Medical Cannabis Monthly Report | July

28 July 2022

Medical Cannabis ETF Monthly Report: Key Takeaways

The Albanian government has drafted and proposed new legislation which would legalize the cultivation and medical cannabis and industrial hemp in the country, becoming the latest European nation to do so. However, the government is only looking at cannabis for exports and patients within the country will not have access to medical cannabis treatment and local companies will not benefit from the use of industrial hemp. Albania is known as the drug-trafficking capital of Europe, and it will be interesting to see how incremental reform can help the government curb the illicit trade. [1]

The Thai medical cannabis home cultivation program has gained significant traction in the country with over 120,000 individuals registering with the regulator to cultivate hemp and cannabis at home. The government is still discouraging the recreational use of cannabis with hefty fines for public smoking or for sales to protected groups. The emphasis is around industrial hemp and cannabis for health aids and traditional medicines. The country is prohibiting direct interests from foreign groups until 2024. [2]

The US Department of Energy has provided a grant of $3.74M to Texas A&M University as researchers attempt to 3D print buildings using hempcrete. A versatile building substance derived of hemp, hempcrete has desirable characteristics including high insulation value, high fire resistance, sound dampening, and insect and mold resistance. The cherry on top is that hemp is net carbon negative, helping with carbon sequestration in building materials. The DOE is providing a total of $39M in grants for 18 projects, with this being the only hemp related initiative in the bunch. Institutional encouragement of hemp outside of CBD is a highly positive sign for a struggling industry. [3]

Eighteen months after adult-use cannabis legalization, Illinois has released a second round of grants funded by cannabis taxation proceeds. After releasing $31.5M similarly in 2021, the state has announced plans to award another $45M in grants across 148 programs to support community reinvestment ideas. Illinois collected almost $400M in tax dollars associated with cannabis legalization in 2021 alone. Tax collection and re-deployment of these proceeds are characteristics being closely watched by many programs on the precipice of cannabis legalization. [4]

After the SAFE Act was rejected/ignored for a sixth time in the Senate in late June, another reform effort has been introduced into US Congress by the name of the CLIMB Act. The Capital Lending and Investment for Marijuana Businesses (CLIMB) intends to make it easier for the cannabis industry to access banking and provide safe harbor language for national stock exchanges and market participants for servicing cannabis related businesses. The draft bill is being proposed by a bipartisan team of Democrat and Republican Representatives. Although this new draft still may not have the magic formula to find approval, it shows that cannabis reform is truly a bipartisan issue with constantly increasing momentum. [5]

Please note that all performance figures are showing net data. Past performance is not indicative of future performance and when you invest in ETFs, your capital is at risk.


Macro Outlook

The first half of the year has come to a difficult end and as investors recap these painful six months, many macro factors make a lot of sense in hindsight. Unlimited liquidity had defined the last two years in the era of easy money, when anything and everything posted positive returns with a significant portion of that return coming from multiple expansion rather than earnings growth. Two years of excessive returns had sent equities and all risk assets flying, and the term ‘everything bubble’ was coined. Like all bubbles, this one too has come to an end with the S&P500 off 20% YTD and NASDAQ off almost 30%.[7] Growth equities have been particularly impacted through this drawdown and cannabis has been no different with the Medical Cannabis and Wellness Equity Index, down -42% for the year.[8] And although this number seems much larger versus broad indices, the universe fares in line with the context of high growth spec-tech.

Cannabis as an industry has strong fundamentals but is still prone to be a very risky industry. Pharmaceutical cannabinoids are still in early phase of development and are challenging Goliath in the form of big pharma to displace entrenched drugs. CBD wellness is working through a phase of re-education with high customer costs and regulatory limits around ingestion. Medical cannabis is performing well in many jurisdictions but long trial programs, lack of mass data, and general regulatory ineptitude is leading to slow roll-outs.[9] And, the ancillary services business which holds it all together is affected by all aforementioned factors. Therefore, in the pecking order of money flows, cannabis remains quite low for investors as they assess investment in multitudes of industries which have gone on sale over the past few months.

The elephant in the room remains US federal reform which has presented itself in many incarnations without being able to stick a smooth landing.[10] A constant pipeline of new legislative initiatives offers hope to investors but the lack of inertia with any of these proposed bills has investors puzzled and second-guessing the sector thesis. Just in early July, high profile Senators like Warren, Sanders, Booker and Wyden have all called on the Biden administration to de-schedule cannabis as a starting point to incremental reform.[11] This is separate to any momentum that the SAFE Act is carrying through the Senate or the newly unveiled CLIMB Act which intends to create safe harbor for businesses working with cannabis.[12] There are plenty of bills which could move cannabis reform forward in the US, and all eyes are on the Democrats with only 120 days left until mid-term elections, where they are set to lose control of Congress. There are suggestions of cannabis reform as part of a vote gathering mechanism coming into the mid-terms. Potentially some small incremental reform could play out before then. [13]

The second and third quarter of this year will present challenges as the inflationary narrative will not spare the cannabis industry either. Cannabis is not immune to rising prices and with very few insurance providers offering claims for medical cannabis, there could be a potential slow-down as consumers re-asses their wallets. Many cannabis companies are tightening their belts as they anticipate a slowdown in consumer spending. The good news is that accessible jurisdictions continue to increase across the US and the European continent.[14] Further de-criminalization initiatives are taking place in Albania, Bosnia and Lithuania. Italian and German legislators are discussing legalization of the plant.[15] The UK regulator has finally presented a list of all CBD products available for sale in the country as well.[16] There are many incremental positives which make us hopeful for the restoration of the industry as both economic conditions and stock valuations improve.

The challenges within the cannabis space are real and unabashed as is evident in the valuation compression experienced in the space over the past 18 months. The space is riding on the momentum of US cannabis reform, which has come along at a snail’s pace. Investors are setting goal posts against the midterm elections of 2022, hoping for Hail-Mary reform to get the industry going again, both in terms of increasing sales, as well as profitability and therefore valuations. We believe that the CBDX Fund is positioned to maximize returns based on US reform but at the same time also has exposure to the strong fundamentals of Europe and the ancillary industries which continue on their path of momentum.

Please note that all performance figures are showing net data. Past performance is not a guarantee of future performance.


The Medical Cannabis and Wellness UCITS ETF Performance Table (As of 30.06.2022)









The Medical Cannabis and Wellness UCITS ETF (Acc)









Medical Cannabis and Wellness Equity Index (NTR)









Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30.06.2022. 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. 

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