ETF Investing: Cannabis-related ETF draws steady inflows as sector sees huge swings

Mutual Funds


One of the few exchange-traded funds to track the cannabis industry has seen steady inflows over the past month, a beneficiary of the surging interest that has surrounded the space as companies see huge gains, along with heavy downside volatility.

According to FactSet, money has consistently poured into the ETFMG Alternative Harvest ETF

MJ, -5.81%

over the past month, with inflows of nearly $112 million since Aug. 22. That accounts for a significant portion of the $652 million the find has in total assets.

The fund hasn’t had a day with notable outflows since Aug. 15, when about $1.3 million was pulled.

The inflows have corresponded with a surge of trading volume. Roughly 9.8 million shares were traded over all of August, more than three times the 3.17 million shares traded over the month of July. Over the past 30 days, the fund has averaged a daily volume of nearly 990,000 shares.

Flow data were not available for another cannabis-related fund, the Horizons Marijuana Life Sciences Index ETF

HMMJ, -4.12%

 , which trades on the Toronto exchange and has $346 million in assets. However, average daily trading volume has also topped 950,000 shares for this fund, an unusually high level of activity for a so-called thematic fund, or one that tracks a narrow subsector of the equity market.

Related: What the blockchain ETF ‘feeding frenzy’ says about the ETF industry

The interest in the cannabis ETFs has come at a time of massive volatility for cannabis-related companies, a sector that has seen meteoric rises over the past month — and also steep drops.

On Friday, the ETFMG fund tumbled 5.5%, though it remains up 13.6% for the week. The Horizons fund is down 4.1% on Friday, but it’s up 11.4% for the week; it has more than doubled over the past 12 months.

The embodiment of the sector may be Tilray Inc.

TLRY, -27.25%

 , which is testing for marijuana’s potential efficacy for different diseases. The stock recently received a massive boost after the U.S. Drug Enforcement Administration has approved its plan to import a marijuana product and test its efficacy in treating a neurological disorder. The news helped spark a rally that has resulted in the stock more than tripling over the past month. However, that volatility has worked in both directions; it is down 25% in Friday trading.

Tilray is the fourth-largest component of the ETFMG fund, accounting for almost 7% of the portfolio, according to FactSet.

Opinion: Enjoy Coke — and the money it might make for marijuana investors

Ryan Vlastelica is a markets reporter for MarketWatch and is based in New York. Follow him on Twitter @RyanVlastelica.

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