When it comes to ETFs tracking marijuana-related stocks, Canada, not the U.S., is the leading market. Several marijuana ETFs listed north of the border have gained traction among investors and at least one issuer is looking to build on that success with some leveraged marijuana ETFs.
Horizons ETF Management Canada Inc. has filed plans with Canadian regulators to possibly introduce double-leveraged marijuana ETFs.
“Horizons ETF Management Canada Inc. filed preliminary documents with regulators last week to launch three new ETFs on the Toronto Stock Exchange that will focus on leveraging the cannabis sector,” reports The Globe and Mail.
The ETFMG Alternative Harvest ETF (NYSEArca: MJ) is the only marijuana exchange traded fund listed in the U.S. 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.
Leveraged Products in Canada
Canada is a smaller ETF market than the U.S. and as such there are not as many leveraged products there as there are in the United States.
“Horizons ETFs is the only provider of leveraged ETFs in Canada, with 25 leveraged funds on its shelf. The three new funds will be in line with the existing BetaPro fund lineup, and have a management fee of 1.15 per cent. The funds will include: BetaPro Canadian Marijuana Companies 2x Daily Bull ETF (HMJU), BetaPro Canadian Marijuana Companies -2x Daily Bear ETF (HMJD) and BetaPro Canadian Marijuana Companies Inverse ETF (HMJI),” according to the Globe and Mail.
Related: A Powerful Catalyst Grows the Marijuana ETF
While there is an appetite for more marijuana ETFs in the U.S., there are regulatory issues that make it difficult for more of these products to come to market. Some states have legalized weed, but it remains illegal at the federal level, presenting hurdles for ETF issuers and custody banks.
“The assets of an ETF in the U.S. have to be custodied in a U.S. bank,” according to Green Market Report. “It can’t be offshore or in Canada. The custodial bank actually holds the securities of the ETF. This is why the main cannabis ETF’s are in Canada with the Horizons company.”
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