Subversive Capital has launched a new actively managed ETF investing in companies that are poised to benefit from further legalization in the US cannabis sector.
There are nearly a dozen cannabis-related ETFs in the US.
The Subversive Cannabis ETF (LGLZ US) has been listed on Cboe BZX Exchange with an expense ratio of 0.75%.
The fund selects its constituents from a global universe of stocks across the market capitalization spectrum; however, eligible companies must derive at least 50% of their revenue from legal THC-related sales within the US.
Up to 20% of the ETF’s portfolio may be dedicated to companies that support the US cannabis industry such as cannabis-focused technology companies or real estate investment trusts (REITs) that specialize in medical-use cannabis facilities.
The fund’s investment approach focuses on value-oriented companies that have dominant positions in their market, exhibit strong profitability characteristics, and are driving consumer adoption of cannabis.
According to Subversive, a constituent’s weight in the final portfolio will be positively impacted by key factors such as a robust network of retail and delivery locations in key cannabis consumer cities and states, its exposure to states that have near-term legalization potential, brand awareness and strength of wholesale penetration, and a lean business model across cultivation and manufacturing.
Subversive will also consider certain diversity, social equity, and social justice factors when selecting and assigning weights to constituents. Examples of such factors include the presence and number of company Directors and C-suite executives that are female or from minority racial groups, or whether the firm invests in minority-owned businesses or donates to social equality programs.
According to Subversive, the ETF has been developed in anticipation of cannabis’s reclassification to Schedule III status, a move that, according to Christian H. Cooper, Portfolio Manager of Subversive Capital’s ETFs, will “meaningfully change the trajectory of the cannabis industry in the United States.”
Cooper said: “We welcome any progress toward de-stigmatizing the cannabis industry. Deaths of despair are exploding in the US and we desperately need opioid alternatives. Since the therapeutic effects of THC continue to be proven by science-backed trials and research, it is time for companies in this space to be normalized and to have access to the same resources and opportunities for profitability as businesses in other industries. We believe it is time for cannabis to be accessible nationwide without fear of repercussion.”
The fund joins a crowded field of nearly a dozen cannabis ETFs in the US including passive and active funds as well as inverse and leveraged products. The largest of these is the $590m AdvisorShares Pure US Cannabis ETF (MSOS US) which is also actively managed and focuses on the US cannabis market. Its expense ratio is 0.80%.