April, 2017: When asked if the federal government will legalize marijuana within the next 10 years, 64% of respondents believe it will, while 36% believe it won’t.The alternative investment community is a fan of marijuana –at least from an investment perspective. With marijuana now legal in 26 states and Washington D.C., and having been approved for recreational use in seven states and Washington D.C., it has become an increasingly attractive investment. According to recent estimates, the global market for medical marijuana alone is expected to reach $50 billion by 2025. But while much of the United States seems to be warming to the idea of widespread marijuana usage, it remains uncertain whether the federal government will ultimately give its own stamp of approval to cannabis –a fact that has thus far made it extremely difficult for marijuana dispensaries to find banks willing to do business with them, and which has consistently kept the marijuana industry in the news.
Marijuana is just one of many appealing “alternative” investment opportunities outside of the alternative investment industry’s typical investment wheelhouse. Other popular options range from art, to jewels, wine and even sports teams, the New York Hedge Fund Roundtable recent took a look at “alternative” alternative investments –all of which are attractive because they do not correlate with the general marketplace.
“Alternative” Alternative Investments was the topic of the Roundtable’s May event, where Karen Boyer, principal of Elements in Play; Madelaine d’Angelo, CEO and founder or Arthena; Zack Henry, CEO of Baltoro Group; and Kevin Murphy, a managing member of High Street Capital Partners Management each weighed in on their areas of expertise, respectively art, art, sports teams and marijuana, in a panel moderated by Alexandra L. Peers, executive editor of Galerie Magazine and executive editor of the New York Observer’s NYO magazine.
“From art, to sports teams and medical marijuana, there are several non-traditional areas outside of those typically focused on by the alternative investment industry that offer the prospect of very attractive returns,” said Adam Weinstein, president of the New York Hedge Fund Roundtable.
Roundtable members believe that marijuana is an attractive investment option for the alternative investment community, with 77% of respondents indicating that, given the rising number of state embracing marijuana usage –both medically and recreationally, it is an area they would consider investing in. Those who remain on the fence about investing in marijuana are concerned about the fact that there is no guarantee that the federal government will ultimately legalize cannabis.
New York Hedge Fund Roundtable members had the opportunity to weigh in on this topic both at the Roundtable’s May event as well as through an online electronic poll.
*Of the respondents to this survey, 36% were fund managers; 21% were allocators; 12% were risk management or trading; 24% were service providers; and 7% were other industry participants.
Following are some of the key findings:
- Asked where the greatest potential gains from investing in marijuana are for the alternative investment community, 78% of respondents think that investment in U.S.-based cannabis operations are most attractive, given the tremendous growth opportunity for these companies as more and more states approve medical marijuana; 22% of respondents think cannabis stocks in Canada, Australia and certain countries in Europe where medical marijuana is legal have the greatest potential.
- 59% of respondents think the biggest benefit of investing in art is the possibility of high returns that are not correlated to the general financial market; while 41% of respondents think investing in art is attractive given that its cyclical nature means there will always be opportunities to pick up individual pieces of art from specific artists or styles that have fallen out of favor, but which are likely to eventually become popular again.
- Asked what they believe the biggest risk of investing in art is, 41% of respondents believe it is the illiquidity of the art market, which means that the true value of an individual piece can only be determined when it is sold; 32% said the fact that the art market is extremely cyclical and that the changing taste of buyers makes it extremely difficult to identify which individual pieces will significantly rise in value over any 5-10 year period; 18% think it is the fact that the art market is unregulated; and 9% think the fact that there is no standardized value for individual pieces of art makes the value of individual pieces entirely too subjective.
- Asked if investing in a sports team is an attractive prospect for the alternative investment community, 52% of respondents think it is given that sports teams have no correlation to the general market, yet tend to remain popular despite what the overall economy is doing; 48% do not like the idea of investing in sports teams given that an individual team’s success and popularity is too heavily dependent on the performance of individual players.
- When asked to identify which “alternative” alternative investments they believe has the potential for the greatest returns, 55% of respondents think it is marijuana; 18% said sports teams; 14% think it is art; 9% believe it is wine; and 4% think it is jewels.
Bonus Question: When asked if the federal government will legalize marijuana within the next 10 years, 64% of respondents believe it will, while 36% believe it won’t.
About The New York Hedge Fund Roundtable:
The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers. Monthly events center around thought-provoking speakers and panels designed to keep members apprised of timely and important issues within the alternative investment industry. The Roundtable’s goal is to provide a forum for thought leadership, where industry professional have the opportunity to enhance their knowledge and skills and to network with other individuals committed to advancing the industry with the highest ethical standards. For additional information about the Roundtable, visit: http://www.nyhfr.org
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