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Global X Files for Marijuana ETF

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In order to capitalize on the ongoing boom in marijuana industry, Global X is looking to join this uncrowded space. This can easily be depicted from the recent filing of the Global X Marijuana ETF with the Securities and Exchange Commission.

While key information, such as expense ratio, holdings breakdown, ticker or listing exchange — was not available in the initial release, other important points got included in the filing. If approved, the proposed fund will provide another option to bet on the cannabis stocks.

Here’s an insight into the filed ETF:

An Insight Into the Proposed ETF

The projected marijuana ETF seeks to invest in the stocks and depositary receipts of the companies that derive at least half of their revenues, operating income or assets from the marijuana industry, which is widely defined in the standards set forth by the fund’s prospectus as a “value chain” (read: Marijuana Stocks & ETFs: What Investors Need to Know).

These companies include those involved in the following areas of the marijuana industry value chain: “(i) the legal production, growth and distribution of marijuana (including industrial hemp), as well as extracts, derivative products or synthetic versions thereof; (ii) financial services related to companies involved in the production, growth and distribution of marijuana, including insurance offerings, property leasing, and investments; (iii) pharmaceutical applications of marijuana; (iv) cannabidiol (better known as CBD) and cannabis oil products, edibles, topicals, drinks and other products; and (v) products that may be used to consume,” according to the filing.

What’s Driving This Move to a Niche Space?

The enthusiasm in the cannabis industry was brought in by Canada’s legalization of recreational marijuana that paved the way for its widespread legality. Additionally, a number of states in the United States have also joined the race of marijuana legalization. The White House, Congress and U.S. regulators have also softened their stance on the drug’s legalization. All these developments have injected a strong wave of optimism into the emerging marijuana industry, spurring deal activities and pushing up marijuana stocks higher.

This tremendous success of the pot industry is showing no signs of slowdown as several alcoholic beverage companies are creating huge opportunities by investing or partnering with cannabis producers (read: 5 ETFs That More Than Doubled S&P 500 This Year).

Per an analyst at Cowen, the U.S. legal cannabis industry is expected to reach $80 billion in sales by 2030, surpassing the carbonated soft drink market in 2017. An analyst at Haywood Securities foresees exponential growth in the cannabis stocks with the U.S. cannabis market envisioned to be worth between $15.9 million and $21.7 billion by 2022.

ETF Competition & Bottom Line

There is a huge appetite for this fund amid a couple of choices available in the space. ETFMG Alternative Harvest ETF (MJ - Free Report) — the first ETF targeting the cannabis/marijuana industry — has accumulated $1.2 billion in AUM and charges 75 bps in annual fees.

Another ETF — AdvisorShares Pure Cannabis ETF (YOLO - Free Report) — is the actively managed fund, seeking long-term capital appreciation by investing in both domestic and foreign cannabis equity securities. It has garnered $57.5 million in its asset base since its inception in April and charges 74 bps in fees per year. Many other ETF providers including Amplify, Innovation Shares and Cambria are also looking to launch funds (read: Marijuana ETFs Head-to-Head).

On approval, this proposed fund could give investors another pure play in the cannabis industry. It will not be difficult for the ETF to buoy a sufficient investor interest in the ongoing green rush and generate decent total returns net of expense ratio.

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