While more states are legalizing cannabis in some form of fashion and the number of exchange traded funds dedicated to the theme is increasing, accessing US-based marijuana companies via those ETFs has been somewhat tricky.
That is changing thanks in large part to the AdvisorShares Pure Cannabis ETF (YOLO). When it debuted in April, YOLO became the first actively managed ETF with a dedicated cannabis investment mandate domiciled in the United States. The AdvisorShares Pure Cannabis ETF, or YOLO, seeks long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. YOLO is designed to fully-invest for pure cannabis exposure under the guidance of a deeply experienced portfolio management team navigating the emerging cannabis marketplace.
YOLO recently added some stocks known as multi-state operators (MSOs) to its lineup.
MSOs “are U.S. based companies directly involved in the legal production and distribution of cannabis in states where approved,” according to a statement from AdvisorShares.
Why It’s Important
Yolo’s portfolio manager believes that today’s new era can be viewed as akin to post-Prohibition, initiating a growing acknowledgement and understanding of cannabis and its uses among a mainstream audience. The industries that constitute the multi-billion dollar cannabis universe represent a new frontier, where proper caution and due diligence must be exercised surrounding its regulations and risks, in seeking attractive long-term cannabis investment opportunities.
“As more states legalize cannabis for medical or recreational-use, MSOs are believed to be a growth opportunity based on their ability to develop operational, distribution, marketing, and research and development efficiencies in multiple states where legal,” said Maryland-based AdvisorShares.
There are some regulations surrounding YOLO’s investment in MSOs. YOLO cannot invest in U.S.-based companies unless those companies businesses are legal at the federal level.
“To invest in U.S. operators like Green Thumb or Cresco Labs (CRLBF) without upsetting the NYSE, the Pure Cannabis fund doesn’t buy their stocks directly,” reports Barron’s. “Instead, it invests in privately-arranged swap securities that are tied to the stocks’ performance. As of Wednesday, those U.S. pot bets amounted to about $4 million of YOLO assets.”
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