HANETF launches its latest Exchange Traded Fund today – a Bitcoin one; this follows the successful launch of its cannabis ETF earlier this year.
The London Stock Exchange-listed ‘Medical Cannabis and Wellness’ fund is currently carrying assets valued at around $10m, rising by over 15% in May.
It was the first European cannabis ETF when launched in January, at a time when cannabis stocks were rock bottom after 2019’s annus horribilis.
Experienced business partners Hector McNeil and Nik Bienkowski take a long-term view with a keen eye for global market megatrends.
Game-Changer For Cannabis
“Its not just the first ETF it is also the first cannabis fund, generally. The cannabis industry is young, dynamic and fast-moving and so it’s a bit of a game-changer for people wanting to get into the cannabis business,” says Mr McNeil.
The business partners have been involved in European Exchange Traded Funds for some time.
HANetf – standing for Hector and Nik – is their fourth ETF iteration. Launched in 2018 HANetf now has assets under management of over $300m, whilst the global ETF market has grown phenomenally over the last 20 years, from $200bn to $6trillion.
“You could say we are ETF serial entrepreneurs; this is our fourth.
“It’s the fastest growing financial services area on the planet,” says Mr McNeil.
‘ETFs Are Very Democratic’
So what are the benefits of cannabis ETFs – or one of the other ETFs – for those with an interest in the markets?
Mr McNeil explained: “They’re a fund that trades like a share, at a relatively cheaper cost. In the past to get that type of portfolio would have been way too expensive, you would have had to pay a private banker or a wealth manger to do it for you.”
HANetf charges fees of 0.8% compared to a fund mangers usual fees of around 1.5%.
“The cannabis ETF is basically an index of medical cannabis companies and instead of buying individual company stocks you can buy an ETF that holds all of those companies in one trade,” added Mr McNeil.
He went on to say that an ETF is one of the most ‘democratic wrappers you can get’.
“This is the first time my mum in Middlesbrough can buy cannabis stocks. She can buy one share for £7 to £8. Whereas the big guys can buy $2 to $3m, and still pay the same fees.”
No Canadian LP Exposure
Cannabis ETFs are popular in North America where cannabis is legal for recreational use in Canada and around a dozen US states, whilst medical cannabis is also available in around 30 US states.
There are some seven ETFs in North America and one of the leading funds, the New York Stock Exchange-listed Alternative Harvest ETF, is heavily-weighted with stock from Canada’s Licensed Producers (LP).
Most of these saw their share prices fall by over 50% in 2019 and, while a rebound is underway, there are still concerns over their performance against hyped expectations.
The Medical Cannabis and Wellness ETF – market ticker CBDX – has absolutely no exposure to any of these Canadian LPs, whilst this may be viewed as a smart, strategic move, the underlying reason is far more prosaic.
The Proceeds of Crime Act, literally interpreted in the UK means revenues generated from overseas activities which are deemed illegal in this country, are viewed as a crime.
A Strong US Focus
In fact all of the stocks in the CBDX Top 10 are US-listed, and, with the exception of UK-based maker of Epidiolex, GW Pharmaceuticals, all are also US domiciled.
They include life science businesses such as Corbus Pharmaceuticals Holdings which is trialing an anti-inflammatory cannabis drug Lenabasum, and Cara Therapeutics.
Ancillary plays include horticultural firm Scotts Miracle Grow and lighting and hydroponics firm Grow Generation.
Well-known CBD brand Charlotte’s Web features, too, as does real estate business Innovative Industrial Properties.
Canadian firm Purpose Investment worked with HANetf in selecting the key stocks for CBDX over a period of 18 months.
With the ETF being traded across Europe the partners have had to ensure it is legal across all EU states and this has required the development of a comprehensive layer of legal analysis.
The fund re-balances its portfolio every quarter, this ensures exposure to any one stock is limited to no more than 10%.
No Recreational Cannabis Stocks
In fact, shortly after its launch the fund had to drop Canadian stock Namaste Technologies as its investee firm Choklat – an Alberta-based craft chocolate maker – had secured a licence to produce a line of cannabis-infused chocolate bars and drinks.
HANetf’s reliance on intellectual input of Purpose sees it classified as white-label fund manager, and this operating method is deployed across its other six ETFs.
These operate in a number of thematic sectors including emerging markets and cloud technology. “We focus on the global megatrends,” says Mr McNeil.
The CBDX is also listed on Xetra market in Germany and the SIX market in Switzerland, it is domiciled in Ireland from where it can be passported across Europe, inuring it to any no-deal Brexit shockwaves.
The January launch of the CBDX saw a surprising number of retail investors participate with and an average trade size of a ‘couple of grand’, said Mr McNeil.
He continued: “Over the first few weeks it was attracting a million dollars every two days, before Covid-19 struck and the global markets nose-dived.
“We are starting to see some good values coming back and increased interest from the professional end of the market; private banking, wealth management and institutional investors.
“The big cannabis bubble has popped, bit it’s now on it way back and the valuations are a bit more realistic.”
Slow Rugby Defences And Illiquid ETFs
Purpose and HANetf provide regular, unique content for fund members and recently launched a webinar programme to help educate investors on the emerging cannabis sector.
It will also be looking to include European cannabis stocks, as the industry progresses. “The whole global market is on our radar,” says Mr McNeil.
However, there needs to be liquidity in the stocks and the general rule of thumb is a daily trade for each individual stock of around $200,000.
“I’m a big rugby fan,” says Mr McNeil. “They say in rugby that your defence is only as good as you slowest man. It’s the same with an ETF; your overall liquidity is dependent on your least liquid stock.”
A native of Yarm on Teesside, Hector left Hull University to work in the London Stock Exchange in 1989 and launched his first ETF 20 years ago.
He added: “We’ve got seven ETFs, now and we’re launching another on Wednesday (June 17) – the first global physical Bitcoin – which will go well with the others.
“We’ll have gold, cannabis and Bitcoin, so all the things you want in life!” He adds, playfully.