Horizons ETFs building out marijuana-focused ETF lineup

Horizons ETFs Management (Canada) Inc. has announced developments related to its suite of marijuana-focused ETFs. These include the listing of futures contracts on the Horizons Marijuana Life Sciences Index ETF (HMMJ), and the filing of a preliminary prospectus to launch ETFs with leveraged, inverse or inverse leveraged exposure to Canadian-listed marijuana companies.

Futures on units of HMMJ have begun trading today on the Montreal Exchange, and futures contracts on HMMJ will be available with quarterly expiration dates—in January, March, June and September—initially extending to a June 2019 expiry.

Proposed ETFs

Horizons ETFs wants to launch three new ETFs that provide leveraged, inverse and inverse leveraged exposure to Canadian-listed marijuana companies, respectively, as represented by the Solactive Canadian Marijuana Companies Index (which seeks to track the price movements in shares of Canadian companies mainly active in the marijuana industry).

The three funds will be branded under the Horizons ETFs family of tactical BetaPro ETFs.

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The proposed investment objective for each respective ETF is as follows.

BetaPro Canadian Marijuana Companies 2x Daily Bull ETF (HMJU): This proposed fund aims for daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that seek to correspond to two times (200%) the daily performance of the Solactive Canadian Marijuana Companies Index.

BetaPro Canadian Marijuana Companies -2x Daily Bear ETF (HMJD): This proposed fund aims for daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that seek to correspond to two times (200%) the inverse (opposite) of the daily performance of the Solactive Canadian Marijuana Companies Index.

BetaPro Canadian Marijuana Companies Inverse ETF (HMJI): This proposed fund aims for daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that seek to correspond to one times (100%) the inverse (opposite) of the daily performance of the Solactive Canadian Marijuana Companies Index.

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Horizons ETFs anticipates that, in respect of HMJI and HMJD and based on existing market conditions, hedging costs could be material, the firm says in a release.

For example, due to security imbalances caused by material rebalances or trading halts, “The hedging costs of each of HMJI and HMJD can increase, will be assessed on a monthly basis to reflect then-current market conditions, and are expected to materially impair the ability of HMJI and HMJD to meet their investment objectives,” the release says.

What investors need to know is that shorting marijuana stocks “is an expensive and complex process,” says Steve Hawkins, president and co-CEO of Horizons ETFs.

“If used appropriately, inverse marijuana ETFs could be a potentially more liquid and easier way for investors to get short exposure to Canadian-listed marijuana stocks while limiting their risk to what they invested,” but there are risks tied to “the high cost of borrowing marijuana stocks,” he adds.

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