Marijuana ETFs investors hold steady despite the flashing red

Cannabis ETFs have received a regulatory boost after Mississippi legalized medical marijuana for people with debilitating conditions such as AIDS, cancer, and sickle cell disease. This makes Mississippi the 37th state to allow the medical use of cannabis, according to the National Conference of State Legislatures.

While it's certainly good news for Cannabis or Marijuana ETFs, the lineup continues to post steep declines (-10% YTD) — in line with marijuana stocks who have been struggling amid intense competition, volatile financials, and lack of major legislation breakthroughs at the U.S. Federal level.  Among the biggest ETF decliners this year are AdvisorShares Pure Cannabis ETF (YOLO, -17.6%), AdvisorShares Pure US Cannabis ETF (MSOS, -13.6%), Horizons Marijuana Life Sciences Index ETF (HMMJ, -13.8%) and Global X Cannabis ETF (POTX, -11.8%) to name a few. Despite the blows, Cannabis ETF investors have kept their poise this year after pouring in over $2.3 billion into these thematic funds in 2021 — as only a meager $17 million were pulled out in January 2022.

Major catalysts ahead for the industry include increased legalization at the U.S. state level, ramped up levels of M&As, and possible European "Yesses" to recreational marijuana. Last December, Malta became the first country in the European Union to agree to formally legalize the use and growing of marijuana for recreational purposes. Germany, Italy, and Luxembourg are expected to jump on the weed bandwagon with government agencies already laying the legal groundwork.

Florian Berberich, Associate Director DACH at Rize who work together closely with New Frontier Data, one of the world's leading Cannabis research firms for their ETF strategy, said: "We can also observe that the strong tailwinds from last year with regards to the news from Germany and Malta have certainly increased the M&A interest." Berberich added that Europe, in general, remains a viable space for broad investments and growth in the space, with 12 countries having already established medical cannabis legislation, and 16 more engaged in earlier stages of adoption in Europe.

European investors can gain exposure to the Cannabis industry through Rize Medical Cannabis and Life Sciences UCITS ETF (FLWR) and HANetf The Medical Cannabis and Wellness UCITS ETF (CBDX). FLWR tracks the Foxberry Medical Cannabis & Life Sciences Index and invests in companies that potentially stand to benefit from the increased adoption of cannabis as a medicine, with a focus on companies in the biotechnology/pharma and hemp, and cannabidiol (CBD) sectors. FLWR has a total expense ratio of 0.65% and trades on the Deutsche Börse Xetra (BLUM, EUR), London Stock Exchange (FLWR, USD or FLWG, GBP), and the SIX Swiss Exchange (FLWR, CHF).

CBDX tracks the Medical Cannabis and Wellness Equity Index and invests in companies conducting legal business activities across nine thematic sub-sectors in the medical cannabis, hemp, and CBD industries. The fund has a total expense ratio of 0.8% and trades on the London Stock Exchange (CBDX, USD or CBDP, GBP), Deutsche Börse Xetra (CBSX, EUR), and the SIX Swiss Exchange (CBDX, CHF).

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