AdvisorShares, one of the largest sponsors of actively managed exchange traded funds, is looking to bring a cannabis ETF to market. A recent filing with the Securities and Exchange Commission includes details about the AdvisorShares Pure Cannabis ETF.
What Happened
The filing contains a ticker for the fund. If it's approved, the AdvisorShares Pure Cannabis ETF would trade on the New York Stock Exchange under the ticker “YOLO.”
“The Fund is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets (plus any borrowings for investment purposes) in securities of companies that derive at least 50% of their net revenue from the marijuana and hemp industry or that are registered with the DEA specifically for the purpose of handling marijuana for lawful research and development of cannabis or cannabinoid-related products and in derivatives or other instruments that have economic characteristics similar to such securities,” according to the SEC filing.
Why It's Important
The ETFMG Alternative Harvest ETF MJ, one of this year's best-performing non-leveraged ETFs, remains the only dedicated cannabis ETF trading in the United States. MJ has had the domestic cannabis ETF market cornered due to regulatory issues surrounding the ability of custodial banks to hold marijuana equities for use by related ETFs.
Marijuana remains illegal at the federal level and banks are regulated by federal authorities, presenting hurdles to the creation of additional marijuana ETFs.
AdvisorShares' own AdvisorShares Vice ETF ACT, which launched in late 2017, skirts some of those issues by holding a mix of alcohol, cannabis and tobacco stocks. ACT's exposure to weed stocks is 22 percent.
What's Next
YOLO could be structured in similar fashion as the filing indicates the fund, if approved, could hold much more than dedicated cannabis equities.
“Cannabis stocks may be categorized among a wide variety of sectors and industries including agriculture, biotechnology, pharmaceuticals, real estate, retail, and finance. The types of companies that may engage in cannabis-related business include companies that conduct medical research, produce drug products, manufacture hemp products, or engage in agricultural activities, real estate activities, or financial services activities,” according to the filing.
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