AdvisorShares Pure US Cannabis ETF

MSOS, the Pure US Cannabis ETF, is an actively managed exchange-traded fund that offers targeted exposure to the U.S. cannabis industry. Unlike many cannabis ETFs that include Canadian licensed producers (LPs), MSOS focuses exclusively on U.S. multi-state operators (MSOs). This means investors get a pure bet on American cannabis legalization without dilution from international holdings. The fund uses a total return swap structure, which is a legal mechanism that allows it to hold shares of U.S. cannabis companies that are federally illegal and therefore cannot be held directly by a conventional ETF. As an actively managed fund, portfolio managers can adjust positions among MSOs based on evolving company fundamentals.

MSOS concentrates its holdings on U.S. multi-state operators (MSOs) — cannabis companies that operate in multiple states where cannabis is legal at the state level. These are typically vertically integrated businesses involved in cultivation, processing, and retail dispensaries. By focusing on MSOs, the ETF avoids exposure to Canadian licensed producers (LPs), which are common in other cannabis ETFs. The fund's active management allows it to shift weight between different MSOs as their financial performance, regulatory outlook, or market position changes. This targeted approach gives investors direct access to the growth potential of the U.S. cannabis market, which is the world's largest legal cannabis market by revenue.

MSOS is designed for investors who want a concentrated, U.S.-only cannabis investment strategy without dilution from Canadian or international cannabis companies. It appeals to those who believe that U.S. cannabis legalization will drive significant growth for multi-state operators and who want to avoid the volatility and lower growth prospects often associated with Canadian LPs. The fund is also suitable for investors seeking active management in the cannabis sector, as the portfolio managers can adapt holdings based on changing company fundamentals and regulatory developments. However, it is important to note that MSOS uses total return swaps, which introduces counterparty risk and may have different tax implications compared to traditional ETFs.

MSOS differs from most other cannabis ETFs primarily in its exclusive focus on U.S. multi-state operators (MSOs) and its use of total return swaps. Many cannabis ETFs, such as those tracking global indices, include a mix of Canadian licensed producers, U.S. MSOs, and sometimes international companies. This dilutes the pure U.S. exposure. MSOS avoids Canadian LPs entirely, offering a pure bet on American cannabis legalization. Additionally, because U.S. cannabis companies are federally illegal, conventional ETFs cannot hold their shares directly. MSOS overcomes this through a total return swap structure, which is a derivative contract that provides the economic exposure to MSO shares without direct ownership. This structural difference is a key distinguishing feature.

MSOS is an actively managed exchange-traded fund that uses a total return swap structure to gain exposure to U.S. multi-state operators (MSOs). This structure is necessary because U.S. cannabis companies operate in a federally illegal industry, making their shares ineligible for direct holding by a traditional ETF under SEC rules. The total return swap is a derivative contract between the ETF and a counterparty (typically a bank) that delivers the economic returns of the underlying MSO shares. Active management allows the fund's portfolio managers to adjust the ETF's holdings among MSOs based on company fundamentals and market conditions. The fund's theme is a pure U.S. cannabis focus, with no Canadian licensed producers, making it a distinct option for investors seeking targeted American cannabis exposure.