while MJ’s underlying index may cover businesses that are legally engaged in activities related to cannabis, the benchmark does not include those that directly cultivate, produce or distribute marijuana or products derived from marijuana, unless such activities become legal under U.S. federal and state laws.
The Spinnaker fund’s selection universe “consists of publicly listed companies that are involved in the legal United States and Canada cannabis industry or otherwise derive some revenue from the legal cannabis industry,” according to the filing.
Spinnaker made its ETF debut with the actively managed Fieldstone Merlin Dynamic Large Cap Growth ETF (NYSEArca: FMDG) and Fieldstone/UVA Unconstrained Medium-Term Fixed Income ETF (NYSEArca: FFIU). Those funds debuted in August 2017.
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