By / November 20, 2019

The second cannabis fund debuts in Brazil

The second cannabis fund from Vitreo hopes to attract small investors.

Launched in October, the Vitreo Cannabidiol FIA IE Fund invests 100% of its assets in the U.S. and Canadian financial markets.

Additionally, it will invest two-thirds of its portfolio in ETFs (Exchange Traded Funds) and one-third in five years’ shares of six companies in the cannabis sector.

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More information about the Vitreo fund

The Vitreo fund is totally focused on the foreign market. The CVM (Brazilian Securities and Exchange Commission) imposes restrictions on access only to qualified investors, i.e. those with at least $237, 000 (R$1 million in financial investments).

Currently, only 15% of Vitreo’s clients declared to have the profile of qualified investors. With the launch of the Cannabidiol Light fund, Vitreo expands the access to the cannabis market for small investors.

This fund will invest 20% of the capital in the Vitreo Cannabidiol FIA IE fund, composed of shares and ETFs, and 80% in the Selic Treasury, a fixed-income security considered the safest available in the country.

The administration fee is 0.056% and the minimum investment is $1, 200 (R$5, 000). The great demand for the fund restricted to qualified investors gave Vitreo a little push to decide to popularize cannabis investments.

In the first 12 hours after the launch of Vitreo Cannabidiol FIA IE, the manager raised more than $711, 000 (R$3 million) and reached $5 million (R$20 million) in the first two weeks.

The manager’s goal for Brazil’s first two cannabis funds is to reach $23 million (R$100 million) in assets in each of them.

Team discussing the cannabis fund
With the launch of the Canabidiol Light fund, Vitreo expands access to the cannabis market for retail investors. (Source)

Volatile market

The shares of cannabis companies are highly volatile, not only because of the traditional variations in supply and demand, as is the case with any variable income asset but also because of risks specific to this segment, such as those associated with government bans.

It is worth noting that although these companies are not state-owned, they are at the mercy of eventual changes in the composition of governments and regulations of the sector.

The manager of Vitreo says that, at the moment, 22 countries already have some free use of cannabidiol, which represents a total population of more than 1.5 billion people.

Risks in the second cannabis fund

Even when outsourcing asset management, Vitreo’s specialists advise its clients to understand at least some of the sectors in which the second cannabis fund applies so that they understand the risks and opportunities involved.

“It’s very important that investors understand the risks of that investment, whether on the equity side, in a sector with high potential growth, or on the foreign exchange exposure side. It is important that investors analyze this based on their investor profile and investment horizon,” said George Wachsmann, partner and head of management at Vitreo.

Is investing in cannabis a crime?

Group explaining how to invest in cannabis funds.
According to the norm of the CVM (Comissão de Valores Mobiliários) the return of the fund can’t be revealed until it is six months old. (Source)

There are no legal grounds to sue an investor for investing in shares of marijuana producing companies abroad or in funds that invest in these companies.

Even so, in the opinion of lawyers and federal attorneys heard by Valor Invest, the principles of autonomy and discretion that govern the actions of public prosecutors and judges mean that there is a chance that the investor will be the target of an investigation or a criminal action, even if in the end these procedures result in acquittals.


(Featured image by Icons8 Team via Unsplash)

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