Pot ETF ‘most scrutinized fund that we’ve ever launched’

Canadians will be able to invest in a basket of marijuana companies when the first marijuana exchange-traded fund launches next week, helping investors diversify their exposure to the volatile and frothy sector.

The Horizons Medical Marijuana Life Sciences ETF (TSX: HMMJ) is slated to begin trading Tuesday on the Toronto Stock Exchange. It will include 11 Canadian-listed stocks and four listed in the United States.

Exchange-Traded Funds (ETFs), which track the performance of a specific index or sector, have proliferated in recent years.

And while there are ETFs for everything from cybersecurity to construction, Horizons needed to jump over an unusual number of regulatory hurdles to add marijuana to the mix, said Steve Hawkins, president and Co-CEO of Horizons ETFs.

“There was lots of regulatory scrutiny, it’s a very controversial asset class,” he said. “By a long shot, this was the most scrutinized fund that we’ve ever launched out of the hundred plus that we’ve done.”

However, it’s also a sector that Horizons sees as very lucrative. Hawkins said being first to market with a sector-specific fund has proven a barometer of success.

Horizons pushed its debut ahead to beat out potential competitors, which have proposed similar funds. Paperwork for a medical marijuana and hemp-focused ETF was filed in February with U.S. regulators by ETF Managers Trust.

As the Canadian government gears up to introduce marijuana legalization legislation as early as next month, the option to invest in an ETF is yet another sign the black market drug is becoming mainstream.

“It is something that investors want to invest in. It is extremely topical,” Hawkins said.

“We’ve never received the feedback for any other product that we’ve launched like we have for this product.”

Horizons is quick to point out it will not invest in any businesses that are not legal, including Canadian recreational-only companies or U.S. companies that produce or distribute marijuana itself.

The fund will be passively managed and offer a management fee of 0.75 per cent. It focuses on companies that generate revenue from the medical marijuana industry, including Canada’s largest publicly traded licensed marijuana producers.