By Steve Gelsi
Longtime cannabis investor Poseidon Investment Management on Wednesday launched an actively managed exchange-traded fund aimed at providing individual investors access to U.S. cannabis companies barred from trading directly on the New York Stock Exchange or the Nasdaq.
The AdvisorShares Poseidon Dynamic Cannabis ETF /zigman2/quotes/231018363/composite PSDN -1.96% will target a portfolio of about 30 stocks initially focusing most exposure to the U.S. market across the cannabis and related sectors.
Most of the big U.S. multi-state operators such as Trulieve /zigman2/quotes/207658767/delayed TCNNF -3.04% , Verano /zigman2/quotes/224743992/composite VRNOF -6.17% or Curaleaf /zigman2/quotes/205334348/delayed CURLF -0.86% are generally not available for investors to purchase directly in their brokerage accounts, as part of the federal ban on cannabis that prohibits cannabis company listings on the Nasdaq and the NYSE.
The Poseidon Dynamic Cannabis ETF includes the ability for the fund managers to purchase total return swaps for exposure to its U.S. plant-touching names in much the same way bitcoin ETFs put their money into swaps instead of buying the cryptocurrency directly. Because of this structure, the Poseidon Dynamic Cannabis ETF is available from Fidelity, Charles Schwab, Robinhood and other equity marketplaces for individual investors.
The ETF’s managers may use of up to 1.5 times leverage for additional return potential and has the ability to dynamically overweight or underweight specific countries, subsectors, or individual companies.
Poseidon Investment Management co-founders and managing directors Emily Paxhia and Morgan Paxhia, and managing director Tyler Greif manage and sub-advise the ETF.
Morgan Paxhia said the ETF is unique in how it approaches leverage.
“We can dial up or dial down our leverage exposure….It’s designed to be a longer term investment rather than a daily trading vehicle,” he said.
Emily Paxhia said the ETF could also help generate more investment capital for the U.S. cannabis sector which remains “capital deprived.”
The ETF has the potential to support the best operators in the space by providing a larger investment base and offer another way for individual investors to participate in the U.S. cannabis sector, she said.
Founded in 2013 and with nearly $200 million in assets currently under management, Poseidon Investment Management has historically managed private funds that are limited to accredited investors. Now the firm is branching out with a product available to a broad investor base including retail and institutional investors.
Poseidon’s ETF has initially been seeded with about $250,000 in investment capital. Early investments by the ETF include Tilray /zigman2/quotes/209129655/composite TLRY -5.09% and Canopy Growth /zigman2/quotes/200603886/composite CGC -1.80% , which are both traded on U.S. exchanges. Although both companies operate primarily in Canada, they have been taking aim at the U.S. market.
The portfolio will continue to build out its positions in U.S. plant-touching names via the total return swaps. The AdvisorShares website will post updates as capital flows into the ETF and the portfolio positions are established.
AdvisorShares CEO Noah Hamman said active ETFs in the cannabis space “continue to gain traction with investors seeking to access managers with proven success records in the fast-growing, dynamic industry.”
Other cannabis ETFS include the AdvisorShares Pure Cannabis ETF /zigman2/quotes/220307682/composite MSOS -2.12% , the AdvisorShares Pure Cannabis ETF /zigman2/quotes/211349815/composite YOLO -3.17% ; also the ETFMG Alternative Harvest ETF /zigman2/quotes/204332491/composite MJ -1.63% , the ETFMG U.S. Alternative Harvest ETF /zigman2/quotes/226726502/composite MJUS -1.66% , as well as leveraged ETFMG 2X Daily Alternative Harvest ETF /zigman2/quotes/227951978/composite MJXL -4.57% and the ETFMG 2X Daily Inverse Alternative Harvest ETF /zigman2/quotes/230060603/composite MJIN +1.91% .