European ETF white label firm HANetf and Canadian asset manager Purpose Investments have launched the first European UCITs ETF investing in medical cannabis, the Medical Cannabis and Wellness UCITS ETF (CBSX).
CBSX will launch the week of the 13th January on Deutsche Boerse, is domiciled in Ireland and has been passported for sale into the UK and Italy.
HANetf co-founder and CEO Hector McNeil (pictured) describes the launch as a ground breaker for European investors. “It’s not just the first ETF in Europe in the space, but also the first UCITs,” he says.
“A major plus point of this product is the huge amount of legal due diligence from a number of different angles as it has been passported across Dublin, Germany, Italy and the UK. It has gone through a huge amount of multi-jurisdictional legislation. One of the challenges investors face if they buy individual stocks in the cannabis market is figuring out what’s legal and what’s not legal but here it is done for them with an experienced firm who are active in the sector and real experts. It’s a great way for investors to get access.”
The Medical Cannabis and Wellness UCITS ETF will have fees of 80 basis points and is designed to offer targeted exposure to the medical cannabis industry which has gone through a massive transformation and growth in the last two years.
Medical cannabis and cannabidiol (CBD) products which are used to treat conditions such as cancer, epilepsy, and chronic pain and are now legal in over 40 countries with more countries expected to follow suit.
In Europe there are now 28 countries with some form of medical cannabis legislation, with the UK being the largest producer and exporter of medical grade cannabis in the world. As of 2018, the global medical cannabis market size was USD13.4 Billion. Experts predict that the market is expected to reach a value of USD148 Billion by 2026, with a CAGR of 26.4 per cent.
Purpose Investments has CAD8 billion in assets across a range of ETFs and traditional funds. Purpose Investments launched a cannabis fund in Canada in 2017, the CAD34.2 million Marijuana Opportunities Fund.
Despite the attention the medical marijuana or legal cannabis industry has received as an investment opportunity over the last few years, the sector had a difficult year last year with the largest global marijuana ETF, ETFMG Alternative Harvest with USD673 million in assets down over 28 per cent over the year and the second largest, Horizons Medical Marijuana Life Sciences ETF down over 33 per cent.
Commenting on the year of underperformance, HANetf’s McNeil says: “The sector was experiencing a bit of a gold rush and quite a few of the banks in Canada are saying 2020 will be a strong year with more realistic valuations.”