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The firm behind Canada's biggest cannabis ETF looks south with potential fund of only US-licensed producers

The firm that created the first marijuana exchange-traded fund is casting its eyes to the US and may create a fund that will contain US-licensed producers

cannabis stocks
Investors would welcome an ETF focused solely on US multi-state operators, says contributor Bob Byrne

The creator of the first marijuana exchange-traded fund – the Horizons Marijuana Life Sciences Index ETF (HMMJ) –  is looking at bolstering its offerings, with an eye on US-licenced producers. 

Horizons ETFs Management Canada Inc, the firm that runs HMMJ, is looking to create a fund that will contain only US-licensed producers, CEO Stephen Hawkins told Bloomberg News in an interview Thursday. It is also looking at leveraged and inverse offerings.  

“We’ve had a lot of investor inquiries saying, ‘HMMJ is great but I want exposure to the underlying US marijuana market directly,”’ Hawkins told Bloomberg. 

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HMMJ is the largest Canadian cannabis ETF, has more than $1 billion in assets, and has returned an eye-popping 60% this year, giving it the crown of being the best-performing equity ETF listed in Canada.

However, it cannot have holdings in firms with US cannabis operations because the Toronto Stock Exchange prohibits the listing of companies that don't comply with the federal law where they operate.

US multi-state operators compelling

Bob Byrne, Proactive Investor contributor, says he beleives investors would welcome an ETF focused solely on US multi-state operators, adding that he believes it is only a matter of time before the cannabis laws are changed at the federal level. 

"Some of the best risk/reward investments available are in the US multi-state operators (MSOs)," said Byrne. "Now, while the MSOs aren’t cheap, on a price-to-sales basis, some of them are significantly cheaper than their Canadian Licensed Producer (LP) counterparts. Also, when you consider the total addressable market in the US versus Canada … I’d argue it makes more sense to invest in some of the MSOs than the popular Canadian producers trading on the NYSE and Nasdaq."

In the US, the ETFMG Alternative Harvest has $1.2 billion in assets, but does not hold any companies growing or distributing cannabis in the US. 

New players added to HMMJ this week

Earlier this week, new cannabis players were added to the quarterly rebalance of the HMMJ, including Flowr Corp (CVE:FLWR), Heritage Cannabis Holdings Corp (CSE:CANN), ICC International Cannabis Corp (CSE:WRLD.U), Zenabis Global Ltd (CVE:ZENA), PharmaCielo Ltd (CVE:PCLO) and Westleaf Inc (CVE:WL). 

Additionally, AgraFlora Organics International Inc (CSE:AGRA), Cannara Biotech Inc (CSE:LOVE), Charlotte's Web Holdings Inc (CSE:CWEB) and 48North Cannabis Corp (CVE:NRTH) were added to the portfolio, which seeks to replicate the performance of the North American Marijuana Index.

Notably, the Colorado-based Charlotte’s Web Holdings was added because it deals specifically with hemp-derived products, which are legal.  

The Horizons Marijuana Life Sciences Index ETF was up 0.86% at C$23.46 on Thursday. 

Quick facts: Charlotte's Web Holdings

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