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Marijuana Industry a New High for Alternative Investments?

Alternative investments comprise a quarter of the portfolios of the wealthiest households, those with a net worth of at least $25 million,

| BY Donald Liebenson

When it comes to alternative investments, it doesn’t get more alternative than the fledgling legal marijuana market.

Washington state recently became the second state after Colorado to legalize recreational marijuana retail sales. The first stores opened for business this week. If demand there is anything like it has been in Colorado, then it will be a further boost for the legal marijuana market that is already attracting investors to the cannabis industry.

Colorado’s marijuana regulators issued its post-legalization market study Wednesday. Based on sales data from the first three months of recreational pop sales, the report finds literally a ton of demand. The study estimates that total market demand for recreational and medical marijuana in Colorado is about 130 metric tons annually, which breaks down to about 121 metric tons for residents and almost 9 metric tons annually for visitors, who account for 44 percent of recreational marijuana retail sales in the Denver area.

Legalized pot in Colorado has an average market rate of $220 an ounce, the study concludes.

Legal marijuana markets are defined by ArcView Group, a San Francisco-based company which runs an angel network for cannabis investors, as “markets composed of individuals who legally consume marijuana as allowed by state laws, together with the businesses that constitute the supply chain to serve those consumers.”

Presently, according to ArcView’s recent “State of Legal Marijuana Markets” report, there are 20 states and the District of Columbia that have some form of pot legalization, which doesn’t necessarily allow for the sale of cannabis.

Two hundred ArcView members recently boarded seven “canna-busses” for a tour of Colorado’s legal marijuana industry, Financial Advisor magazine reports. They visited dispensaries and related businesses such as head shops.

ArcView members have invested more than $10 million in 14 private cannabis-related companies, FA reports. An ArcView report assesses the U.S. national legal market value as $1.53 billion, comprising all states that have active and open sales of marijuana to people legally allowed to possess it under state law. It projects that the national market will grow 68 percent over the next year and reach $2.6 billion.

Among the states projected to adopt Adult Use regulations within five years include Alaska, Arizona, California, Delaware, Hawaii, Maine, Maryland, Massachusetts, Nevada, New Hampshire, Oregon, Rhode Island, and Vermont

Alternative investment products, which offer investors choices beyond traditional stock, bond, and cash products, appeal to most – but not all – of ultra-wealthy investors, according to Spectrem’s Millionaire Corner research. Alternatives, such as hedge funds, commodities, real estate and venture capital, often offer the potential for high returns, but can also pose a high level of investment risk. Among other things, they can be less transparent and liquid than publicly traded securities.

Alternatives comprise a quarter of the portfolios of the wealthiest households, those with a net worth of at least $25 million, according to wealth level studies conducted by Millionaire Corner.

Almost half (47 percent) of these investors own hedge funds as well as venture capital investments (45 percent). More than half of those households hold private equity investments. Among the $25 million plus households investing in alternatives, more than 40 percent own three more hedge funds and 5 percent say they own seven or more hedge funds. Thirty-two percent say they have one hedge fund and 25 percent have two.

About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.