October 28, 2015

Investment dollars are already flowing north into Canada due to that country’s more lenient laws regarding medical marijuana use, but with Justin Trudeau’s recent electoral win, if the Liberals follow through on their pledge to legalize recreation marijuana use, Canada could become a leading global destination for marijuana investments.

San Francisco-based hedge fund, Poseidon Asset Management, which is a pure play investment vehicle focused on the legal cannabis space, says that following the Trudeau win, it is exploring the option to increase its Canadian holdings.

In the U.S., Poseidon’s investment portfolio includes businesses that are one step removed from the cannabis plant, including businesses dedicated to developing vaporizer technologies, or cooling systems used in marijuana production as a means of protecting its investors from federal suspicion.

Although Oregon, Colorado, Washington, and the District of Columbia have legalized recreation use of marijuana, contradictory federal laws create legal grey areas where investors are unwilling to venture.

“We wouldn’t want to put our (investors) at risk with that exposure in the United States,” says Morgan Paxhia, Poseidon’s found partner and chief investor. “That’s why Canada is of interest to us, because we can then participate in that growth.”

In Canada, medical access to marijuana is legal nationwide, eliminating the conflict between regional and federal laws, and attracting U.S. institutional investors seeking out cannabis plays – so much so, that now, the bulk of the funds raised by Canadian companies are coming from foreign investors according to Khurram Malik, an analyst with Jacob Securities who tracks the medical cannabis industry.

Some U.S. companies, such as Oregon-based Golden Leaf Holdings, a cannabis extracts producer, have even begun listing on Canadian markets to gain a share of the growth. Golden Leaf, which targets nationwide expansion across North America listed on the alternative Canadian Securities Exchange on October 14 under the symbol, GLH, and U.S.-based Nutritional High International Inc. has been listed on the Canadian Securities Exchange since March 2015.

However, Branden Perry, a lawyer who specializes in government compliance, cautions that U.S. funds investing in Canadian cannabis companies could face challenges and complications.

“If you have U.S. money invested in a product that is illegal in the United States, repatriating that money could be considered a money laundering violation,” said Perry, a partner in Kansas City-based law firm Kennyhertz Perry, LLC.