There is no doubt that the cannabis market has been incredibly lucrative over the past few years, but many are wondering if hedge funds could be the next big thing for investing in the marijuana industry. At the beginning of the time period for hedge funds, many arguments came about wondering whether or not there could be a high enough amount of liquidity to make hedge funds worth it for the industry. As we continue to ask this question, the market continues to respond.
One of the biggest draws of investing in a cannabis hedge fund is the fact that many traditional brokerages don’t allow their consumers to invest in cannabis due to the fact that it is a Schedule I narcotic as far as the national government is concerned. Many large financial institutions also have yet to come to terms with the fact that cannabis is growing very quickly, and could become one of the larger markets for investment in the near future.
The past few months have been crucial to the development of the cannabis hedge fund. With companies like Constellation Brands, which owns Corona beer, investing over $200 million in the cannabis company known as Canopy Growth Corp, it seems as though more and more big names are entering the space. Many cannabis market analysts around the U.S. have been working to create hedge funds as a marked interest in the creation is peaking throughout the industry.
Whether or not hedge funds currently exists in the cannabis industry is still up in the air. Harrison Phillips, the vice president for Viridian Capital stated that “Hedge funds are slowly getting into the cannabis space, but they are likely investing in only a handful of companies that are not 100 percent cannabis-focused and that also fit their fund mandates [a set of rules that assure investors how and where their money will be invested. So, I wouldn’t say hedge fund investments in the cannabis industry are a very widespread trend. But, we are seeing some, for sure,” Phillips added.
The topsy turvy world of investing in cannabis has kept many investors out, but as legalization occurs all around the country, more and more are becoming curious. Don Steinbrugge, Managing partner at Agecroft Partners stated that “Investing in cannabis companies is still controversial in the U.S. because the federal government and many states still deem marijuana illegal. While some hedge funds have shied away from the industry for moral reasons, most have done it because they are concerned about the reaction of their investors.” This reaction that he is referring too is an antiquated opinion on the market of cannabis. For too long, marijuana has had to live in the shadows of other markets, but now that the substance has been legalized for medicinal and recreational use in a majority of the U.S., it is time to change those attitudes.
Giadha Carcer, founder and CEO of New Frontier Data recently stated that, “Hedge funds have a very structured way in which they invest. Some standardization, basic things like complete access to banking, have to occur in the cannabis industry before we can see hedge funds really come in.”
The issue of federal legislation is still something that very much gets in the way of the rest of the industry. Once cannabis related businesses have the accessibility to a range of financial tools, they will be able to work on creating the hedge fund industry within the growing market. The hopes are high that the cannabis industry continues to move forward, offering new ways for individuals to get involved.