A medical cannabis ETF would have been "impossible" to launch five years ago and, to this day, remains "one of those edgier subjects", according to co-founder of Rize ETF Rahul Bhushan.
To get it past the depositories, the administrators, the legal and regulatory issues, let alone getting it signed off by the investment committee… At Legal & General would have taken us six decades, not six months, to launch that product," he said.
The team hoped the Rize Medical Cannabis and Life Sciences UCITS ETF would "really put us on the map" with a "new, innovative and exciting" product that showcased the former ETF Securities team's "expertise and capabilities" and "even more importantly, attract people to come and work for us".
To date, the ETF has returned 8.13% since it launched on 12 February this year, outperforming the Pharma Health & Biotech sector, which has returned 6.37% over the same period, according to data from FE fundinfo.
The duo of debut funds was completed with the Rize Cybersecurity and Data Privacy UCITS ETF, a "2.0" version of the product they launched in 2015 at ETF Securities, which was "the first cybersecurity ETF in Europe".
"Five years later it felt like there was an opportunity to build something that was slightly more tailored to the landscape of 2020," Bhushan explained.
For the co-founder, this included a "built-in ESG screen" to exclude firms like Lockheed Martin and Northrop Grumman as they discovered clients had "a lot of issues with these types of companies", and offering the ETF for half the price of their original 2015 product.
While it is "too early to tell" whether the ETF will continue its outperformance (up 14.92% since inception, compared to the Tech Media & Telecom sector's 8.23%), Bhushan explained the companies included are "resilient companies" operating at "50%-60% gross margin" with a business model that allows them to add customers with "very little additional cost to your balance sheet".
"Deglobalisation, all that stuff we are expecting with tariffs and trade wars does do not really affect these companies because by their very nature they are global companies. Their entire business model is built on software, they are not capital intensive businesses.
"You can have a group of 40 people sitting in San Francisco servicing the entire world."