Up in Smoke
The End of the ETF TOKE
Cambria, the manager of the ETF TOKE, has announced they are shutting down the fund in April.
About two years ago, I signed on as a research consultant for TOKE to try to resurrect it. At the time, TOKE had $8 million in assets and really needed to surpass $50 million to break even. Cambria also has a policy of charging no fees on ETFs below $50 million in assets — which meant that for the past year, I too was paid nothing as the research consultant.
For two years, Cambria gave it a go, losing money the entire time. At one point, we got the ETF above $22 million, but even then it was a struggle to attract assets at a time when no one wanted to invest in cannabis.
What surprised me most was learning how some of the remaining institutional investors use ETFs. When I asked whether they would consider investing in TOKE, their feedback caught me off guard. These investors used ETFs purely as trading vehicles — for quick long and short trades — and they actually wanted more volatility. One large investor told me they didn’t care about performance. Another said they had no interest in understanding the nuances of individual companies; they were in it for short-term trades.
My goal was to attract capital to an industry I believe in and to expand access for investors who cannot participate in my funds because they are not accredited or qualified investors. It didn’t work out, but I will continue to do my best for the industry and the companies I believe in.
I’m proud of what we accomplished over the past two years. Including dividends, TOKE fell about 10% during my tenure — compared to a 55% decline in MSOS, the behemoth of the space.
Thank you to Cambria’s Meb Faber and Jonathan Keetz for trusting me these past two years!
With over $60 million in assets, Mindset Capital continues forward with multiple private funds in the cannabis space. We remain bullish on the opportunity and believe that with a long-term horizon, investors can generate very attractive returns with best-in-class operators in a messy industry with a very bright future.