Learn more about the Cannabis ETF
- With the Democrats in the
driving seat, legislative leaders have made clear that cannabis reform will be
a priority item for 2021
- The total addressable market for
the US continues to increase as additional states adopt cannabis reform
- In the quarterly rebalance, the fund added 14
securities to bring the total number of securities held to 34. The new
additions included seven companies operating in the ancillary services sector,
three securities in each of the medical and pharmaceutical sectors, and one
single holding in the CBD Wellness sector
April
|
12 Month*
|
-6.14%
|
106.66%
|
Past performance is no guarantee
of future performance.
Source: Bloomberg, HANetf
*12
Month figures based on 30.04.20-30.04.21
Performance Review
With global equity markets trying to find solid footing in a
rapidly changing environment, the risk-on characteristics of the cannabis
industry are dominating price action again. As uncertainty looms over the
near-term actions of central bankers, investors are finding it difficult to
value growth equities in a scenario of ever-changing interest rate assumptions.
By taking a step back and focusing on the fundamentals, the potential of the
cannabis industry remains clear. An opportunity for cash-strapped governments
to collect tax revenues on sales, the prospects of job creation in a high-wage
low skill industry, and a possible plethora of better healthcare opportunities
are all demanding attention around the globe. With the U.S. rollout improving
on a proliferation model laid out by Canada, we’re seeing multiple European
jurisdictions discuss and weigh the benefits of both medical and adult-use
cannabis.
So even though short-term performance of -6.1% might seem
concerning, it’s important to contextualize fund performance as +27%
year-to-date and over 80% since inception in January of 2020. The largest
detractor for the month was the ‘ancillary services’ sector, which has been the
best legal investment to capitalize on the U.S. proliferation in the past 24
months. Additionally, the Fund reduced single name risks in the portfolio via a
rebalance in February, bringing total investment to thirty-four. Increased
diversification for a broad-based exposure should help lower the volatility of
the portfolio moving forward.
Past performance is no guarantee of future performance.
Source of all data: Purpose Investments.
The Medical Cannabis and Wellness UCITS
ETF Performance Table
As of 30.04.2021
|
1M
|
3M
|
6M
|
YTD
|
12M
|
SI
|
The Medical Cannabis and Wellness UCITS ETF (Acc)
|
-6.14%
|
10.62%
|
76.76%
|
27.30%
|
106.66%
|
80.72%
|
Medical Cannabis and Wellness Equity Index (NTR)
|
-6.08%
|
10.67%
|
77.29%
|
27.45%
|
107.55%
|
80.61%
|
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. Source: Bloomberg /
HANetf. Data as of 30/04/21
Industry News
British American Tobacco
(BAT) has entered the cannabis arena following the footsteps of rival Altria
Group. The company chose Canada’s Organigram (OGI) as a partner by investing US$175M into a strategic collaboration with a focus on
research and product development. Stated in their intentions, the company is
less focused on the Canadian market but rather laying the groundwork to
capitalize on the growing global marketplace for cannabinoid-based products and
delivery systems. The transaction displays further acceptance of cannabis as an
industry with wider and deeper potential than the US and Canada alone.
U.S. cannabis giant
Curaleaf (CURA) has taken its opportunity and jumped into the European market
with the acquisition of Europe’s leading
medical marijuana company, EMMAC Life Sciences in a transaction worth up to
US$343M. The now closed transaction provides Curaleaf a comprehensive European
supply chain serving eight European markets including United Kingdom, Germany,
Italy, Spain and Portugal. After 3+ years of focusing capital allocation to the
U.S., the deal marks a significant turning point as cannabis companies look to
develop roots in Europe as the next frontier.
After adding hemp
derived-CBD to the list of permissible substances of use in cosmetic and
skincare in February, the EU’s key market regulator for trade has now approved
hemp-derived CBG in cosmetic and skin care lines as well, providing another
victory to the hemp industry and further normalizing the use of cannabis/hemp
derived materials into everyday products. Product development will be key in
any future success of cannabinoids as a manufacturing ingredient, and these
steps pave the way for the development of this market vertical.
GW Pharma achieved a
monumental milestone for the pharmaceutical cannabinoids industry as it was
acquired by a mainstream pharmaceutical, Jazz in February. However, they
company has further helped validate the industry by winning the Queen’s Award
for Enterprise 2021 in the Innovation category. A prestigious honour as the
company has spent over 20 years and GBP1.3B developing its revolutionary drugs,
furthering the mainstream acceptance of cannabinoids for medicinal purposes.
Outlook
In the near
term, markets are still trying to decipher how central bank policies can change
in the near future as we look towards the end of the pandemic. With global
vaccine supply improving and North America and Europe vaccinating quickly and
looking for a broader re-open, investors are concerned of impending inflation
and therefore another possible taper tantrum. Volatility remains elevated but
it is important to keep the long-term picture in mind when it comes to cannabis
proliferation. There continue to be growing possibilities for the industry as
further work is put into the product and its regulation. A recent balance sheet
strengthening will help put in a valuation floor for the industry and
regulatory reforms in the near term will provide upwards catalysts.
The
Cannabis ETF Fund page