AdvisorShares has expanded its suite of marijuana-focused ETFs with a new fund delivering leveraged exposure to the US cannabis market.
Dan Ahrens, Managing Director at AdvisorShares.
The AdvisorShares MSOS 2x Daily ETF (MSOX US) has been listed on NYSE Arca with an expense ratio of 0.95%.
The fund delivers twice the daily performance of the AdvisorShares Pure US Cannabis ETF (MSOS US), currently the largest publicly traded cannabis fund in the world with $730 million in assets under management.
MSOS is actively managed, offering dedicated exposure to American companies that are engaged in cannabis businesses across multiple industries. The fund includes multi-state operators which are firms directly involved in the legal production and distribution of cannabis in states where approved.
Both MSOS and MSOX are overseen by AdvisorShares’ Managing Director Dan Ahrens, a seasoned portfolio manager specializing in cannabis and vice-related investment strategies.
Commenting on the new launch, Dan Ahrens, said: “We are pleased to add this new dimension to our active cannabis ETF offering. While all our cannabis ETFs provide dedicated exposure to the emerging growth opportunity in cannabis, they are all different from one another in their investment strategies and underlying holdings. We believe MSOX is a unique investment tool that is designed specifically for experienced investors and professional traders which can potentially provide amplified returns in all market environments.”
The new fund has launched at somewhat of a low point for the cannabis industry which has been on a downward trajectory over the past 18 months – MSOS has slumped a massive 75.8% since its high on 10 February 2021.
The segment still has its supporters, however, who tend to highlight the consistently steady sales growth of cannabis manufacturers as well as the growing number of states either decriminalizing or legalizing marijuana. Three more states (Missouri, Maryland, and South Dakota) are due to vote on legalizing marijuana at the mid-terms in November while momentum is growing in Florida to add the issue to the ballot paper for 2024.
For sophisticated investors seeking to profit from a potential bounce-back in the sector, MSOX offers an effective tool to enact a bullish, magnified position on US cannabis stocks.
However, volatility in cannabis stocks is generally higher than the broader market, a fact that investors seeking leveraged exposure to the sector should bear in mind. Inverse and leveraged ETFs provide an efficient means to obtain tactical exposures; however, they tend to decay in value if held for an extended period of time, potentially leading to significant losses, especially in volatile but range-bound markets.
This feature of leveraged products, combined with the protracted slump in US cannabis stocks, explains why the ETFMG 2x Daily Alternative Harvest ETF (MJXL US), the only other leveraged cannabis ETF available in the US, currently houses just $1m in assets under management.