Credit: Shutterstock photoCinthia Murphy, Staff Writer for ETF.com
Bitcoin is so last year. So far in January, it seems all investor eyes are on the latest craze taking over the financial world: marijuana ETFs.
In the past week, we’ve taken measure of just how popular a pot ETF can be. The first to come to market in the U.S., the ETFMG Alternative Harvest ETF (MJX)—a fund that originally was a Latin America real estate strategy but that was transformed into a marijuana ETF in late December—already boasts nearly $300 million in assets under management. Net asset inflows into MJX totaled $273 million last week alone.
We’ve also learned that despite its right-out-of-the-gate success, MJX is anything but a guaranteed slam dunk. The uncertainty centers on custodians, usually banks, who are wary and may be unwilling to continue playing that role for the ETF going forward. Custodians are the third-party players that hold an ETF’s underlying securities, and without them, ETFs wouldn’t exist.
ETF.com Staff Writer Lara Crigger summarized the issue: “Until recently, most big banks refused to shoulder the reputational and possible legal risk of having their brands associated with a cannabis fund. Nevermind Attorney General Jeff Sessions' anti-marijuana crusade. Holding stocks involved with a drug still outlawed by the U.S government could potentially run a bank afoul of federal banking laws, maybe even cost them their FDIC insurance or banking license. It was perceived as simply too wide a river to cross.”
What happens next is anyone’s guess.
Commodities Shine
In other ETF news, while bitcoin and marijuana captured investor attention, it was good-old commodity funds that delivered the strongest punch in terms of performance at the end of 2017 and into 2018. Almost every broad commodity ETF ended the year strong, with funds like the Elkhorn Fundamental Commodity Strategy ETF (RCOM) leading the segment with gains of 11.1%.
That upward momentum is likely to continue, many market analysts say, potentially making one of the most unloved segments of last year one of the favorites of 2018.
Note: Table measures the total return for 2017 for all broad commodity ETFs for which full-year data is available.
On the product side, the newest ETF to come to market is an anti-momentum fund. The Arrow Dogs of the World ETF (DOGS) picks five countries, excluding the U.S., that have performed poorly and show weak relative strength, but that are likely due for mean reversion.
DOGS has an expense ratio of 0.65% and is Arrow Funds’ sixth ETF.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
