PE Firm Hopes Pot Investment Fund Will Pan Out

The fund is "agnostic as to medical or recreational" marijuana use but stands to benefit if it's already invested in a market that subsequently receives approval for recreational use, says Bierman.

Despite the growing legalization of marijuana by states, the drug is still illegal under federal law, but the Justice Department did issue guidance in late August 2013 that prosecuting state legal medical marijuana cases under the Controlled Substance Act is not a priority.

When asked about the legal limbo that can affect the cannabis industry because of differences in state and federal law, Bierman said the Medmen Opportunity Fund essentially sidesteps the impact by investing "at the project level," in land, buildings and equipment used by operators in the industry, such as growers and dispensaries. If a project fails the fund still has the collateral, which could potentially be repurposed. The fund will diversify investments by types of assets and geography.

The fund, which has partnered with Wicklow Capital in Chicago, is open to accredited investors only. They include institutional investors as well as  individuals with financial assets worth more than $1 million before taxes but net of liabilities or with net assets of at least $5 million or net income before taxes above $200,000 for each of the last two years (above $300,000 if including the income of a spouse) or was once was a registered advisor or dealer.

Bierman says the fund, which hopes to reach its $100 million target by the first quarter of 2017, is an investment opportunity for high-net-worth individuals and family offices — investors who could be "at the forefront of this next wave" of growth for the industry.

The Medmen Opportunity Fund is not the only investment that could potentially profit from the growing cannabis industry. Others include Privateer Holdings, a private-equity firm focused on legal weed, U.K. biotech company GW Pharmaceuticals (GWPH), which is licensed to grow marijuana plants by the British government and whose shares are up 26% year-to-date based on positive results from U.S. FDA trials on its cannabis-based epilepsy drug, and Poseidon Asset Management, a hedge fund that invests in companies involved in the cannabis industry.