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YOLO? US Investors Are Getting Another Cannabis ETF

ETF Professor

U.S. investors craving cannabis exposure via the exchange traded funds have, since late 2017, one choice: the ETFMG Alternative Harvest ETF (NYSE: MJ).

Another choice in the U.S.-listed cannabis ETF space is coming Thursday, April 18, with the debut of the AdvisorShares Pure Cannabis ETF (NYSE: YOLO).

What To Know

AdvisorShares' efforts to launch YOLO were highlighted in a Securities and Exchange Commission filing out earlier this year.

“The Fund is an actively managed exchange-traded fund that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets (plus any borrowings for investment purposes) in securities of companies that derive at least 50% of their net revenue from the marijuana and hemp industry or that are registered with the DEA specifically for the purpose of handling marijuana for lawful research and development of cannabis or cannabinoid-related products and in derivatives or other instruments that have economic characteristics similar to such securities,” according to the SEC filing.

Why It's Important

YOLO will be the first actively managed cannabis ETF to trade in the U.S. Maryland-based AdvisorShares also sponsors the AdvisorShares Vice ETF (NASDAQ: ACT), which is also actively managed and can allocate about a quarter of its weight to cannabis equities. Dan Ahrens, ACT's portfolio manager, will also serve as YOLO's portfolio manager.

YOLO “allocates across a universe of primarily U.S. and Canadian cannabis companies engaging in legal business which span different industries, including those specializing in consumer products,” according to AdvisorShares.

YOLO will typically hold less than 40 U.S. and Canadian mid- and small-cap cannabis companies. The fund will also be the first U.S.-listed ETF to have the word “cannabis” in its title.

What's Next

The aforementioned MJ ETF has over $1.2 billion in assets under management and U.S. investors have been clamoring for more cannabis ETFs. YOLO could benefit from that demand and the new AdvisorShares ETF has an advantage, albeit modest, over the established MJ.

YOLO will charge 0.74 percent per year, or $74 on a $10,000 investment, an annual fee that is one basis point lower than the 0.75 percent charged by MJ.

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