Marijuana ETF's Premium Mishap

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Cinthia Murphy, Managing Editor, ETF.com

Another week, and another cautionary tale about investing in marijuana stocks through an ETF.

Investors who own the popular ETFMG Alternative Harvest Fund (MJ) saw the ETF’s creation/redemption mechanism fundamentally break in the past week, leading to notable premiums in the ETF’s price relative to its net asset value.

The whole event apparently centered on ETFMG’s move to shift the fund’s custody, replacing MJ’s former custodian and transfer agent—U.S. Bank, and its parent company, U.S. Bancorp—with Wedbush Securities and Computershare, respectively.

While it remains unclear whether the fund’s “plumbing” is working just fine, or whether somewhere along that custody switch MJ’s service providers dropped the ball, “investors should be extremely cautious trading any ETF that exhibits unexpected premiums, or discounts,” ETF.com’s Lara Crigger reported.

Source: Bloomberg.com; data as of Sept. 20, 2018

AGG Turns 15

While MJ is the U.S. market’s first—and still only—pot ETF, the past week marked a major milestone for the first aggregate bond ETF, the iShares Core U.S. Aggregate Bond ETF (AGG). AGG turned 15 on Sept. 22.

The first bond ETF to track the Bloomberg Barclays U.S. Aggregate Bond Index, AGG is today a $56 billion fund—the single largest bond ETF, and the 10th largest U.S.-listed ETF among the 2,100-plus funds on the market today. AGG is also very cheap, costing only 0.05% for a portfolio of 7,000 securities—that’s $5 per $10,000 invested.

AGG has long been considered a game-changer, tagged with democratizing access to the investment-grade bond market by offering easy trading, liquidity and transparency to an otherwise opaque and difficult-to-navigate fixed-income space.

Chart courtesy of StockCharts.com

More on ETF.com:

Understanding Closed End Funds In ETFs

Best Performing ETFs Can Bite You

Vanguard Makes ESG Debut

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs , ETPs
Referenced Symbols: MJ , AGG

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