Cannabis ETF drops firm involved in edible cannabis market
HANetf has been forced to make changes in its newly launched CBDX ETF that tracks the Medical Cannabis and Wellness Equity index from Solactive, as one of its components has entered the cannabis-infused edible products market.
Namaste Technologies Inc no longer meets the criteria for inclusion following its announcement that Choklat Inc, an Alberta-based craft chocolate manufacturer and chocolatier in which Namaste holds a 49 per cent equity position, has received a processing license from Health Canada to produce a line of cannabis-infused chocolate bars, drink mixes and infused sugar.
The sale of cannabis-infused edible products (which will be sold by their subsidiary starting March 2020) will generate revenue in the adult-use cannabis market, outside the scope of the index methodology and the removal of Namaste represents a proactive move to keep the index in line with the calculation methodology, HANetf writes.
The firm adds that this deletion reinforces one of the major benefits of CBDX provides to European investors - comfort that the companies held in the index remain legal as evidenced by the removal of Namaste expediently via a screening process. “Some European jurisdictions do not allow recreational use of cannabis at this point in time. Hence these controls help the fund remain in compliance with its objective.”
Nawan Butt, Portfolio Manager at Purpose Investments, says: “Namaste’s entry into the crowded recreational market is contradictory with the index’s overall thesis in identifying long term value trends in the medical and wellness space. Although we believe this could be positive for those focused on near term monetization of the Canadian adult use cannabis industry, the long-term value is still within the scientific medical approach.”
Ignatius Faisal, Director of Product Management at HANetf says: “This proactive deletion highlights the ongoing qualitative monitoring of the underlying constituents that we perform to ensure all constituents are complying with the rules of our medical and wellness cannabis index.”