A portfolio manager doesn’t expect to see additional marijuana-centered funds due to lack of demand.
Nawan Butt, portfolio manager with Purpose Investment, told the Investing News Network (INN) despite the success of managed funds with a direct focal point in pot stocks, he isn’t sure there is a lot of money available for more funds.
“There’s really no more flow of money into the space right now, everyone seems to have just paused,” he said.
Butt described the landscape of marijuana funds as “limiting” when asked about the possibility of Purpose Investment launching a second fund in addition to its Purpose Marijuana Opportunities Fund (NEO:MJJ).
“I don’t think there’s enough demand, just right now,” the portfolio manager said. However, one catalyst that he expects could change this outlook is the legalization of cannabis in the US.
With the growth and establishment of the marijuana landscape, the potential entry of institutional investors has intrigued companies and observers of the market.
He told INN Purpose Investment has noticed “a lot more institutional investment behind marijuana.” Butt highlighted the entry of California Public Employees’ Retirement System.
Despite this move, Butt said serious institutional money won’t make a move until the US clears its federal illegality issue.
The entry from institutional money into the cannabis public market could also allow for the volatile marijuana space to slow down, according to Butt.
He still expects volatility to continue as the early entry is not going to “materially” impact the unpredictability of the sector.
When evaluating the current sentiment of investors, Butt said the preference has moved towards US multi-state operators.
These companies operate in legal states and own assets to the marijuana market such as cultivation facilities, networks of dispensaries, brands and other product lines.
“What we’ve done is become more aggressive on the US cannabis names, just the past five to six months rather than focus on the Canadian [licensed producers] LPs,” he said.
“Generally speaking we do like the States more and more but you do have to be more careful when you invest into the States.”
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
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