Canada’s Pot Fund Scales Down on Recreational, Focuses on Medical Cannabis

Canada’s first weed mutual fund is scaling down on recreational pot while shifting to include more healthcare stocks, Bloomberg reported on Friday.

The UIT Alternative Health Fund has reduced its holdings in marijuana companies to 33 percent from 44 percent at the end of 2017.

Run by the Toronto-based Faircourt Asset Management Inc., the open-end fund has lost only 4 percent in the Q1 in comparison to the BI Canada Cannabis Competitive Peers index, which dropped by 25 percent after tripling in 2017.

The fund has more than C$700 million ($550 million) in assets. It is re-orienting its priorities after seeing investors fleeing risky assets especially amid the simmering fears of a global trade war between the U.S. and China.

The fear of an escalating trade war is heightening concerns over the valuations on some of the pot stocks, many of which have little or no revenue. For instance, Canopy Growth Corp. has a market value of C$5.5 billion on 2017 sales of about C$70 million.

Doug Waterson, who is managing the fund, said it has recently added to its positions in CannTrust Holdings Inc. and MedReleaf Corp. because of their exposure to the global medical marijuana market.

Medical marijuana is seen as generating higher margins than recreational products.

Stock futures fell on Thursday as U.S. President Donald Trump proposed an additional $100 billion in tariffs on China in retaliation over Beijing’s recent $50 billion tariffs on Washington.

Pot stocks fell after China imposed its $50 billion tariffs on the U.S. but on Thursday the North American Marijuana Index made a comeback.