Today, AdvisorShares rolled out its third ETF to focus on marijuana. The AdvisorShares Poseidon Dynamic Cannabis ETF (PSDN) joins the AdvisorShares Pure US Cannabis ETF (MSOS)—the largest marijuana ETF trading in the U.S. with $1.24 billion in assets under management—and the $258 million AdvisorShares Pure Cannabis ETF (YOLO).
PSDN comes with an expense ratio of 0.92% and lists on the NYSE Arca.
The fund, like all AdvisorShares offerings, is actively managed, with Poseidon Investment Management listed as its subadvisor. Poseidon has been involved in managing cannabis assets since 2013 via hedge funds.
What sets PSDN apart in particular is its ability to implement leverage on select securities in its portfolio. The ETF, according to its prospectus, can apply up to 1.5x leverage to individual securities in the fund.
Noah Hamman, AdvisorShares’ CEO and founder, says that the leverage aspect will be applied as needed to individual high-conviction holdings in the portfolio rather than all of its holdings. Although the leverage will make the fund more volatile, Hamman says the fund is designed as a long-term holding, unlike the more common leveraged ETFs with daily resets.
Generally, the fund will invest in companies that generate at least half of their revenues from marijuana related activities, but up to 20% of the portfolio can be invested in companies that are expected to generate revenues from such activities. Those business lines include medical research, agricultural and real estate activities, financial services and the production of drugs or hemp-based products, the prospectus says.
Poseidon will focus on companies that have competitive advantages relative to their peers and are positioned for growth, with securities selected based on fundamental research, market analysis and third-party ratings, according to the fund document.
The fund's initial holdings at launch include AFC Gamma, Agrify and Canopy Growth. The current portfolio is fairly concentrated, with just 19 companies represented, but AdvisorShares says that the portfolio managers expect to build into other positions over time.
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