Horizons ETF Management Canada Inc. recently filed preliminary documents with Canadian securities regulators last week in an effort to launch three new marijuana-focused ETFs on the TSX.
Back in April of 2017, Horizons made ETF history with the launch of its Marijuana Life Sciences ETF (TSX:HMMJ) (OTC:HMLSF). Now, with HMMJ attracting nearly $1 billion CAD in assets under management, Horizons wants to offer investors more choices when it comes to ETFs with exposure to the green rush.
Looking for leverage?
Whereas most exchange traded funds, or ETFs, are targeting risk averse self-directed retail investors, leveraged ETFs aim to deliver 2x and 3x the returns offered by their underlying index.
For example, HMMJ tracks the Solactive North American Marijuana Index. If it went up 1.5% today, HMMJ investors would expect to see roughly, if not exactly, 1.5% returns on their investment. If there were a 2x leveraged version, investors would expect to see roughly, if not exactly, 3% returns on their investment.
It goes without saying however, that a -1.5% day in the underlying index would lead to a -3% day if it were 2x leveraged. This double-edged sword phenomenon is what draws and detracts investors attention from the wild world of leveraged ETFs.
First (and only) mover advantage
Not only was Horizons the first ETF company to launch a cannabis-focused fund, but its the only Canadian ETF issuer to even offer leveraged ETFs. With over 20 leveraged ETFs already offered to investors, Horizons offers investors the chance of doubling their wins (or losses) in oil, equity indices, and more.
Rather than making a leveraged ETF that uses the same underlying index as HMMJ, Horizons will be using a new Solactive Canadian Marijuana Companies Index, The Globe and Mail reports.
As the Canadian senate just passed historic Bill C-45 to legalize and regulate recreational marijuana nationwide, it should come as no surprise that Canadian marijuana investors want a pure-play option on the country’s new industry.
Since there are both bulls and bears out there when it comes to cannabis, Horizons will be offering ETFs for both of them.
3 new marijuana ETFs
The new exchange traded funds that Horizons will be launching include:
- BetaPro Canadian Marijuana Companies 2x Daily Bull ETF (TSX:HMJU) seeks to give investors daily investment results that correspond to 2x the daily performance of the Solactive Canadian Marijuana Companies Index;
- BetaPro Canadian Marijuana Companies -2x Daily Bear ETF (TSX:HMJD) seeks to give investors daily investment results that correspond to -2x the daily performance of the Solactive Canadian Marijuana Companies Index;
- BetaPro Canadian Marijuana Companies Inverse ETF (TSX:HMJI) seeks to give investors daily investment results that correspond to -1x the daily performance of the Solactive Canadian Marijuana Companies Index.
The BetaPro Canadian Marijuana Companies -2x Daily Bear ETF and the BetaPro Canadian Marijuana Companies Inverse ETF are both for the bears, offering investors the chance to bet on falling pot stock prices with ease.
Steve Hawkins, President and Co-CEO at Horizons ETFs, said that “Given the underlying volatility of this sector, we believe there is demand from Canadian investors to take on more risk.”
With many Canadian cannabis stock valuations soaring to new heights following the approval of C-45, the bearish new ETFs may be in high demand…
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