AdvisorShares has announced the upcoming launch of a new actively managed ETF which offers access to companies directly linked to the cannabis industry.
Dan Ahrens, Managing Director at AdvisorShares.
The AdvisorShares Pure Cannabis ETF (YOLO US) will list on NYSE Arca on Thursday 18 April and is set to become the first active ETF in the US to offer dedicated cannabis exposure.
“We feel cannabis stands poised to become a market disruptor and long-term emerging growth opportunity, especially as societal, business, and regulatory landscapes evolve,” said Dan Ahrens, Managing Director at AdvisorShares. “We believe YOLO may provide a compelling case to investors seeking emerging growth and dedicated cannabis exposure for their portfolios.”
The fund invests primarily in US and Canadian companies from a range of industries including agriculture, biotechnology, pharmaceutical, real estate (including REITs that derive revenue from the ownership and management of cannabis growing facilities), retail, and finance. A minimum of 25% of the portfolio will be allocated to stocks from the pharmaceutical, biotech, and life sciences industry groups.
To maintain its pure-play exposure, the fund will only select firms that derive more than 50% of their revenue from marijuana-related activities but may also invest in companies with no sales history that are expected to derive significant future revenues from cannabis operations.
According to the ETF’s prospectus, the fund will primarily hold small and mid-cap equities but may also invest in preferred stock and various derivatives to obtain its exposure. Additionally, in a bid to capture returns associated with new entrants into the industry, as well as the high level of merger and acquisition activity, the portfolio may participate in initial public offerings.
The ETF comes with an expense ratio of 0.74% which undercuts the cost of the ETFMG Alternative Harvest ETF (MJ US), the only other pure-play cannabis ETF in the US, by one basis point. This fund tracks the Prime Alternative Harvest Index and has accumulated nearly $1.2bn in assets under management.
AdvisorShares also offers the AdvisorShares Vice ETF (ACT US) which includes cannabis stocks as well as firms operating in the tobacco and alcohol industries. Its expense ratio is 0.75%, and the fund has approximately $15m in AUM.