Canada’s Anson Funds, once primarily known for wagering against stocks, is pivoting to make more long bets after last year’s market rout.

The US$1.5 billion fund began the year with a net long position of around 20 per cent compared with 9 per cent at the beginning of 2022, according to Moez Kassam, the firm’s co-founder and chief investment officer.

“At the end of last year everybody was negative on the market,” Kassam said in an interview. “So we’re like, you know what? The stocks have gone down, down, down — let’s cover our shorts.” 

Anson has a reputation for making money on bearish bets, but that may be starting to change. While the hedge fund previously bet against weed, for example, it went long marijuana stocks last year amid debates over whether to reclassify the drug in the U.S. 

“Everybody was talking about cannabis being the best thing; we were short,” said Kassam, 42, referring to Canadian cannabis stocks. “Then people said cannabis is the worst industry in the world now, so we’re very long” the U.S. pot sector."

Anson is also backing an activist investor fighting for control of First Capital Real Estate Investment Trust, and it made money from a pending merger between Shaw Communications and Rogers Communications.

Bad Timing

Marijuana stocks fell in December after the U.S. Congress failed to pass any pro-weed measures. Anson will maintain its positions in cannabis stocks — including U.S. marijuana dispensary Curaleaf Holdings Inc. — even as the firm anticipates a “volatile journey” for the industry, it told investors in a January letter.

While 21 states have legalized recreational cannabis, it remains illegal under federal law despite calls for reclassification from politicians, including President Joe Biden. In 2021, the U.S. House of Representatives passed the Secure and Fair Enforcement Banking Act, which protects banks that serve legitimate cannabis-related businesses. The Senate hasn’t approved the bill.

Cannabis stocks fell sharply last year, with the U.S. Marijuana Index plunging 70 per cent in 2022. Curaleaf dropped 52 per cent and is down more than 11 per cent year-to-date as of Thursday.

“We got the timing wrong, but we believe that the country is moving toward approving the Secure and Fair Enforcement Act,” Kassam said. Kassam also noted, “I don’t need to make money on something today, if I know in two, three years it’s going to go up 400 per cent, 500 per cent.”

Anson’s long-short fund returned 7.6 per cent last year, bringing gains to around 100 per cent in the past three years. 

The firm’s short selling has attracted scrutiny. Anson, with offices in Toronto and Dallas, is among dozens involved in the U.S. Department of Justice’s investigation into short selling among hedge funds and research firms. Anson was subpoenaed directly as part of the probe, Bloomberg reported in March, citing people familiar with the matter. 

A subpoena doesn’t necessarily mean charges will be filed. Kassam declined to comment on the matter.