I have been following the publicly-traded cannabis stocks for over five years now, and one of the most interesting developments has been the recent introduction of mutual funds and exchange-traded funds (ETFs) focusing on the sector. Many investors prefer buying a fund over picking individual stocks, as a fund offers diversification and allows the investor to save the time and effort required to select individual securities. These benefits come with the cost of the management fee, which is not inconsequential and can eat into the returns over time.
While I like the concept of an investment fund targeting cannabis stocks, the ones that have been created thus far are not well constructed for the most part. Only two funds have achieved critical mass, and both of them are heavily exposed to Canadian licensed producers with limited exposure to the U.S. cannabis industry. Only one fund is traded on a U.S. exchange.
While many credit Horizons for being the first to market with its ETF listed on the Toronto Stock Exchange, it was actually preceded by a small mutual fund in the United States. I will now review each of the mutual funds, ETFs and other investment vehicles in the order of their coming to market.
American Growth Fund Series II
Distributed by World Capital Brokerage in Denver, the American Growth Fund Series II was the first