Just before the start of 2018, the first U.S.-listed marijuana exchange-traded fund (ETF) debuted in the form of the ETFMG Alternative Harvest ETF (MJX). The ETFMG Alternative Harvest ETF previously existed as the Tierra XP Latin America Real Estate ETF, a fund dedicated to high-yielding Latin American real estate investments.
As the Tierra XP Latin America Real Estate ETF, the fund performed admirably but struggled to gain traction with investors. The opposite is proving to be true of the ETFMG Alternative Harvest ETF. Although it may be a stretch to consider MJX as new since it was converted from an existing fund, it is still gaining a following in rapid fashion. "Assets into the ETFMG Alternative Harvest ETF swelled from $5.7 million on Dec. 26, its first trading day, to $77.4 million by Tuesday," reports Bloomberg. (See also: ETF Focused on Marijuana Industry Launched.)
In other words, it took MJX a mere five trading days to top $77 million in assets under management. The ETF tracks the Prime Alternative Harvest Index and has an annual expense ratio of 0.75%, or $75 on a $10,000 investment. The Horizons Marijuana Life Sciences Index ETF (HMMJ.TO), which debuted in April 2017 and trades in Toronto, not in the U.S., has over $587.1 million in assets under management. The success of Canada's Horizons Marijuana Life Sciences Index ETF, the world's first marijuana ETF, is not a guarantee of similar things to come for MJX. However, MJX does have first-mover advantage in the U.S., by far the world's largest ETF market.
MJX's underlying index "tracks companies likely to benefit from the increasing global acceptance of various uses of the cannabis plant," according to the issuer. "This includes treatments from innovative medicinal breakthroughs involving the plant's unique properties – the result of years of significant research by the global biotech and pharmaceutical community." (For more, see: What Stocks are on the Marijuana Index?)
At its current pace of asset gathering, MJX would become a $1 billion ETF in less than two months, according to Bloomberg. Only the SPDR Gold Shares (GLD), the world's largest gold ETF, topped $1 billion in assets faster, doing so in just three trading days.
MJX debuted just days before legal recreational weed outlets opened in California. That legalization was official on Jan. 1. On Jan. 2, volume in MJX was nearly 4.9 million shares before rising to almost 6 million on Wednesday. Of MJX's 30 holdings, 78% are Canadian and U.S. companies. The ETF's top 10 holdings combine for about 53% of its weight. (See also: The Economic Benefits of Legalizing Weed.)