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Is Cannabis the New “Alternative” Alternative Investment?

77% of the respondents said marijuana is “an area they would consider investing in.
David N. Feldman is a partner at Duane Morris LLP, where he concentrates his practice on corporate and securities law and mergers and acquisitions, as well as general representation of public and private companies, entrepreneurs, investors, and private equity and venture capital firms. Mr. Feldman also advises small businesses with regard to alternatives to traditional financing through initial public offerings. His popular blog at www.DavidFeldmanBlog.com, focusing on entrepreneurship and the regulatory environment, has been recognized by LexisNexis as a Top 25 corporate law blog, and his videos appear on his YouTube channel, The Entrepreneur’s Advocate. Mr. Feldman is a 1985 graduate of the University of Pennsylvania Law School, where he was managing editor of the student newspaper, the Penn Law Forum, and a graduate of the Wharton School of the University of Pennsylvania. He has served as chair of the board of Wharton’s global alumni association.
David N. Feldman is a partner at Duane Morris LLP, where he concentrates his practice on corporate and securities law and mergers and acquisitions, as well as general representation of public and private companies, entrepreneurs, investors, and private equity and venture capital firms. Mr. Feldman also advises small businesses with regard to alternatives to traditional financing through initial public offerings. His popular blog at www.DavidFeldmanBlog.com, focusing on entrepreneurship and the regulatory environment, has been recognized by LexisNexis as a Top 25 corporate law blog, and his videos appear on his YouTube channel, The Entrepreneur’s Advocate. Mr. Feldman is a 1985 graduate of the University of Pennsylvania Law School, where he was managing editor of the student newspaper, the Penn Law Forum, and a graduate of the Wharton School of the University of Pennsylvania. He has served as chair of the board of Wharton’s global alumni association.

The New York Hedge Found Roundtable, made up of professional investors who generally focus on “alternative investments,” the other day said its members believe investing in cannabis companies is “appealing.” The normal alternative investments one thinks of, derivative securities, hedge and private equity funds and managed futures, tend to be reserved for rich people, institutions and family offices. Some in this community are beginning to find interest in “alternative alternative” investments such as art, sports teams and yes, marijuana.

In connection with a panel the NYHFR held recently on these double alternatives, the group conducted a survey of their members. The results: 77% of the respondents said marijuana is “an area they would consider investing in.” The respondents, according to the Roundtable, were 36% fund managers, 21% allocators, 12% risk managers, 24% service providers and the rest other. The survey also showed a stronger interest in US investing by respondents as more and more US states approve legal use. One more interesting stat was that 64% of those answering the survey believe the federal government will legalize marijuana within the next 10 years.

Why is this important? For the most part hedge, private equity and venture funds have stayed away from cannabis investing, even while the individual partners in those funds have poured millions of their personal money into it. Some are prohibited in their fund documents from investing in an “illegal” business. But others are not. Yet others have begun to be formed solely for investment in cannabis stocks. This might be the beginning of a new wave of professional funds and investors entering the rapidly growing cannabis industry.