Medical Cannabis Monthly Report | April

20 April 2022

Medical Cannabis ETF Monthly Report: Key Takeaways

The Marijuana Opportunity Reinvestment and Expungement (MORE) Act [1], which decriminalizes cannabis at a federal level, was passed in the House of Representatives in the US along party lines. The legislation which has once before passed the House is expected to move on to the Senate. The Senate however has its own version of a decriminalization bill in the Cannabis Administrative and Opportunity (CAO) Act, spearheaded by Senate Majority Leader Chuck Schumer. The CAO Act is expected to be introduced in April following several months of public comments and revisions. There is ample movement in Congress to finally table passable cannabis legislation and with competing bills on the table, there is increased hope that compromise can be reached between and within political parties. [2]

As European cannabis consumption picks up, cannabis exports from Portugal increased drastically from 4.5 tonnes in 2020 to 30 tonnes in 2021. [3] Europe is focusing on the highest EU-GMP standards of cannabis products and also on keeping supply chains regionally tight. We observe that a lot of the anticipated growth in Europe is expected to come locally as adoption increases and European medical and adult-use markets come online.

The long-awaited Public List of validated UK CBD products has been published by the Food Standards Agency. About 3500 CBD products are still permitted for sale in the UK as the FSA attempts to implement standards for the industry with consumer safety in mind. [4] 

Fund holding Charlotte’s Web (CWEB) has signed an exclusive product distribution agreement in the United Kingdom with Savage Cabbage Ltd, an established UK CBD brand. CWEB has secured distribution in the UK to capitalize on their strong brand and story and create a foothold in the emerging UK market. [5]

Subsidiary GW Pharmaceuticals of fund holding Jazz Pharmaceutical (JAZZ), is looking to build $100M medical cannabis site in Kent. The facility is expected to be 60,000 sq ft in size and expected to bring over 100 new highly skilled job to the region once open in 2024. The site expansion is expected to boost the company’s revenue from $3B to $5B in 2025. [6]



Macro Outlook

The first quarter of the year has been marked by a risk off environment which is a function of persistent inflation, geopolitical instability, and increasingly hawkish central bankers. Of these factors, the cannabis industry is mostly insulated to geopolitical landscape of Eastern Europe. However, the other two factors have leant heavily on the cannabis industry; valuations are at lows last experienced before de-criminalization in the USA was even a topic in politics with the Republicans in charge of the country. [7]

Inflation hurts most consumer-centric industries as purchasing power of the consumer is diluted. The industry on the medical cannabis as well as the CBD wellness side is still dependant on discretionary income which is threatened by the rise in prices of consumer goods. The cannabis industry received tail-winds from the pandemic as adoption increased in a time of higher savings and demand was pulled up by about a year. A soft-landing was mostly expected in cannabis demand however inflation threatens a steeper drop off in sales than many had earlier expected. Our research has found that many medical cannabis, CBD wellness, and some ancillary companies have experienced flat quarters of sales, which is almost alien to the industry accustomed to consistent high growth.

Hawkish central bankers are well on their way to make capital more expensive which negatively impacts growth industries such as cannabis. Tightening monetary conditions are not conducive to growth as future earnings become discounted and growth capital becomes more expensive to implement. With this, the first quarter was negative for fund performance with CBDX down 7.8% for the quarter, regaining some of the lost ground as the max drawdown for the fund was in excess of -16% in the middle of March. Interestingly enough, the Fund followed a very high correlation to the NASDAQ in the first quarter somewhat validating the above two points on valuations. [8] Please note that all figures are showing net data. 

Like all high growth industries, cannabis was a target of risk-off trading in the first quarter. However, there has been alleviation as investors climb a ‘wall of worry’ and the market better prices in a European war, hawkish bankers, Chinese property bubbles, and an overall slowing economy. The fundamentals of the industry are still very strong with a continuous flurry of new geographies expanding the potential market size. The US, Malta, Germany are all examples of upcoming proliferations and the opportunity of our invested companies to increase their top and bottom lines. 



The Medical Cannabis ETF Performance Table (As of 31.03.2022)









The Medical Cannabis and Wellness UCITS ETF (Acc)









Medical Cannabis and Wellness Equity Index (NTR)









Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data. 


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