The global cannabis market will double from $29 billion in 2021 to $61 billion by 2026, according to BDS Analytics, with most growth coming from the U.S. and Canada. While public cannabis companies have struggled, some analysts believe the industry could be reaching an inflection point in terms of profitability and regulatory momentum.
Roundhill Investments recently launched the actively-managed Roundhill Cannabis ETF (WEED) to selectively invest in the market. Rather than weighing its portfolio by market capitalization, the fund managers will have the flexibility to construct a global portfolio based on the risk characteristics of the entire cannabis market.
Let’s take a closer look at the new actively-managed ETF and why investors may want to consider it.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
What's in the Portfolio?
The Roundhill Cannabis ETF provides broad exposure to the cannabis industry, including cannabis producers and distributors, cannabis-related technology companies, and additional ancillary businesses. In addition to U.S. multi-state operators (MSOs) and ancillary businesses, the fund will provide exposure to foreign cannabis companies.
The fund’s current portfolio consists of 24 companies, including:
| Company Name | Ticker Symbol | Portfolio Weight |
|---|---|---|
| Curaleaf Holdings Inc. | CURLF | 13.10% |
| Green Thumb Industries Inc. | GTBIF | 8.99% |
| Verano Holdings Corp. | VRNOF | 8.14% |
| Trulieve Cannabis Corp. | TCNNF | 7.85% |
| Canopy Growth Corp. | CGC | 5.83% |
| Cresco Labs Inc. | CRLBF | 5.03% |
In particular, the portfolio consists of about 60% U.S. MSOs and 20% Canadian licensed producers (LPs). Another 15% of the portfolio consists of ancillary businesses and technology companies, such as Leafly, WM Technology (Weedmaps), and Innovative Industrial Properties. The result is a robust all-around portfolio for cannabis exposure.
How Does It Compare With Others?
There are seven cannabis ETFs targeting various subsets of the market, but Roundhill’s Cannabis ETF is the only actively managed option. In addition, the Roundhill Cannabis ETF has a net expense ratio of just 0.59% (0.16% is waived until at least April 2023), making it among the lowest-cost ETFs in the group despite being actively managed.
Here’s how the different funds compare:
| Name | Ticker | Total Assets | Expense Ratio | YTD Change |
|---|---|---|---|---|
| AdvisorShares Pure US Cannabis ETF | MSOS | $734 million | 0.73% | -45.25% |
| ETFMG Alternative Harvest ETF | MJ | $591 million | 0.75% | -27.35% |
| AdvisorShares Pure Cannabis ETF | YOLO | $112 million | 0.76% | -41.54% |
| Global X Cannabis ETF | POTX | $73 million | 0.51% | -32.12% |
| Amplify Seymour Cannabis ETF | CNBS | $58 million | 0.75% | -36.45% |
| Cannabis ETF | THCX | $49 million | 0.75% | -34.78% |
| Cambria Cannabis ETF | TOKE | $19 million | 0.42% | -22.22% |
Data as of May 5, 2022
The Bottom Line
The cannabis industry continues to post strong growth. While public companies have struggled in recent years, the industry may be reaching an inflection point in terms of profitability and legalization. Investors interested in building exposure to the industry may want to consider the Roundhill Cannabis ETF given its active approach to the market.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.