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This Hedge Fund Got Way High Off Pot Stocks

March 3, 2017, 8:32 PM UTC
Marijuana Grow Near Albany For State's Legal Medical Marijuana Dispensaries
JOHNSTOWN, NY - AUGUST 19: Cannabis plants grow in the greenhouse at Vireo Health's medical marijuana cultivation facility, August 19, 2016 in Johnstown, New York. New York state lawmakers voted to legalize marijuana for medical use in 2014 and the law took effect in January 2016. Currently, five organizations are allowed to grow and sell the drug for medical use in the state. New York's new law only allows people with 'severe debilitating or life threatening conditions' to obtain marijuana for medical use. (Photo by Drew Angerer/Getty Images)
Photo by Drew Angerer—Getty Images

For one hedge fund, last year was one immense high driven.

Tribeca Investment Partners, a boutique fund manager based, confusingly, in Sydney, Australia, rather than New York, used bets on marijuana companies to help generate a 145% return over the year, the best of over 10,000 funds tracked by data provider Preqin.

According to Bloomberg, 22 percentage points of that, or nearly $20 million of its investment gains in 2016, was due to gains in marijuana stocks, such as Aurora Cannabis and Canopy Growth. The shares of the medical marijuana producers more than tripled last year.

The ability to make (legal) money out of pot has expanded exponentially in the U.S. as eight states and the District of Columbia have legalized recreational use of the drug. In addition, over half of the union’s 50 states have approved it for medical use.

Bloomberg cited portfolio manager Ben Cleary, who runs the fund together with Craig Evans, as saying he expects the market to grow to $20 billion a year within five years, from just under $7 billion least year.

Last year was a good year for a large part of the fund’s universe: Industrial commodity stocks in particular roared back from a cyclical low after paring excess capacity.

But Tribeca, which offers its service to “those who actively seek innovation beyond the mainstream,” has a more esoteric investment approach. Besides cannabis, one of its biggest gains came from a constrained market for, of all things, salmon. Demand for the fish has been booming as China starts to develop a taste for it.