By Juliette Fairley
Electrum Partners’ Leslie Bocskor along with his partner Gordon Katz have filed paperwork with the SEC to launch a cannabis-related hedge fund. Placement agents are aiming to raise $25 million.
“Our approach to investing in companies that touch the plant is a process that’s different from firms like Privateer Holdings and Poseidon Investments,” said Bocskor, an investment banker and entrepreneur. “They don’t have our specific process that contemplates investing in companies that touch the plant.”
The Electrum Hedge Fund’s investment strategy will be based on guidance issued by the Department of Justice and Financial Crimes Enforcement Network.
“The Justice Department and FINCEN guidance have been established as a threshold to do banking and if we use it as a guideline for the companies we invest in, we are less likely to find ourselves subjected to an enforcement action,” Bocskor told MJINews.
According to an upcoming report by GreenWave Advisors, Colorado sales of medical cannabis were $375 million in 2014 compared to $386 million in 2013, and recreational cannabis reported $305 million in sales last year. Over time, a cannabis-related hedge fund is likely to attain success.
“In all likelihood, the companies we invest in will be referred to us by investors already invested in these companies that are trading at a low price,” Bocskor said. “We will help turn these companies around if the asset is worth it.”
“We are looking at primarily processing, cultivation and dispensaries in states that are establishing regulatory framework,” Bocskor added.
Those states include Oregon, Alaska and Nevada because they allow for-profit entities. “We will be investing in private and public cannabis companies in the U.S. as well as those listed on foreign exchanges in London, Canada and Australia,” Bocskor said. In Canada, Tweed and Aurora are two companies that Bocskor is currently circling.
Before Bocskor could even begin the process of establishing a cannabis-focused hedge fund, he had to become a registered investment advisor. “It took me 4 weeks of preparation and 2 weeks of hard study for the test,” he said. “It wasn’t a stretch for me since I am already licensed with a series 7 and 63.”
Interested accredited investors will have to drum up a minimum of $100,000 once the fund is launched.
“In this case, the hedge fund aspect would refer to the compensation structure, which would likely be a percentage of the assets invested plus a large percentage of any profits generated,” said Alan Brochstein, chartered financial analyst and founder of 420 Investor.