Adding Tilray to ETF was a 'no-brainer'

Tilray was the biggest addition to the Horizons Marijuana Life Sciences Index ETF (HMMJ:TSX) after its latest quarterly rebalancing.

The British Columbia-based cannabis company surged to prominence last week after the announcement it had received permission from the United States Drug Enforcement Agency to export Cannabis to California for medical study.

Its stock soared and, despite a retreat, is still flying high. Despite less than $20 million revenue in the first half of 2018, at one point the company was valued at $11 billion.

Steve Hawkins, Horizons president and CEO, said the inclusion of Tilray into the world’s first cannabis-focused ETF was a “no-brainer”.

He said: “Even though it completely bypassed the Canadian capital markets, and didn’t do a listing in Canada, it’s still a Canadian company only operating in Canada and has no US operations, so for us it was a no-brainer to go into the index.

“Even though we knew it was very likely to go in, we’re not in the business of taking significant tracking error risks with respect to the index and adding names prior to absolute confirmation.

“And who knows what could have happened with the Tilray stock? It’s an unbelievable chart and we couldn’t have known that. Adding Tilray to the portfolio early in advance of the index change would have created a significant tracking error difference.”

As at September 5, passively managed HMMJ had reached more than $1 billion in assets under management. In addition to Tilray, it also moved Aleafia Health, Choom Holdings, Eve & Co, GTEC Holdings, FSD Pharma, James E Wagner Cultivation Corp, Namaste Technologies and INDIVA into its portfolio.

Hawkins said: “There’s going to be continued corporate actions out there with respect to this industry. Big Pharma, Big Tobacco, Big Alcohol have been standing on the sidelines too long and with Constellation, Diageo smoking around and Coke now getting involved, these are all things we didn’t really anticipate a year ago but it’s really [a sign] of how rapidly changing the environment for cannabis is. These companies have finally decided they need to pick up their socks and get to work.

“The ETFs, from my point of view, are the best place to be because of the diversified exposure and if you have your own portfolio of marijuana stocks, or one of two stocks, you might miss the boat. You might not though; you take that chance.

“We’re a strong proponent of diversified exposure to any asset class and HMMJ, as the world’s first and largest marijuana ETF with approximately 50 names in its portfolio, provides you with a very significant diversified exposure to this new and innovative sector.”

Follow WP on Facebook, LinkedIn and Twitter