AdvisorShares’ First Vice ETF On The Way

With the exponential growth of the ETFs, “thematic investing” is rising and the “smart beta” theme is selling like hot cakes. In order to make the most of this trend, AdvisorShares plans to launch ETF on the NYSE Arca that target companies involved in the tobacco, alcoholic beverage or marijuana industries (read: Inside the Rise of Thematic ETFs).

AdvisorShares VICE ETF ACT is an actively managed fund seeking long-term capital appreciation by investing primarily in U.S. equities, including common and preferred stocks. It also invests internationally through American depositary receipts (ADRs) of companies related to alcohol, cannabis and tobacco.

The fund invests at least 80% of its net assets in securities of companies that derive at least half their net revenues from tobacco alcoholic beverages; the marijuana and hemp industries; or from legal research and development activities around cannabis-related products, as per the prospectus.

What’s Driving the Move to the Niche Space?

Alcohol and tobacco, a niche category within the consumer staples space, has a solid long-term growth potential in all types of market environments. This is especially true as tobacco products possess the highest profit margins of any consumer product despite less people smoking and heavily restricted advertising. Alcohol-related companies are also known for providing some of the largest profit margins among consumer products.

Additionally, the largest alcohol and tobacco companies are among the top dividend payers and have a history of consistent growth and dividend hikes. Some of these companies also carry a competitive advantage of operating in heavily regulated industries supported by a record of exemplary performance across multiple markets and economic environments.

Further, since demand for alcohol and tobacco isn’t affected by good or bad economic times, these companies provide some protection in down markets (see: all Consumer Staples ETFs here).