Roundhill Investments, an ETF sponsor focused on innovative thematic funds, has refocused the exposure of its Roundhill Cannabis ETF (WEED ) to exclusively target the largest and most liquid U.S. multistate operators (MSOs). In addition, Roundhill has agreed to lower WEED’s net expense ratio to 0.39% until at least April 30, 2023.
Due to current macroeconomic conditions, including high interest rates and persistent inflation, Roundhill believes that the cannabis companies with the lowest costs of capital and strongest relative balance sheets are best positioned to survive a downturn and increase market share. Tier 1 MSOs, defined as U.S. cannabis companies generating more than $500 million in annual revenues, most closely align with this view.
As of October 11, WEED maintained concentrated economic exposure to six MSOs: Curaleaf Holdings (with a weighting of 34.5%), Green Thumb Industries (20.3%), Trulieve Cannabis (17.2%), Verano Holdings (14.4%), Cresco Labs (8.7%), and Columbia Care (4.2%).
Launched on 4/20 (cute), WEED was designed to provide exposure to the cannabis sector.
“While publicly-listed cannabis companies have recently underperformed, we believe that the cannabis market may be entering an inflection point in terms of both profitability and regulatory momentum,” said Roundhill CEO Will Hershey in a news release announcing the fund’s launch. "We wanted to provide investors with a comprehensive vehicle to invest in the space, and … we believe that WEED has the potential to become the benchmark for the entire sector. WEED allows U.S. retail and institutional investors to gain exposure to U.S. operators, potentially in advance of positive legislation.
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