Medical Marijuana ETF To Debut Soon

It is often said in the exchange traded funds (ETFs) business that “all of the good ideas are taken.” Well, maybe not. The legal marijuana industry is booming in the U.S. and, as of now, there is not a dedicated ETF that investors can tap to play that trend.

That could change as ETF Managers Group (ETFMG), a New Jersey-based company that helps ETF sponsors bring their products to market, has filed plans for the Emerging AgroSphere ETF. Assuming the Emerging AgroSphere ETF comes to life, it will track an index created by BE Asset Management.

That index "tracks the performance of the exchange-listed common stock (or corresponding American Depositary Receipts (“ADRs”) or Global Depositary Receipts (“GDRs”)) of companies across the globe that (i) engage in lawful medical research intended to lead to the production of government-approved prescription drugs which utilize natural or synthetic versions of the cannabidiol CBD and other cannabis-based extracts, (ii) are involved in the production or sale of products which are legal derivatives of industrial hemp, or (iii) are involved in the supply chain of either category of company. The Fund will not invest in any companies that are focused on serving the non-medical marijuana market in the United States, Canada or any other country unless and until such time as the production and sale of non-medical marijuana becomes legal in the United States, Canada or such other country, respectively," according to a filing with the Securities and Exchange Commission (SEC).

Interested investors should note that Emerging AgroSphere ETF, again assuming it hits the market, will focus on medical marijuana. That means the ETF will not be a play on the highly lucrative recreational marijuana markets that are popping up across the U.S. Colorado is generating handsome tax revenue from legal recreational marijuana and the same could hold true for other states in the future. For example, during the 2016 elections, Californians voted to legalize marijuana for recreational use, and the largest U.S. state by population will see its first recreational pot stores open in 2018.

"Currently, 28 states plus the District of Columbia have laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis and consumer use of cannabis in connection with medical treatment," according to the ETFMG filing with the SEC. "Even in those states in which the use of medical marijuana has been legalized, its sale and use remains a violation of federal law."

The filing did not contain a proposed ticker or expense ratio for the marijuana ETF. Those are often signs that a new ETF is close to coming to market, so it could be a while before investors can access the Emerging AgroSphere ETF.

By Todd Shriber

Source: http://www.investopedia.com/news/maybe-medical-marijuana-etf/