Speaking at AltFi’s Cannabis Finance Forum on Tuesday, McNeil discussed the increasing interest in the green leaf as an investment opportunity.
North America has thrived in the cannabis industry having launched 7 ETFs in the last two years but none have made an introduction in Europe yet. Canada, in particular, has been the pioneer in the space, ahead of the US, according to McNeil.
Canadian cannabis ETFs have taken advantage of the legalities in the country by offering exposure to the industry with actively managed products comprised of both public and private securities. Additionally, companies which comprise the ETF are involved with both medicinal and recreational use of cannabis.
Shifting the concentration to European interest, McNeil says there is definitely demand for a cannabis ETF however, he believes it will come primarily from retail investors in its early stages.
When asked if HANetf is developing a cannabis ETF for Europe, McNeil denied any progress with such a product however, is keeping a “close eye on the space”.
There are many hurdles launching a product like this in Europe compared the US due to complying with so many more countries and regulators.
HANetf typically domiciles its ETFs in Ireland and then cross lists in Italy and Germany while passporting into another 10 countries. There are a lot of service providers to satisfy before being able to launch a cannabis ETFs, especially as it is still classified as an illegal substance in a significant number of European countries.
“I expect the first product to be very skinny in terms of the number of stocks it will hold and will be very medicinally exposed,” said McNeil.
He continued: “Every service provider you work with, such as the custodian, will say what stocks are allowed and what isn’t, and the same will be said for the investment manager, the issuer and the audit firm. So if one doesn’t like one of the stocks, it’s out.”
Once these issues have been resolved and finalised, he believes a cannabis ETF will likely launch next year but didn’t specify by which ETF issuer.
In the US, the ETFMG Alternative Harvest ETF (MJ) reached $1bn in assets earlier this year, but has since fallen back below the milestone however, McNeil believes a similar product in Europe will attract in excess of $1bn as well.