Short sellers help marijuana ETFs earn millions

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The two largest marijuana ETFs are making money hand over fist

Exchange-traded funds (ETF) targeting cannabis companies are proving to be highly lucrative. Not only are they producing direct monetary gains, but they’re also making more money from short sellers. The two largest marijuana ETFs have so far made millions of dollars by lending out their holdings to those traders who have wanted to gamble against the 60% cannabis stock climb this year.

Horizons Marijuana Life Sciences Index ETF and the ETFMG Alternative Harvest ETF have already seen returns of more than 45% this year. This performance is better than virtually all, non-leveraged ETFs in North America and doesn’t show any signs of slowing down.

According to the president and CEO of Horizons ETFs Management Canada, “There’s a lot of people that don’t believe in this sector from a long-term growth perspective and are trading on that volatility. They’re coming to us because we are the largest institutional holder of a lot of these companies.”

ETFs in Canada are able to lend out as much as 50% of their holdings, while U.S.-based funds are limited to just 33%.

Horizons has seen its fund increase 53% across the first quarter of the year, becoming one of the top ETFs in North America. Securities lending increased its performance by around 1.1% in the first two months, which resulted in a 7% yield on an annualized basis.

ETFMG hasn’t been too far behind, gaining 46% in the first quarter. This was greater than any other unleveraged U.S. fund and income from short sellers gave 0.58% to the company. Securities lending created around 2%, over $9 million, for the company’s shareholders last year.