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There's a New Cannabis-Focused Hedge Fund in Town

May 22, 2017

 (Photo via Flickr

 

All too often, people think that I'm joking when I say that cannabis investing is the next big thing. Here on Wall Street, it's all too serious.

 

The best performing hedge fund of 2016 was an Australian natural resources fund that gained 145% thanks to smart investments in cannabis, salmon and more, according to Bloomberg. According to the article, "stock and credit investments in North American marijuana producers contributed to 22 percentage points of last year's gain." 

 

It was a smart call for Ben Cleary and Craig Evans, the managers of Australia's Tribeca Global Natural Resources Fund, to invest in cannabis last year. If I had to guess, they'll be looking towards cannabis for more growth this year given the legislative developments on the horizon here in the U.S. as well as abroad. 

 

While the Australian fund will probably earmark some funds for the cannabis space in 2017, there's a new fund on the street that's sole focus is the booming cannabis industry. When two experienced money managers partner to open a cannabis-focused hedge fund, that should send serious signals to the investing public. 

 

We're not talking about mom-and-pop investors sitting at home investing in cannabis through their E*Trade account, we're talking hedge fund veterans managing millions of dollars with only one sector in mind: marijuana.  

 

Last week I got the pleasure of sitting down with co-managers Sean Stiefel and John Kaden of the Navy Capital Green Fund, LP in their midtown Manhattan office to chat about the new fund and more. 

 

The Team

 

The Navy Capital Green Fund is run by two Wall Street veterans with years upon years of combined markets and money management experience. You may have already heard of Sean Stiefel from his interviews on the direction of Snap Inc. stock, as Navy Capital also manages a beta-minimizing fund focused on TMT (technology, media and telecommunications) as well as the consumer and industrial sectors. 

 

Sean Stiefel founded Navy Capital, LLC back in 2014 to take advantage of a "research-oriented, fundamentally-driven investment process" that "focuses on identifying event and catalyst-driven opportunities." A few years later, and Navy Capital has a fund dedicated just to the legal cannabis space. 

 

Before founding Navy Capital, both Mr. Stiefel and Mr. Kaden met at a global long/short hedge fund called Northwoods Capital Management Partners. Mr. Stiefel was a trader and research analyst while Mr. Kaden was co-Manager and Chief Investment Officer. 

 

Prior to Mr. Stiefel's time at Northwoods Capital Management, Sean held positions ranging from associate within a long/short equity fund at Millenium Partners to an equities trader at Barclays Capital. Sean studied at USC's Marshall School of Business.

 

Prior to Mr. Kaden's time at Northwoods Capital Management, John founded and managed a global macro hedge fund called Cynthion Partners from '06 through '13. Prior to this endeavor, Mr. Kaden was working in the Strategic Division of BlackRock. In the first role of his career, Mr. Kaden was a macro strategist for The G7 Group. John graduated Magna Cum Laude from Harvard followed by a J.D. from Yale Law. 

 

Together, these two bring serious experience to the cannabis investing space.

 

 

The Fund

 

Currently, the fund has raised $10 million dollars, with more fundraising to come. With a minimum investment size of $250,000, this fund is only for serious investors. Stiefel and Kaden plan to hop on opportunities as they see them, and that takes capital. While publicly traded cannabis companies are also available to at-home investors, the best opportunities don't last long.

 

After all, when it comes to the cannabis industry, there's a lot going on. Forget about the states within the U.S. that have made legislative action to legalize marijuana in some form or another, there's legalization efforts going on all across the world. Medical marijuana is federally legal in Canada, with recreational legalization coming down the pipes. Meanwhile the medical marijuana industry is just starting to take off in Australia, Germany and more.

 

Stiefel and Kaden plan to focus initially on the companies operating in the Canadian and Australian space. Many of the leaders in the Canadian medical marijuana marketplace will become leaders abroad as well. Canadian companies like CanniMed Therapeutics Inc. (TSX:CMED) have already completed exports of medical marijuana products to Australia

 

Investing early in leading cannabis companies like this could set the Navy Capital Green Fund far ahead of the Tribeca Global Natural Resources Fund for best-performing hedge fund of 2017. Beyond just making money off of the appreciation in value of the fund's positions, the Navy Capital Green Fund will also make extra money off of lending shares out to short-sellers. 

 

I wouldn't bet against these guys, but in case you'd like to...the shares will be available on loan. 

 

Conclusion

 

Cannabis legalization is coming sooner or later. Those who don't invest will wish that they had only to realize it's too late. If it's any sign of how big this will be, down the block from this hedge fund was a tower formerly owned by Phillip Morris' parent company Altria. Big tobacco is not going to be so big when you compare it to big cannabis. 

 

With Wall Street veterans at the wheel, this cannabis-focused hedge fund should be an absolute success. Anyone looking for more information regarding Navy Capital should e-mail ir@navycapital.com

 

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