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May 22, 2019

Horizons unveils higher-risk leveraged, inverse cannabis ETFs

Horizons' Mark Noble: New cannabis ETF only for those ready for high risk

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Horizons ETF Management Inc. introduced the world’s first leveraged and inverse cannabis exchange traded funds Wednesday, in a bet that the standard volatility of pot stocks isn’t enough for some investors.

Horizons is the creator of the first marijuana ETF, the Horizons Marijuana Life Sciences Index ETF.

The firm said its new funds – the BetaPro Marijuana Companies 2x Daily Bull ETF (HMJU.TO) and BetaPro Marijuana Companies Inverse ETF (HMJI.TO) – will provide leveraged and inverse exposure, respectively, to the North American MOC Marijuana Index and are more appropriate for “sophisticated investors.”

"HMJU and HMJI are higher-risk ETFs that will give Canadian marijuana equity investors the opportunity to potentially generate returns in both positive and negative markets in the marijuana sector," Steve Hawkins, president and CEO of Horizons ETFs, said in a release.

"Until now, generating leveraged and inverse exposure to marijuana equities has been difficult and typically requires using a margin account and securities lending facilities. HMJU and HMJI streamline this process and allow investors to get leverage and inverse access through diversified ETF exposure to the sector, rather than taking on individual stock risk or having to use a margin account."

But the high borrowing costs for shorting marijuana stocks could erode any potential returns from Horizons’ inverse cannabis ETF, according to Patrick Horan, principal portfolio manager with Agilith Capital.

“This is a product that is purely speculative,” Horan told BNN Bloomberg Wednesday. “It’s sort of like a hit and run. You want to use it for a couple of days and get out. I don’t really call that investing.”

Horizons’ HMJU and HMJI ETFs will begin trading Friday on the Toronto Stock Exchange.

Cannabis Canada is BNN Bloomberg’s in-depth series exploring the stunning formation of the entirely new – and controversial – Canadian recreational marijuana industry. Read more from the special series here and subscribe to our Cannabis Canada newsletter to have the latest marijuana news delivered directly to your inbox every day.