There is no doubt that the marijuana market is lucrative. But as it continues to grow, U.S. observers are curious if hedge funds are the next step amid a federal crackdown on the industry.
For hedge funds to bloom, the marijuana market requires serious liquid assets.
However, there are big companies which are investing. The New York-based Constellation Brands Inc, a Fortune 500 company, and owner of Corona Beer paid about $191 (U.S.) million for a 9.9 percent stake in Canopy Growth Corp., a Canadian seller of medicinal-marijuana products.
Harrison Phillips, Vice President of the New York-based Viridian Capital, a financial and strategic advisory firm dedicated to the cannabis market, said hedge funds are slowly getting into the cannabis space.
“but they are likely investing in only a handful of companies that are not 100 percent cannabis-focused.”
“that also fit their fund mandates a set of rules that assure investors how and where their money will be invested.”
Phillips said hedge fund investments in the cannabis industry are not a trend. But, there is a pattern emerging.
Market Viewed as Unstable
Investors view the marijuana market as unstable. But as the trend to legalize pot continues despite federal clampdown in the U.S, many are curious.
Managing partner at Agecroft Partners, Don Steinbrugge, said:
“Investing in cannabis companies is still controversial in the U.S. because the federal government and many states still deem marijuana illegal.”
“While some hedge funds have shied away from the industry for moral reasons, most have done it because they are concerned about the reaction of their investors.”
Steingrugge believes attitudes need to change as 29 U.S. states have already legalized medical marijuana and up to nine others permitted the recreational use of the green herb.[share-btn]