A head start over the establishment has given Ninepoint’s cannabis mutual fund the edge, according to its co-CEO.
James Fox, who is also managing partner, said the sector is a “unique situation”, which the Ninepoint-UIT Alternative Health Fund, the first actively managed cannabis-focused mutual to have a full one-year track record, can take advantage of.
Fox said studies have predicted 20-28% growth for the marijuana space every year for the next 10 years and said it’s these startling numbers that led them to tap into the MFDA market.
The fund is focused 50% on cannabis, with companies like MedReleaf, CannTrust and Hydropothecary featuring, while the other 50% consists of alternative health stocks and technologies. This, said Fox, means exposure and protection.
“Our view is that our clients’ advisors, as much as they commit to the space and want exposure to this space as part of their asset allocation, [know] it will be highly volatile.
“So as much as you might say I want X% of my client’s allocation to a sector that’s going to rapidly grow, that will come with higher volatility and it could happen that your client gets shaken out of that trade. When you have up and down swings of plus 40%, we believe the way the UIT fund is run, they’ve been able to temper their volatility.”
Fox said that after February’s market drop, some ETFs were down 30% while the fund was down only 3%. He admits this level of success won’t always happen but it will help the client stay the course.
He said the sector as a whole is unique in that companies are doing extensive research and launching products without recreational weed being legal yet, while the more traditional players tip-toe around the space waiting for approval.
He said: “Stigma has led the banks not to be involved. It’s a unique situation. We are seeing, as the legalization date comes closer in Canada at least, banks getting involved in financing cannabis companies and starting to initiate research and coverage in the space.
“It’s very unique where you have the establishment waiting until it’s legal even though we know it’s going to be legal. The team behind the [Ninepoint] fund has been to every conference and met with every major CEO for the last year and a half. So even if other groups launch funds, it will take time to really have the knowledge of the sector to get caught up with our team.”
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