"Thirty seconds for the market to open," a Toronto Stock Exchange representative said as the crowd started to clap, cheer and celebrate. It was the anniversary of the Evolve Marijuana ETF (TSX:SEED)(OTC:EVVLF) and they were celebrating being the best-performing equity ETF on the TSX in the last year.
But there was more than one reason to celebrate for Evolve Funds Group, as the company on Wednesday launched the world’s first ETF investing in the U.S. cannabis industry—the Evolve U.S. Marijuana ETF. The fund is now trading on the NEO exchange under the ticker "USMJ."
After joining Evolve Funds Group to ring the bell at the TSX on Thursday, Benzinga sat down with the company’s chief investment officer, Elliot Johnson, to discuss the ETF.
Evolve And Cannabis
Evolve launched the first actively managed cannabis ETF roughly 14 months ago. To date, it’s the only marijuana-focused ETF that qualifies for a TSX listing because it doesn't invest in U.S. pot companies.
Evolve followed up on Wednesday launched its U.S.-centric fund.
“We think active management is particularly important in the cannabis sector because it is so driven by news, changes, corporate M&A," Johnson told Benzinga. "So you really need a team that is focused on this to manage an ETF like this, because the dispersion in returns between those companies that succeed and those that are not succeeding in any point of time is very wide."
Part of Evolve’s active management approach includes re-thinking its portfolio whenever it’s needed.
“We don’t call it rebalancing. We will make tactical shifts in the portfolio on any given day... Rebalancing on a schedule is not appropriate for this space, in our view,” Johnson said.
This doesn't mean this is a high-frequency trading ETF or portfolio, but Evolve’s team will take action when markets warrant it, rather than waiting for specific dates to do so. Also important to these ETFs is liquidity, Johnson explained, assuring the company wouldn't invest in positions that aren't easy to liquidate at any given time, if necessary.
Five of USMJ’s top holdings include:
- Curaleaf Holdings Inc (OTC: CURLF)
- Green Thumb Industries Inc (OTC: GTBIF)
- Cresco Labs Inc (OTC: CRLBF)
- Canopy Growth Corp (NYSE: CGC)
- Harvest Health & Recreation Inc (OTC: HRVSF)
All stocks need a market cap of at least $100 million to be considered of the USMJ ETF. The portfolio includes 38 cannabis companies operating in the U.S.
"The thesis of this product is to provide exposure to the U.S. cannabis market, which is very different from the Canadian market as a result of how legalization is happening, on a state-by-state level, instead of federally," Johnson said.
Photo courtesy of TMX, parent company to the TSX.
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