Leslie Bocskor, one might say, is high on the legal cannabis industry.
Bocskor, who describes himself as an investment banker and entrepreneur, plans to roll out a hedge fund in the fourth quarter that will invest in legal cannabis-related businesses across the country.
The opportunity comes, he said in an interview with ThinkAdvisor, as a number of states decriminalize possession, others create medical marijuana programs and a few have full adult use regulatory frameworks and are currently selling cannabis and regulating it as they do alcohol.
"Gradually the misrepresentations regarding cannabis are starting to come to light as reasonable people have an honest conversation about cannabis's benefits, issues surrounding it, about the reality of it," he said.
The investment opportunity is huge. Bocskor, citing research by the ArcView Group of which he is a member, said the size of the legal cannabis industry this year would reach $2.8 billion, up from $1.5 billion at the end of 2013.
According to ArcView, legal marijuana markets comprise individuals who legally consume marijuana as allowed by state laws, together with the businesses that constitute the supply chain to serve those consumers.
Bocskor put the size of the illegal cannabis market in the U.S. at between $40 billion and $50 billion, based on United Nations and Rand Corp. reports.
"If you believe as I do that we will see the drop of federal prohibition and at some point we will see a legal cannabis market in the entire U.S., except for some states that may opt out or be dry, we should expect the industry to grow to approximately $40 billion to $50 billion."
And that figure does not take into account a nascent nutraceutical market, Bocskor said. "Companies are selling cannabis-based extracts—legally—on Amazon. That's just the beginning of what will be a nutraceutical market where non-psychoactive components of cannabis plants are going to be put into beverages, vitamins, supplements, etc."
Hedge Fund
"With that background, I started looking into opportunities," Bocskor said.
Indeed, he said in an email exchange, "the birth of a new industry is no stranger to me, as I was one of the first to invest in the Internet, and have since focused on the development of new disruptive markets."
He decided to create a cannabis-focused hedge fund.
Bocskor said he and Gordon Katz, his partner in Electrum Partners, a consulting firm he founded, were dotting the 'i's and crossing the 't's on the hedge fund Offering Memorandum, and expected to have it ready around Labor Day. They will then start to raise assets.
He said investors would include both high-net-worth individuals and larger institutions such as incubators and funds of funds. He expected the minimum investment to be $100,000.
The fund, he said, would look to invest in producers, processors and distributors of cannabis, companies that directly handle legal marijuana, as well as ancillary businesses that do not directly handle the plant, covering segments such as consumption devices, product packaging and production equipment.
He said ancillaries might include Surna, which makes liquid-cooled air conditioning units for cultivation facilities; Cannasure, a financial services firm that provides insurance for the cannabis industry; and Heliospectra, a Swedish outfit that makes LED lights for cultivation.
Among companies that touch the product, he said, are Bhang Chocolate and Auntie Dolores, producers of edible products.
Dual Strategy
The hedge fund's strategy has two components, according to Bocskor. One involves investing in public companies where the fund is able to add real value.
He said that in January of this year, some 20 publicly traded companies were involved in the cannabis industry in some form. By midyear, he had heard that 200 to 300 companies had announced that they were going to be involved in the cannabis business.
These figures could not be independently confirmed, though they appeared to be in line with various media reports.
