It may not be your cup of tea, but marijuana could become a potent alternative for certain high-net-worth investors looking for an industry with strong growth potential.
Last week Microsoft announced a software partnership to help state governments track marijuana sales, and, come Election Day, at least four states, including California, will host ballot initiatives to legalize recreational use of marijuana. Four states already have — Alaska, Colorado, Oregon and Washington — and those states plus some 21 more have legalized cannabis use for medical purposes.
Also last week, MedMen, a management company serving North America’s legal cannabis industry, announced the launch of the MedMen Opportunity Fund, a private equity fund seeking $100 million to “pursue strategic investments” in the domestic marijuana market.
MedMen CEO Adam Bierman says “there’s a world of investor capital just dying to invest in cannabis,” which he contends is “the fastest growing industry in the U.S.” and one that holds the promise of “tech-like returns” as an “industry at the end of prohibition.”
Legal marijuana sales in the U.S. totaled $5.4 billion last year and could grow to $7.1 billion this year, according to private equity firm The ArcView Group, a private equity and venture capital firm, projecting a $22.8 billion market by 2020.
The Medmen Opportunity Fund will invest in projects in “supply-constrained” states such as New York and Illinois, which have a low number of licensed facilities and offer an opportunity to capture a large market share, said Bierman. It won’t invest in states in states like Colorado and Washington, which don’t provide that opportunity.
The fund is currently invested in Illinois, California and Nevada and is interested in New York, Arizona and Massachusetts – large potential markets with a low number of total licenses, or what Bierman calls “merit-based oligopoly systems.” California and Nevada, as well as Arizona, Maine and Massachusetts will all have initiatives on the November ballot to legalize recreational use of marijuana.